Small and medium-sized retailers are contending with significant increases in shipping expenses as fuel costs remain elevated, creating financial strain during the traditionally busy holiday shopping period.
Shipping costs have risen substantially across the industry. One Kansas City-based small business owner reported that average postal shipping costs increased from around $4.50 last year to nearly $6 per package. Globally, air cargo rates have climbed approximately 43% compared with a year earlier, reaching about $3.37 per kilogram according to transportation data. The spike in costs follows fuel price increases that began in February and has affected shipping across all modes of transport—sea, air, rail, and road. Major carriers including Amazon have reported double-digit increases in shipping expenses, while UPS, FedEx, and USPS have all implemented holiday surcharges.
Small retailers lack the negotiating power of larger competitors and cannot secure long-term contracts that lock in lower rates. Many business owners are caught between competing pressures: rising shipping expenses threaten profit margins, yet charging customers more for shipping may drive sales away, as consumers have grown accustomed to free or low-cost shipping options. Some retailers are considering raising prices or initiating shipping charges for the first time in years, while others are absorbing losses on individual orders. One New Jersey clothing manufacturer began charging for return shipping this week, while a handmade accessories seller reported losing money on orders despite already charging customers $6 in shipping fees.
Despite these headwinds, consumer spending is expected to remain robust, with the National Retail Federation projecting 4.2% growth in holiday retail sales totaling $1.01 trillion. However, analysts note that much of this growth reflects price increases rather than increased purchasing volume. Larger retailers with established shipping contracts and control over delivery networks are better positioned to weather the cost increases, while smaller operators face potential financial distress heading into the first quarter of next year.
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