In order to run a successful e-commerce business, you must consider a lot of things from coming up with consistent marketing strategies to ensuring the supply of high-quality products. However, nothing is probably more important than shipping your products safely to your consumers but at the same time, keeping the freight rates minimal for both parties.
Shipping costs can either make or break your business. In fact, they are the top reason why 75% of online customers abandon their carts. That’s why it’s important to keep these costs in check.
Want to keep shipping costs under control? Read on to know the 8 key factors affecting freight rates.
8 Main Factors That Affect Shipping Costs
1. Fuel Costs
All types of courier services would all depend on fuel in order to get your packages from point A to point B. That’s why the rising and fluctuating price of fuel is probably the number one factor affecting freight rates.
Once fuel prices fall, airplanes, container ships, and trucks become cheaper to operate. This would ultimately minimize the cost of transportation. In contrast, increased fuel costs mean higher shipping costs.
The origin location and destination of your cargo can also affect freight rates.
If you’re shipping via ocean, be aware that various ports of disembarkation charge different rates. When sending cargo internationally through the air, you should be informed that exchange rates between different countries can result in variable shipping costs.
It’s also important to know that the farther the package travels to reach its intended delivery point, the more expensive shipping costs would be. For instance, sending cargo across the country would cost considerably less compared to delivering it abroad.
Tip: As a business owner, you really can’t do anything about the distance traveled. However, you can consider running fulfillment centers near key locations (based on past marketing data) in order to get closer to your customers. This would ultimately reduce shipping costs.
3. Package Dimensions and Weight
Both dimensions and weight of packaging are determining factors affecting freight rates.
The larger the packaging, the more expensive shipping costs would be. This is also the same for the weight of the cargo—heavier shipments can cost significantly higher to ship out compared to lighter goods.
And while the weight of your items can’t really be changed, you do have control over what type of packaging you will use. Make sure to choose a box or crate large (yet snug!) enough to fit your product. By selecting a perfectly fitted packaging material, you can also minimize the risk of cargo damage during transit. Avoid putting your cargo inside a very spacious container as it can be more prone to bouncing, shaking, and vibration.
4. Demand for Freight
Shipping costs would also depend on the particular demand for freight. For instance, if stocks of products are limited yet in high demand, you may be inclined to sell these items with shipping fee at a premium price. On the other hand, if the business is slow, you can lower the costs of goods or even offer “free shipping” promotions to get rid of the extra space in your warehouse.
5. Tracking and Insurance
Availing cargo insurance and tracking is not the most cost-friendly option in the market. In fact, it can significantly increase your shipping costs.
However, as a business owner, it’s still an aspect you should consider when shipping your items as it provides numerous safety benefits for your business. For one, it acts as proof that you have already forwarded the package to a courier company. It also covers your expenses just in case the cargo gets lost or damaged while in transit. This ultimately leads to better customer experience which in turn, boosts your profits.
6. Customs and Duties
When you regularly cater and ship packages to international customers, you’ll be dealing with a lot of strict customs regulations. This requires you to pay for extra fees that can vary greatly from country to country.
Consumers would usually shoulder these additional shipping costs which can take them by surprise. However, as a business owner, it’s important to include such information on your shipping policies. You should properly explain that these hidden costs are beyond your control and you will not earn a commission from them.
7. Geopolitical Events
Aside from customs and duties, international shipping costs can also be affected by a range of geopolitical events.
For instance, businesses that primarily use sea freight have been suffering from considerable losses caused by global piracy. And with concern about pirates and rogue governments growing increasingly each day, courier companies are forced to take longer shipping routes and pay for expensive insurance premiums. This ultimately leads to costly freight rates.
Did You Know? The global damage caused by piracy is estimated to cost $18 billion according to the World Bank.
Unlike other factors, the weather does not greatly affect freight rates but it still has an impact on how much you pay for the shipment of your cargo.
Busy ports, for instance, would still charge for delayed shipments regardless if it’s caused by natural calamities or not. This sanction is also applicable to major airlines (that are usually affected by airport closures caused by flooding) and trucking companies (that may be affected by damaged roads due to extreme rains).
ALSO READ: 7 Surprisingly Common Logistics Mistakes and How to Avoid Them
Shipping costs can vary a lot depending on the distance traveled, package dimensions, and shipment weight. It can also be influenced by tracking and insurance fees as well as additional payment for customs. Fortunately, by understanding these 8 factors affecting freight rates, you can minimize the relatively large amount which would ultimately lead to cost-saving benefits in the future.
Are you looking for a courier company in the Philippines that offers reliable logistics services at competitive rates? With over 20 years of experience in the industry, Worklink Services Inc. is committed to providing high-quality freight forwarding service for our customers. Consider availing our range of Dalivery services for your air freight, land freight, and sea freight needs. Contact us today to get started!
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