As the holiday season approaches, U.S. consumers face higher prices

Demand is rising, costs are rising, and shipping costs are rising! Rising costs and inventory shortages seem to be two mountains weighing on major retailers. Under such circumstances, American consumers will also face rising product prices during this year's holiday shopping season.

The cost of shipping containers has been soaring in recent months . Before the coronavirus pandemic, it cost about $2,000 to ship a 40-foot container from Shanghai to New York, according to Bank of America. Today, the cost has increased eightfold to $16,000.

Costco Chief Financial Officer Richard Galanti called freight costs a "permanent inflationary item" during a conference call last week. He attributed the increase to factors such as higher labor costs, increased demand for transportation and products, as well as shortages and rising commodity prices for computer chips, oil and chemicals.

The series of problems brought about by the new crown epidemic are significantly increasing the operating costs of major retailers, and these costs will eventually be passed on to consumers. At present, inflation has become the current economic buzzword in the United States.

Specifically, Galanti said Costco's merchandise inflation rate is likely between 3.5% and 4.5%. He noted that the cost of paper products has risen by 4% to 8%, and shortages of plastics and pet products have led to price increases of 5% to 11%.

As retailers prepare for the busy holiday shopping season, they are trying to balance inflationary pressures with operating profits. Keith Jelinek, managing director of the consulting firm's global retail practice, said: "We have seen a series of cost increases for goods, and these costs will affect our operating profits. The real challenge for all retailers now is how much information can be conveyed to consumers about the cost increases and how much profit can be obtained from operations."

Fortunately, for now, consumers appear willing to accept higher prices. Data shows that trillions of dollars in government stimulus during the pandemic have helped individuals increase their wealth, with U.S. household net worth growing 4.3% in the second quarter.

Federal Reserve officials acknowledged last week that inflation will be higher than they expected in 2021. However, they still see commodity prices settling in a normal range of about 2% over the next few years.

As the holiday shopping season is approaching, the price increase of goods seems to have become an inevitable trend. Cross-border sellers must plan ahead while preparing for the goods and find a balance between cost increases and maintaining profitability.

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consumer

inflation