Costco Wholesale, one of the largest US wholesalers, forecasts a 3.5% to 4.5% increase in on-shelf products, including toilet paper and paper towels. According to the chain’s financial director, Richard Galanti, the justification is the delays in deliveries from suppliers, which reduced the company’s ability to respond to increased sales.
Due to the spread of the delta variant in the country, consumers went back to panic buying, fearing new lockdowns, causing a shortage of products on the shelves.
Although Costco absorbs part of the costs and asks suppliers to do the same, the network said that it will still be necessary to pass on part of the impact to consumers through higher prices.
“A year ago, there was a shortage of merchandise,” Galanti said in a conference call on Costco’s balance sheet. “Now they’ve got plenty of merchandise but there’s two- or three-week delays on getting it delivered because there’s a limit on short-term changes to trucking and delivery needs of the suppliers, so it really is all over the board.”
The decision to impose limits on the purchase of toilet paper for consumers highlights the logistical bottlenecks that affect global supply chains, exacerbating the shortage of essential products and increasing price pressures. At Costco, rising freight costs, combined with higher wages and more expensive raw materials such as pulp and paper, have led the company to raise its inflation expectations, Galanti said.
To mitigate rising freight costs, the company chartered three ships for next year to increase its shipping capacity between Asia and North America.