Why Skyrocketing Import Costs Are Hammering Amazon Sellers (And You)

Shipping one container from China to the U.S. cost $2,000 a year ago. Now it’s up to $15,000, leaving sellers scrambling and causing product prices to rise.

Why Skyrocketing Import Costs Are Hammering Amazon Sellers (And You)

Tyler Rodriguez, an Amazon third-party seller based in Florida, has seen his import costs from China triple since the start of the pandemic. He’s had to bump prices for the toys he sells on the site by 10 to 15%. And he’s among the lucky ones.

Rodriguez is part of a growing segment of the U.S. economy getting crushed by rising import costs from China. Before the pandemic, Amazon sellers and their fellow U.S. retailers could import a 40-foot container from China for approximately $2,000. Now, that same container runs as much as $15,000. And Rodriguez, who still hasn’t seen the brunt of the pricing surge, is bracing for what’s to come.

“It started getting crazy,” Rodriguez told me. “I don’t know what the upper limit could be.”

The shipping cost surge is most acutely hitting Amazon’s third-party sellers — who operate on thin margins and often compete with Amazon itself — but it’s also shocking the rest of the import-reliant U.S. economy. To account for the greater costs, companies like Rodriguez’s are raising prices, and others are going out of business. And with industry experts predicting this will go on for months, it’s time to brace for a prolonged period of upheaval for businesses and price increases for the rest of us.

“Anyone selling shoes, or cameras, or surfboards, or anything super big, they're definitely getting absolutely smashed right now,” Rodriguez said.

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The chain of events that led to today’s shipping price spike began with China’s shutdown at the start of the pandemic. When the country closed its factories, ocean carriers took ships offline because they had nothing to ship. Then, just as China started ramping back up, demand for products soared as homebound Americans went on lockdown buying sprees. The result was a classic marketplace squeeze, where shipping capacity couldn’t match demand. So prices skyrocketed.

“It hurts if you're a Walmart or Kohl’s. It can be almost devastating if you're a smaller importer,” Will Urban, the chief revenue officer at the freight forwarder Flexport, told me. “That additional $13,000 per container, that could be all their profit right there.”

Leyla Zhao, who works with Amazon sellers and is based in China, told me the ports in China are congested, short on containers, and are working slow due to the pandemic. The pandemic’s devastation in India caused even more sellers to look to China for products, leading to further stress on the system. “The export volume is more than before,” she said.

There’s little chance the pressure lets up this year. Rates are locked in for the next few months. And then merchants will stock up as we approach the holiday season, leaving little room for a respite. Meanwhile, the ocean carriers don’t seem to be in a hurry to restore capacity, seemingly enjoying the rates they can charge and wary of going back to ‘normal’ before they know what normal is.

The short-term effects are already apparent. Some companies that Flexport works with have shut down, while others are passing along the price increases to their customers.

“Cmpanies have a choice. They can either just die on the vine — which they're probably not going to do, or try not to do — or they're going to pass it on to the consumer,’’ Urban said. “And that's what ties to inflation.” Urban said his family is going to do its holiday shopping early.

For Rodriguez and his fellow Amazon sellers, the plan is simple: “You raise prices and hope that containers become cheap again.”

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Further Reading:

An ‘aggressive’ fight over containers is causing shipping costs to rocket by 300% (CNBC)

Higher Shipping Costs Are Here to Stay, Sparking Price Increases (Bloomberg)

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