DHL Express joins rivals FedEx Corp. and United Parcel Service Inc. in raising freight rates for customers, which begs the question: Is inflation structural in nature rather than "transitory"?
Effective Jan. 1, DHL will increase freight rates by 5.9%, or about the exact rate FedEx announced last week.
"You have general inflation; We've got to cover for that," Mike Parra, CEO of DHL Express Americas, told WSJ. He said other costs for increasing capacity, such as planes, trucks, and facilities, are becoming more expensive.
DHL Express announced the increase on Friday and said it would apply to U.S. account holders shipping to or from the 220 countries and territories. It was only last week when FedEx and UPS stated they would increase freight rates. Both companies called today's environment "challenging" as costs rose.
This ultimately means that retailers will have to increase prices as the cost of shipping is only going higher. The cost pressures will force retailers to absorb added costs or pass them along to consumers.
Cathy Roberson, head of research and consulting firm Logistics Trends & Insights LLC, said rising shipping costs could be a nightmare for companies that may have to rethink their logistical fees for customers:
"Retailers may need to rethink the whole 'free shipping' offering that they provide to their customers," Roberson said. "It's going to end up having to be trickled down to the customer, because the shippers—such as retailers, manufacturers, wholesalers and so on—they can't keep absorbing higher costs. They've got to pass them on in some form or another."
Meanwhile, at the annual Morgan Stanley Laguna conference, some of the largest U.S. corporations warned last week that inflation is "unprecedented" and becoming "structural."
There's even talk from BofA's Michael Hartnett that this winter could be filled with higher inflation, hawkish central banks, weaker growth, i.e., stagflation.
One would suspect that it's only a matter of time before Amazon raises its monthly Prime membership as soaring logistical costs show no signs of abating anytime soon.