High trucking costs are expected to last through 2021, adding to retailers' challenges
- A shortage of semi-conductors to build new trucks and drivers to drive them is causing rising freight costs.
- The rising transportation costs coupled with backlogged ports are adding to business woes.
- Toilet paper, diapers, cars, bikes, electronics, and houses have all become more expensive lately.
- See more stories on Insider’s business page.
Retailers are sounding the alarm on increasing transportation costs as truck drivers and new trucks are in short supply, the Wall Street Journal reported Sunday.
The higher costs are expected to last at least through the end of the year, the Journal said. US freight demand rose 3.4% in March from February, as trucking costs rose 6.5%, almost twice the rate, the paper reported, citing data from Cass Information Systems.
Rising freight costs have been a problem since last year. At the time, trucking companies began offering huge wage increases to attract drivers to the industry. The lack of drivers has since been complicated by a semi-conductor shortage keeping new trucks from coming on the market, the Journal said.
“It’s just been this constant increase in the cost of purchased transportation at a rate that’s really something that we’ve never seen,” Bob Biesterfeld, chief executive of C.H. Robinson, told the Journal.
Read more: Bank of America names 5 trucking stocks to buy as the economy recovers — and explains why the industry is perfectly positioned to benefit from the boom ahead
For retailers, that adds to their supply chain woes from backlogged ports and repercussions from the Texas winter storm.
“We contended with a fair amount of challenges as well, including port congestion, the impact of Texas storms on raw material availability, a significant rise in inflationary costs, freight challenges as well as demand spikes across many categories,” Ravi Saligram, chief executive of Newell Brands, which owns Sharpie and Crockpot, among other brands, said on an April earnings call.
Bed Bath & Beyond and General Mills also warned investors of the rising price of freight on their earnings calls recently. General Mills CDO Kofi Bruce said the company is seeing mid-single-digit inflation in freight costs, making the price of delivering to customers higher.
Gustavo Arnal, Bed Bath & Beyond’s chief financial officer, said the company saw an “unfavorable impact” from higher shipping costs.
“We continue seeing previously communicated industry-wide headwinds from freight costs,” Arnal said on the April 14 call.
Retailers across the country have begun raising prices on goods from toilet paper to diapers to offset shortages and shipping costs, Insider previously reported. Cars, bikes, electronics, and houses have become more expensive, too, as the supply chain remains in disarray.
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