America’s smaller retailers could be facing a tough holiday season due to high shipping costs.
That’s according to a report Friday (Nov. 6) from CNBC, which noted that while consumer demand is strong, these business owners worry that rising shipping costs—driven by increasing fuel prices—will dampen their profits.
“I am losing money at this point, and I’ve really taken a huge hit this year,” Jenni Shields, owner of the Kansas-based hair accessories company Evie Pearl Handmade, told CNBC. “I feel like it’s just been this slow increase up [in shipping costs], and I feel horrible.”
She launched her business eight years ago, paying $2.93 to ship an order. Now, that price has risen to nearly $6, the report said.
CNBC cited National Retail Federation data projecting that retail sales through the remainder of the year are expected to climb 4.2%, or $1.01 trillion in spending. That’s up from $972 billion last year, the equivalent of 3.1% growth. However, some of that growth is due to inflation, or consumers paying more for the same products.
“Customers all expect to spend more this holiday, but part of why they expect to spend more is they expect things to cost more, not because they’d like to spend more or they were hoping to get more quantity of stuff,” Aaron Cheris, global retail practice head at Bain & Company, told CNBC.
Meanwhile, research by PYMNTS Intelligence shows that while more consumers are feeling more confident about the economy, there is still some reluctance when it comes to spending.
One-in-five consumers surveyed in October said they’d delayed a major purchase during the previous 90 days, versus 18.3% in August. Another 11.1% said they had cancelled a major purchase, up from 9.6% in the earlier survey.
Small businesses are facing other headaches as well. A new Federal Reserve report shows that banks are tightening lending standards for small businesses, and instituting stricter collateralization requirements and the use of interest rate floors for these borrowers.
Also this week, Amazon announced it will charge marketplace sellers in the U.S. an average of 19 cents more per item to fulfill orders next year.
“However, for a merchant deciding how much stock to send Amazon before the next holiday rush, the bigger change may be what happens after the holidays,” PYMNTS wrote. “Sellers whose goods move within six months will pay the same or less for storage, the announcement said. Those whose merchandise sit longer will pay more.”
