At least one major retailer says that transportation costs are lessening, easing strain on retailers’ budgets, and clearing up supply chains.
Key details
Tech retailer Best Buy is still struggling with excessive inventory levels, but pressures around transportation costs are easing up a bit.
Shipping costs typically increase during the holiday season, but remarks from Best Buy CEO Corie Barry indicate a deviation from the norm.
“We are experiencing some relief in international first and early signs of loosening markets domestically,” Barry says about shipping costs.
Since spring this year, trucking rates have fallen, but high fuel costs have prevented prices from falling to a more normal level, The Wall Street Journal reports.
In July, trucking prices were around $2.64 per mile. Now that number is averaging $2.53 per mile.
Shipping costs have seen a more dramatic change. Last year, costs were at a record high. In fall 2021, a shipping container traveling from China to New York cost $16,138. Now that same box costs $9,569.
Why it’s news
Retailers like Walmart and Target announced in the last few months that they have excessive inventory, leading companies to mark down prices in order to clear shelf space.
As a result, retailers are ordering less new stock, lessening shipping demands, and driving down costs.
Retailers are forced to sell products at reduced prices, meaning overall profit margins will be smaller. Target and Walmart warned investors that their profits would be lower by the glut of inventory.
While an increased number of sales might be nice for consumers struggling with inflation, the tighter profit margins could have negative effects on businesses preparing for recession.
