Small retailers rethink shipping fees as holiday shipping costs climb
The National Retail Federation expects holiday retail sales to rise 4.2% to $1.01 trillion, but higher fuel prices and carrier holiday surcharges are raising shipping costs. Evie Pearl Handmade's owner now pays nearly $6 per package and is considering raising her shipping fees for the first time in six years. A New Jersey clothing founder began charging customers for return shipping this week. Larger retailers with dedicated contracts are better insulated for now, though Amazon reported an 11% rise in third-quarter shipping expenses.
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Key takeaways
NRF expects holiday retail sales to rise 4.2% to $1.01 trillion.
UPS, FedEx and USPS have added holiday surcharges that run through the end of the season.
One small seller's average label rose from around $4.50 last year to nearly $6 last month, and she is considering raising her shipping fees.
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Holiday demand is still growing, but small retailers are rethinking shipping fees as holiday shipping costs climb. The National Retail Federation expects holiday retail sales to rise 4.2% to $1.01 trillion, compared with $972 billion last year, CNBC reported. At the same time, higher fuel prices since February have driven up the cost of moving goods by sea, air, rail and road.
UPS, FedEx and USPS have all added holiday surcharges that vary by package type and run through the end of the season, and those charges have risen over the past few years, according to CNBC and Briefs Finance.
What small sellers are seeing
Jenni Shields, who runs Evie Pearl Handmade from her spare bedroom, paid $2.93 per order when she launched eight years ago. Her average label was around $4.50 last year and nearly $6 per package last month, CNBC reported. She charges $6 for shipping, including about $1.50 for packaging, so she no longer breaks even on it and is considering raising her shipping fees for the first time in six years.
I can't compete with Amazon on the free shipping. I can't do that. I can't afford that. — Jenni Shields, Owner, Evie Pearl Handmade
Todd Shelton, founder of a 23-year-old New Jersey men's clothing company, began charging customers for return shipping this week for the first time, deducting it from refunds, and is considering raising prices or charging for shipping, according to CNBC and Briefs Finance.
Why scale matters this season
Larger retailers are better insulated for now. TD Cowen transportation analyst Jason Seidl told CNBC that bigger companies tend not to be exposed to the spot market and have dedicated deals in place. Even so, Amazon reported an 11% year-over-year increase in third-quarter shipping expenses. Air cargo is running about $3.37 per kilogram, up 43% from a year ago, according to Freightos data cited by CNBC.
If anything, it benefits the scale players over the little players, but it's kind of a little bit bad for everybody. — Aaron Cheris, Global Retail Practice Head, Bain & Company
What retailers can watch
PYMNTS noted that Amazon will also charge U.S. marketplace sellers an average of 19 cents more per item to fulfill orders next year. For small and midsize sellers, the decisions in front of them this season are the ones Shields and Shelton describe: how much of the shipping cost to pass on, whether to charge for returns, and how to price against free-shipping expectations while holiday demand is still growing.
Sources
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