Shipping is an enormous cost in business, but it is also a cost that customers are stubbornly unwilling to support. A study covered in Marketing Land found that 9 out of 10 online shoppers ranked free shipping as their #1 incentive to spend more money online, ahead of faster shipping times or high-tech solutions such as drone delivery. The idea of “free” shipping may drive sales, but businesses know that offering free shipping actually means raising prices, offering a lower-quality product, or cutting into bottom lines.
The free shipping that customers know and love online is different from the shipping that gets consumer goods from manufacturers to market, but the true costs of each are equally invisible to the end consumer. According to Reuters, customers around the country may start feeling an extra pinch in their shopping carts, especially at the grocery store: prices for food products like poultry and candy, along with many other consumer goods, are set to go up due to rising shipping costs. Customers will likely not recognize the cause, but they will notice the cost passed on to them.
Shipping costs are rising due to high fuel prices, wage inflation, a shortage of truck drivers, and stagnant capacity in the locomotive industry. The trucking industry has consistently struggled to retain drivers amidst stagnant wages and rising costs, which translates to lower capacity and flexibility. Similarly, a worker shortage and aging infrastructure in the locomotive industry is causing weeks-long delays and unreliable delivery times. According to Reuters, frustrated companies are considering buying their own rail infrastructure instead of relying on rail companies to solve the problem themselves.
The cost of shipping has now risen beyond twice the ordinary rate of inflation, and it has yet to show signs of slowing. According to a spokesman for Tyson, shipping costs are up 10 to 15 percent in the food industry alone. Company spokespeople have been reluctant to officially announce price increases, but it is hard to imagine that they will continue to swallow the cost, even if it leads to consumer frustration.
There is good news: according to Bloomberg, consumer inflation is slowing overall, meaning that the bump in prices will sting consumers less than it might have in previous years. Still, raising prices is only a temporary solution to the underlying problems that plague today’s shipping industry.