The effects of the Covid-19 pandemic will be felt for the next decade or more. Like a spring that has been stretched beyond its capacity, it will never be able to snap back to it’s original form. In THIS business owners opinion (and 37 years experience), freight rates will probably never come back to the levels prior to 2020.
When and How Will Freight Rates Drop?
At this point in time (post pandemic – specifically first quarter of 2023), we’re seeing fuel prices about 25% lower than their high about 18 months ago. As of the date of this post, Regular Unleaded Gasoline is in the neighborhood of $3.39/gallon and Diesel Fuel is about $4.49/gallon. So why are freight charges going up?
THIS business owner believes that fuel will need to drop an additional 20% or more from today’s rates for trucking companies to adjust their rates down, even a little. Why?
Pressures Keeping Trucking Rates High in 2023
The phenomenon of Supply and Demand is the major culprit today affecting shipping rates.
There’s a high demand for truck drivers because the trucking industry lost a lot of drivers during the pandemic. During 2020, all kinds of businesses were shut down and therefore, truck drivers were laid off. A great deal of them never returned. When businesses began to open up again, the shortage of truck drivers created demand and the greater demand created upward pressure on truck drivers’ wages.
I went out to assist in unloading a 2-pallet delivery into on of our warehouses and got into a conversation with the truck driver. There was something about him that was different than most of the truckers I’d experienced in my nearly 4 decades in the wholesale business. We had some small-talk and one thing led to the other and ultimately he revealed that he’s a college graduate. I don’t recall what he had his degree in, but it was something significant – impressive. The other thing he revealed is that he’s making more money as a truck driver than he would have had he pursued a career related to his college degree.
UPS, Fedex, Amazon, Instacart and Other Delivery Services
America has learned that the convenience of small, quick delivery is a pretty good bargain, especially when most consumers are getting their stuff delivered free (at the vendors’ expense, at it IS expensive). The business who are selling the products are paying higher-than-ever prices, and the delivery vehicles are packed to the gills. This is partially due to the way most of us have come appreciate the convenience of delivery and the fact that the delivery services are still scrambling to acquire more drivers.
As long as the demand for drivers continues to grow, the upward-pressure on shipping costs will remain a fact of life.
There’s No Such Thing as FREE SHIPPING
FREE SHIPPING is a math calculation. Everybody pays a freight charge. It’s either added to the bill or blended into the price of the product. Some places are more expensive to ship to, such as rural and remote areas, and some are less expensive, such as a city suburb. Businesses are in a constant state of analysis because of the variables that affect shipping costs and thus, profit margins.
At Mazer Wholesale, we do our best to keep our wholesale prices low. We add the freight charge to most orders (we a handful of free-shipping items), so that we remain the best choice even with the higher shipping rates we pay these days.
WE EXIST TO SAVE OUR CUSTOMERS MONEY.