If you’ve noticed a spike in your shipping rates lately, and are concerned about this going into the holiday season, you aren’t alone. The retail market has been trending towards digital for years, but the pandemic has accelerated and cemented this change for the foreseeable future.
With this new reality in mind, finding a way to manage fluctuating shipping costs can be the difference between success or disaster for many businesses. By looking at the causes of this increase, the best practices with which to respond then becomes a bit more clear.
Lower Transportation Capacity
The root cause of the increase in shipping costs stems from transport capacity operating well below their normal rate in terms of both frequency and total availability.
Canceling international flights was one of the first measures taken by governments around the world as the pandemic first developed. As these flights’ cargo space is a common means of transport for both domestic and international shipments, there just isn’t enough available space left on those flights which are just still active.
Commercial routes have been reduced in frequency or outright cut as customer demand has plummeted and is yet to fully return. Even within those countries who have reopened their borders, air traffic overall is still down by as much as 50 percent.
With sea freight options, we can see similar problems with lower frequency but higher costs. Freight cargo pricing from China to the US West reached an all-time high in September at $3,900 while there being 20 percent fewer options.
Whether by air or sea, there just isn’t the same capacity across the board. Even those options that still function commonly encountered delays due to new rules and regulations. Unfortunately, most popular shipping methods have become exceedingly costly, and this has coincided with entering the highest consumer demand quarter of the year
All-Time High Demand
This year, e-commerce is expected to grow by as much as 27 percent in the pivotal last quarter of the fiscal year. Thus far in 2020, customers have been impressed with how seamlessly online shopping has stepped into the role brick and mortar stores once filled.
Studies show 58 percent of customers in 2019 still preferred to shop in person, but in 2020 that has flipped as 60 percent now choosing online as their primary shopping method. Those same customers say this year has elevated their expectations of online shopping, and a majority see no reason to shift back to in person.
This could be advantageous news for those prepared to take advantage, but due to restricted overseas shipping, US inventories are down 10 percent. At the moment shipping and logistics companies hold all the cards as there is a massive demand for in-demand goods manufactured overseas — everything from dishwashers to gaming systems — and they can charge whatever they wish for every inch of precious available space to move them.
The low capacity and high demand combined make shipping disproportionately expensive when compared to the past years. For those already operating on razor-thin margins, the potential loss incurred by high shipping rates could be disastrous to them when surviving an already difficult year.
It’s not a great scenario, but there are options available to mitigate the potential damage.
Responses to Consider
If you want to avoid absorbing these higher costs, then you’ll have to take action quickly to offset the higher costs. The traditional means to do so would be negotiating with multiple shipping companies to find the best rate, but in this reduced capacity setting, the pickings are rather slim.
- Merge Shipments
One effective solution to these unique circumstances is to consolidate your buying power to receive better rates. Platforms like Easyship can help you accomplish this as they have tens of thousands of clients, and thus have increased clout when negotiating rates with shipping companies.
Time-consuming tasks like clearing customs are then off your hands as well, which can then in turn be used to focus on marketing and sales.
- Offer Alternative Shipping Options
Another option many companies are adopting is to outfit their distribution centers for in-store pickup. Even if only a portion of your customers lives close enough to take advantage of this, by entirely avoiding the higher shipping rates for some, it can balance out the higher rates for the others.
- Dial In the Details
While sweeping moves like an entirely new overseas carrier might be unrealistic right now, tweaking the small details of your shipping materials to further cut costs can result in substantial savings.
Before the holiday season is fully underway, take a hard look at the dimensions and weight of your direct to consumer shipping containers. If you can source a functional replacement that is smaller and lighter, then now is the time to shift.
The same goes for raw materials in terms of packaging. By getting creative with your sourcing, you can find the same items for discounted rates.
If you have using USPS, UPS, and FedEx, then purchasing a large number of prepaid shipping labels also can help you cut costs in the long term. It costs more upfront, but if you are confident in your upcoming holiday sales, it’s a low-risk high reward move.
Although the higher shipping rates right now are far from ideal, if you can successfully minimize their impact and take advantage of the higher overall demand, there is an undeniable opportunity.
- Featured Image, Pexels