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How Shipping Shortfalls Are Affecting Small Businesses

AUDIE CORNISH, HOST:

Online sales are up, and shipping companies are having trouble keeping up. And slow shipping hurts small businesses. Sally Herships and Cardiff Garcia from our daily economics podcast The Indicator From Planet Money explain.

SALLY HERSHIPS, BYLINE: Meaghan Thomas lives in Louisville, Ky. She is the co-owner of a small online business, Pinch Spice Market. And Meaghan says one of her biggest fears from shipping delays is losing customers.

CARDIFF GARCIA, BYLINE: Meaghan uses the post office. So over the summer, she experienced what disruptions to shipping can be like. But what's happening now, she says, is far worse.

MEAGHAN THOMAS: On a scale of one to 10, the delays were a nine or 10 at times.

HERSHIPS: Meaghan says the packages of spices that she and her partner were shipping out - they were just not moving. They could see them sitting there, using tracking software. Ten percent of the packages were getting delayed, and 5% or sometimes even more were just getting totally lost.

THOMAS: We ate that cost. We want our customers to be happy. It's not their fault that this is happening. So we would ship out another package of their spices for free.

HERSHIPS: They also gave out coupons to customers - 10 bucks off as a way to say, hey; I'm sorry your package is delayed. And all of this is obviously really expensive.

GARCIA: And this is sort of a classic problem where supply and demand don't match up. And in this case, demand for shipping services has just shot up, and supply just hasn't caught up yet. And that's what's happening here. We do not have a big enough supply of shipping services. And businesses, especially small businesses, which have already taken such a beating from the pandemic, are suffering.

HERSHIPS: Why not just use FedEx or UPS?

THOMAS: We use USPS.

HERSHIPS: So this is a big question to answer. So I'm going to jump in and summarize part of what Meaghan said here, which is that the USPS is awesome and affordable and that, for small businesses like hers, other services like UPS and FedEx can be more expensive.

THOMAS: We really don't have a lot of sway with UPS and FedEx. They give a lot of priority to big-box stores who have contracts with them for heavy discounts and for priority shipping, meaning they get kind of ahead of the line. So it's really hard to compete with that.

HERSHIPS: FedEx says it doesn't discuss customer agreements publicly. UPS says that Meaghan's statement is not accurate, and it's really working to help small businesses which have been hit extra hard by the pandemic.

GARCIA: Whatever the case, retailers are warning their customers to order early for Christmas to avoid delays. And that includes Meaghan Thomas, who says shipping delays are getting worse. Twenty percent of her orders are delayed up to four days right now. Packages are getting lost, and she is working around the clock doing customer service. So she and her partner just decided they are going to offer UPS shipping to their customers and eat half the cost.

HERSHIPS: Sally Herships.

GARCIA: Cardiff Garcia, NPR News.

(SOUNDBITE OF DJ MAKO'S "ASH") Transcript provided by NPR, Copyright NPR.

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