VC Firms' Tech Stocks Fell 44%—After Buying Them Up In The Selloff Read More

The port of Houston this week. Photo by Bloomberg.
e-commerce economy

Online Merchants Squeezed by Surging Freight Costs, Slower Demand

Photo: The port of Houston this week. Photo by Bloomberg.

In August, Steven Borrelli, founder of online apparel brand Cuts Clothing, faced a tough decision. Demand for the hoodies and T-shirts that Cuts sells was skyrocketing. Yet shipping the merchandise into the U.S. from factories in China, Vietnam, the Philippines and Peru was no longer an option, as a shortage of trucks, containers and drivers had left ports backed up. So Borrelli decided to fly his merchandise into the U.S.

That lifted his cost of transporting goods tenfold, to $35,000 from $3,500. The Los Angeles, Calif.–based brand raised its retail prices by $2 an item to cover some of the extra expense, although the company is bearing the brunt of it. The result is that Cuts Clothings’ net profits have eroded by 3 to 4 percentage points, Borrelli said.

Cuts Clothing is among many online merchants that are stretching out their dollars to get their wares to the U.S. and eventually onto their customers’ doorsteps ahead of the all-important holiday season. Like Borrelli’s firm, other e-commerce brands are passing along at least part of their higher costs to their customers through price rises, a tactic that is expected to slow revenue growth. At the same time, firms are absorbing some of the higher costs, which is eroding their profits, as third-quarter reports from public companies such as Purple Innovation and The Honest Co. highlighted this week.

Get access to exclusive coverage
Read deeply reported stories from the largest newsroom in tech.
Latest Articles
 
The Briefing markets startups
Sequoia, Andreessen and Bessemer’s Beating and Snap’s Selfie Drone
Sequoia Capital's office in Menlo Park, Calif.
Is anybody else pumped for some appointment streaming this weekend? The first episode of HBO’s “House of Dragon,” the hotly anticipated prequel series to “Game of Thrones,” premieres Sunday night. Then, 12 days later, Amazon will debut its own fantasy series, “The Lord of the Rings: The Rings of Power,” on Sept. 2. It’s fair to say HBO and its debt-laden parent company, Warner Bros....
Latest Briefs
 
Apple Warns Mac, iPhone, iPad Users of Critical Security Flaws
Snap Halts Development on Its Selfie Drone Pixy
China Lashes Out Against New U.S. Chips Act
Stay in the know
Receive a summary of the day's top tech news—distilled into one email.
Access on the go
View stories on our mobile app and tune into our weekly podcast.
Join live video Q&A’s
Deep-dive into topics like startups and autonomous vehicles with our top reporters and other executives.
Enjoy a clutter-free experience
Read without any banner ads.
Illustration by Clark Miller
Man v. Machine ai
Can Creatives Survive the Future War Against Dall-e 2?
Earlier this year, Karen X. Cheng, a video director in San Francisco, was commissioned by a client to make an augmented reality dress for special events.
Art by Clark Miller
Bought and Sold media/telecom
Meet Axios’ New Owners: Old-Money Atlanta Billionaires Hungry for the Next Big Thing
The pitch Sebastian Thrun made to investors in 2014 was an alluring one. Thrun—former head of Google X, the company’s top-secret skunkworks—had already raised over $20 million for his buzzy online-education startup, Udacity.
Gili Raanan of Cyberstarts. Art by Clark Miller
Exclusive startups enterprise
How a Former Sequoia Capital Partner Cornered the Israeli Security Startup Market
Whenever a cybersecurity startup seeks capital from venture capital firms in Israel, whose military trains an outsize number of security software entrepreneurs, the first thing prospective investors usually do is check whether Gili Raanan has invested in it.
Art by Clark Miller
The Big Read
‘It’s Just Bad News All the Time’: With the Tech Economy Buckling, Silicon Valley Therapists Are in High Demand
Over the last couple of months, David Mahabali has become highly skilled at lugging pillows, floor pads and blankets around the San Francisco Bay Area.
Art by Clark Miller.
Exclusive startups asia
How Instagram’s TikTok Envy Finally Backfired
Last month, Kim Kardashian, Kylie Jenner and other influencers stirred up a public relations firestorm for Instagram, complaining to their hundreds of millions of followers about the app's recent attempts to mimic TikTok.
Bolt co-founder Ryan Breslow. Photo by Julian Buitrago. Art by Mike Sullivan
Exclusive startups venture capital
Startup Workers Find Founders Cashed Out When They Couldn’t
A few weeks before Ryan Breslow stepped down as CEO of commerce software startup Bolt in January, he made a deal with investors.