Business1 min read

Small retailers brace for 'huge hit' this holiday season as shipping costs spike

By · Published by Everything Blog

In short

Carrier surcharges from UPS, FedEx, and the U.S. Postal Service are compounding fuel cost increases across sea, air, rail, and road transit. In response, some apparel merchants have started subtracting return delivery fees directly from customer refunds to preserve operational margins. Although the National Retail Federation projects overall holiday sales to rise by 4.2% to approximately $1.01 trillion, independent sellers warn elevated overhead will erase expected gains.

Key points

  • Independent merchants lack the dedicated, negotiated freight agreements that shield massi…: Independent merchants lack the dedicated, negotiated freight agreements that shield massive corporations like Amazon from steep rate hikes.
  • Small apparel businesses are actively scaling back customer-friendly perks by deducting r…: Small apparel businesses are actively scaling back customer-friendly perks by deducting return shipping expenses directly from buyer refunds.
  • Strong top-line consumer spending during the peak holiday shopping period may not transla…: Strong top-line consumer spending during the peak holiday shopping period may not translate into net profitability for small retailers.

Sources checked by our analysis pipeline: 1

When Jenni Shields began her small business eight years ago selling handmade hair accessories, she paid $2.93 to ship an order, or close to $4 in today's dollars when adjusted for inflation.

Last year, Shields said, an average shipping label for her products cost around $4.50. But when she took a typical batch of orders to her local U.S. Postal Service office last month in Kansas City, Kansas, she was shocked to see that it was an average of nearly $6 per package.

Shields is just one of the small- and medium-sized retailers who are struggling to keep up with rising shipping costs as the price of fuel continues to trend upward.

Small business owners such as Shields are facing a difficult holiday season. Customer demand is strong, but some retailers said their profits will be dented — if not eaten up entirely — by higher shipping and other costs.

Shields said she charges her customers $6 in shipping fees, which includes roughly $1.50 to cover her packaging supplies. The dramatic upswing this year means she's no longer breaking even…

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