Business owners balance shipping costs, inflation as they prepare for the holiday season

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Friday, October 7, 2022
Business owners balance shipping costs, inflation ahead of holidays
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Business owners in the Triangle balance shipping cost and inflation ahead of busy holiday season.

RALEIGH, N.C. (WTVD) -- Business was bustling Friday afternoon inside Light Years, a jewelry store in the Village District.

"Our foot traffic has been really good here," said owner Shannon Joyce, who took over the business at the beginning of April.

Joyce noted they've received some relief from falling overseas shipping prices. Data compiled by Statista found global container freight rates dropped more than 60% year-over-year, with Bloomberg Finance finding a 76% drop in the cost to ship a 40-foot container from Shanghai to Los Angeles.

"The savings will be passed on to the consumers, but it's going to take some time. A recent statistic I saw is it takes something like six to nine months for companies like Costco or Target or Walmart who are importing lots and lots of merchandise to actually pass those costs on," said Connel Fullenkamp, a professor of economics at Duke.

Fullenkamp zeroed in on two of the reasons why prices have fallen sharply; decreased demand and canceled orders.

"This should be the time of year when they've got all the boats scrambling to get all the merchandise to the US for the holiday shopping season. So that I think is really the troubling news about this, is this may be a sign that at least stores think this is going to be a depressed holiday season," said Fullenkamp.

The National Retail Federation reported holiday sales increased by 14.1% in 2021 compared to 2020 but rising inflation could temper expectations.

"It really does seem like inflation is taking a serious bite out of people's willingness to spend that extra amount on extravagant gifts and such," Fullenkamp explained.

OPEC's announcement earlier this week that they would cut production sent energy prices up, with AAA reporting nearly a 14-cent increase this week in North Carolina.

"It seems like the situation with our railroads which are extremely energy efficient is still pretty backed up and messed up in terms of having the rail cars where they need to be to ship things at the cheapest and most efficient rates. So, I think truck shipping, air shipping are going to be used more heavily than before," said Fullenkamp.

Joyce said they've been impacted by shortages of materials, specifically to their boxes, which they're now paying significantly more to have delivered.

"Our biggest issue is our people here in the United States getting merchandise and being able to keep the cost low from there," Joyce explained.

Still, she's been cognizant to alter pricing.

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She credits improved COVID metrics in helping draw people back into stores.

"It's definitely been very important, especially with a lot of our jewelry. If it's a certain stone, the coloring can be different. So, it's really nice for people to come in and touch it and see it," said Joyce.

The Bureau of Labor Statistics released its monthly jobs report Friday, showing unemployment nationally dropped to 3.5%, and manufacturing output had returned to pre-pandemic levels.