Gas price spikes could put a last-minute squeeze on holiday supply chains

The price of gas overall is up about 50% in the U.S. since the start of the conflict between the U.S., Iran and Israel on Feb. 28. But last week, some states started to see alarming price increases on top of that. In Wisconsin, for example, the average price for a gallon of gas jumped 61 cents in just eight days. In Nashville, gas prices surpassed $4 per gallon for the first time in three months. 

Gas prices are suddenly surging again, partially due to significant drone attacks on a pipeline that is Saudi Arabia’s primary way of transporting oil instead of going through the Strait of Hormuz. “Gas prices are about to take a big jump, analysts say, with the worst still to come,” a Washington Post headline proclaimed. All of this threatens to put a damper on the all-important holiday season. 

The good news is that many retailers have already brought most of their holiday inventory to the U.S. from overseas. So, the disruption should be minimal, though carriers like UPS and FedEx will likely continue to increase fuel surcharges ahead of the holidays.

Perhaps the biggest risk comes on the consumer front: If gas prices continue to rise, it could lead some consumers to cut back on their holiday gifting budgets. Some may also buy more products online or consolidate in-person shopping trips to save money on gas.

“Walk into Walmart or Target today, and you’ll already see Thanksgiving table settings and Christmas wreaths out,” logistics consultant Matt Hertz told Modern Retail. Hertz is the CEO and founder of Third Person, a service that connects brands with fulfillment partners. So, from that perspective, “a big chunk of the holiday supply chain was ‘accomplished’ before this recent leg up in fuel prices,” he said.

The risk, he said, lies in fuel surcharges. Today, all the major carriers and even many of the regional carriers have some kind of fuel surcharge. In the past, it was fairly nominal. “When I started my career, [a fuel surcharge] was a few percentage [points],” Hertz said. “It was something that you didn’t even look at. So it’s historically been absorbed.”

But fuel surcharges have now hit, if not record highs, close to near-record highs. For domestic packages, FedEx is now charging a fuel surcharge of 32.25%. Fuel surcharges are calculated weekly based on diesel and jet fuel prices.

Brands can negotiate fuel surcharge rates with their carriers, Hertz said. Another way brands can protect themselves is by relying on multiple carriers. “That’s been a very effective way of circumventing, or squashing, the impact of rate inflation and fuel surcharges,” Hertz said. 

Indeed, perhaps the biggest risk to retailers from rising gas prices involves what it could do to consumer demand. Hertz wonders, for example, whether more shoppers will opt to buy more of their holiday gifts online and cut back on how much they drive to stores. 

If consumers find rising gas prices are eating into their holiday shopping budgets, retailers may have to rely even more on discounts to move product this holiday season. “I think, in the event that demand is a little bit on the softer side, you’ll start to see much heavier promotional activity going into the holiday season, which will probably start as early as next month,” Marcus Shen, CEO of B-to-B resale platform B-Stock, said. 

The good news, Shen said, is that “a lot of these retailers are ready” to adapt to any potential volatility during the holiday season.

“For better or worse, for the last five or six years, they’ve seen a ton of volatility from both a supply and demand perspective,” he said. “They’re a lot more resilient maybe than they would have been pre-Covid.” 

Breaking down this season’s peak surcharge fees 

In other carrier news, next week peak season surcharges also start to go into effect. These are the additional fees carriers institute between now and approximately mid-January to account for the extra volume they are forced to handle. The highest surcharges typically hit right before the end of November (to coincide with the start of Black Friday) and run until the end of December. 

FedEx, UPS and USPS have all published detailed tables detailing this year’s peak season surcharges.

Laura Behrens Wu, founder and CEO of Shippo, a multi-carrier shipping software provider for e-commerce companies, told Modern Retail this year that one of the biggest changes brands should be mindful of is that USPS has changed how it charges for dimensional weight; it now calculates dimensional weight by dividing a package’s volume by 139 instead of 166 — but really, the main thing brand and retail execs need to know is that this now matches UPS and FedEx standards. 

But perhaps the biggest difference for brands is that, ahead of these peak season surcharges — which happen every year — there have been additional cost increases over the course of this year. USPS, for example, also announced a transportation surcharge in March that runs through January 2027.

“I think it’s getting more and more important to make decisions on your shipments and the shipping providers — not on a year-by-year basis, but truly on a package-by-package basis,” Behrens Wu said. 

What we’ve covered 

Beyond Yoga hosts a pop-up to promote its newest fabric 

New fabrications play a big role in the growth of activewear brands; there’s a lot of juice to be squeezed if an activewear brand can convince many of its die-hard customers that they need to buy a new pair of leggings specifically designed for pilates or a sports bra that does a better job of staying dry during high-impact activities. 

In turn, Beyond Yoga is hosting a pop-up in New York City to promote its newest fabrication, Glowzone, MR’s Julia Waldow reports. Glowzone took two years to come to market and is designed for higher-impact workouts, like strength training, hot yoga, cycling and running.

But Glowzone, while still a very technical fabric, represents a larger philosophy and system for Beyond Yoga, CEO Nancy Green said in an interview with Waldow. “If you’re in the activewear business, [clothes] have to perform,” she said. “We do that, but we don’t come to market with this super intense point of view on performance. We come to market with a joyful expression of being active and what movement does for your mental and physical well-being.”

The Laundress enters Target, embarking on its largest retail expansion to date 

After years as a predominantly direct-to-consumer brand, Unilever-owned The Laundress is entering Target stores with a fresh take on laundry care. A 16-SKU collection from The Laundress is now available for sale on Target’s website and through its app. Products are rolling out in 600 Target stores this month, with expansion into 1,000 Target stores planned for March 2027. 

Fragrance will be the key selling point in stores and online. The Laundress is bringing its three other top-selling scents — Classic, Dream and Marine — to Target across a range of products, including laundry detergent and fabric softener. The Laundress also developed an exclusive fragrance for Target, called Cloud. 

In turn, The Laundress had to think carefully about how to sell Target customers on its scents both online and in-store. The Laundress redid its packaging to make it more descriptive, and end caps in stores will feature scent puffers. 

What we’re reading 

• Macy’s rolls out AI inventory replenishment tool – Retail Dive 
• On Holding’s aversion to discounting tested by softer retail sales – The Wall Street Journal 
• Asia-US container rates soar past $11,000, near pandemic records – Freight Waves