Shipping Costs - Why Are They So High?

[Guest guest]

Howdy y'all,

 

When I was in Russia and able to read the list but not respond .. one

member asked the above question and a few folks replied .. but I want

to discuss this too and I hope this will edumocate new members and

make the old hands say, " Dang, I knew that. " ;-)

 

WARNING: This is not a short post .. it will take some folks to the

School House and bore some others. If you get tired of reading it

then just skip to the bottom .. there is a short recap there. ;-)

 

Shipping costs will always be higher than they used to be. It was

ordained to be so long, long ago .. the Gawds and Gawdesses determined

that until the end of time folks should ask such questions.

 

Another reason shipping costs are higher than in years past is because

transporters can charge more .. and get it. Shipping companies are

usually wealthy organizations who ride on the edge of Anti-Trust. But

on Anti-Trust violations, one must catch companies with their pants

down and all conspiracies are not hatched in a corporate board room

with lots of witnesses present. It only takes a meeting of two folks

over a martini to conspire and if they don't put the minutes of the

meeting in writing its next to impossible to nail them to the wall.

 

Valid reasons are the increase in costs of fuel, labor and insurance,

increases that usually exceed the rate of inflation. But can we

expect shipping costs to go down if the price of fuel goes down? ;-)

 

Specialization is another cause for increased costs. Specialization

of tasks has been refined over the years .. a necessary extreme to

correct an extreme. Was a time when companies could assign multiple

tasks to a single employee and get away with it. Many companies

abused employees in this manner. Increased gummit regulation, the

risk of liability for damage that might not be due to .. but might be

alleged to have been caused by multiple tasking which resulted in lack

of adherence to gummit rules and regulations .. and Unions .. have

done much to increase costs of all goods and services.

 

When companies " modernize " or " upgrade " their information processing

capability .. and lay off 25% of their work force .. they claim to be

reducing their costs. Can we expect to see any of those savings

passed along to the consumer? Not usually, and we know why. Its

all about increasing profits and companies know that folks always get

used to and accept price creeps.

 

When a dollar bill changes hands the US Gummit makes money .. a single

dollar bill might change hands 10 days a day. When goods change hands

someone is making money .. those who handle the goods or the documents

and those who pay the salaries of these folks are making money. As

the gummit regulates more .. and Unions see employers trying to

squeeze more profit out of the efforts of employees .. the more we can

expect to see increases in the cost of goods and services. Is this

all bad? Not if we are in the chain and are recipients of these

increases. As long as the increases we might share don't exceed the

cost we must pay for other goods and services its acceptable .. but if

we are unemployed .. or retired .. then it is not a good thing for us.

 

There are up and down sides to all economic systems .. Communist

Gummit Controlled .. Socialist Gummit Controlled .. or the alleged

Capitalist systems. One thing present in all these systems is greed.

If a CEO or Gummit appointed stooge manager is not greedy s/he will

soon be replaced. I won't give my opinion of the up and down sides of

various economic systems and I hope my post doesn't turn into a

discussion on which one other folks think is best. ;-)

 

As a fairly experienced international trader in goods and services,

and one that has worked with both Socialist and Capitalist systems ..

it has been my experience that in the export-import business the

Capitalist system is by far the easiest to work with because its a

fixed system that can be used for planning future operations. Matters

not what obstacles a company must deal with to do business .. a good

manager will consider these obstacles in their business plan .. but

when conditions change according to the weather or the whims of low

paid, barely trained, overly powerful government stooges who want you

to feather their nest .. like I have had to deal with many times ..

one can find that their planned profits can be reduced by 10% or more.

To correct this .. they must raise prices on the other end.

 

In authoritative, gummit controlled systems corruption is a norm and

the successful business must learn how to survive in that system ..

those doing business where Big Brother sees to the needs of the

sheeple learn this early on. I believe that the down sides to total

gummit control far outweigh those of corporate greed in the Capitalist

system where Anti-Trust laws are supposed to help control corporate

greed .. even though these laws are easy to circumvent and for many

goods and service providers they are not applicable.

 

Authoritative systems are difficult to work in because they usually

accept that their employees will demand bribes. The gummit will turn

a blind eye because they see it as a normal means of supplementing

income. The point that I am " talking around " here is that I have often

had unforeseen expenses that caused me to pay more for clearance and

shipping than I had planned .. and I had to pass those increased costs

on to the end buyers.

 

Even though the above is based on my personal experiences .. I reckon

its around 80% fact and 20% opinion .. but the below is 100% fact and

I accept that there will be some exceptions but no company can operate

based on exceptions .. just as a household can't operate on hopes that

they will pick the right numbers in a Lottery drawing.

 

I have watched shipping costs go up more than 300% since I first began

to export in 1995 .. but the price I can charge for various oils ..

like Oregano .. has increased less than 50% during those 12 + years.

This has put many small distillers out of business.

 

We will often find that the cost of moving goods exceeds the cost of

production of those goods .. this might seem unfair to a consumer if

they are not considering the realities of commerce. This has been the

case since man learned he could sell goods to folks a long distance

away from the place the goods were produced. Whether it was a camel

caravan of silks and spices or wooden ships loaded to the gills with

amphora filled with wine and olive oil, shipping increased the cost of

goods.

 

Those who moved goods by camel caravan and wooden ships knew that the

costs per kilo for movement decreased as gross weight increased and

that is still the case today. The caravan masters knew that their

insurance costs (the hiring and feeding of mercenary guards) increas

somewhat as the length of the caravan increased .. but not that much,

...similar to insurance costs for large/small shipments today.

 

The wooden ship transporters were often accompanied by other ships for

protection from pirates .. but the one group of pirates they could not

protect themselves from are still in business today .. Customs Agents

and Freight Forwarders. Go to any old port city in the world and you

will find that the oldest and most elaborate building in Old Town will

be the Customs House.

 

I bring up the ancients to point out that conditions bearing on cost

of transport have changed little in the last 5 or 6 thousand years.

 

If we consider the costs to bring natural products into the USA today,

we find that unless one uses sea transport (which I don't) the per

kilo cost of international air shipment over 500 kilos gross will be

roughly $5 a kilo .. under 500 kilos can be as much as $7 a kilo

depending on gross weight. Then we pay $600-$800 to a US Customs

Broker/Freight Forwarder and the US Gummit .. and then we pay the

domestic shipping .. which in many cases is as costly as the

international shipping.

 

And .. like the ancient traders, if a modern company can afford to pay

for the import of 50 metric tons instead of 5 metric tons they can get

a lot more bang for their shipping buck. If they want to they can

pass along the savings to the consumer. Just as the ancient traders

knew their markets .. modern companies have good market analysts who

research the cost of similar goods in their area and though they might

sell their products for less than the other feller .. it will not be

heckuva lot less. Good planning and marketing result in increased

profits for the owner of the company or the stock holders. If one is

a part of that system they see it as good business practice but if

not, they might see it as greed .. and who is to say who is wrong?

 

Applicable to the ancients and the modern importer .. for little folks

who import but 100 kilos or so there are no breaks .. and for those

who import even 5 metric tons .. unless they do it on a regular basis

they are at the mercy of the system.

 

The Customs Clearance Agents and sometimes Freight Forwarders had

power in ancient times and still do today. They can find many

supposedly valid reasons to drag their feet on an import .. and while

they do this there will be storage costs even though the shipment has

not been moved to storage. This situation is similar to the British

military folks Iran held hostage .. the word " hostage " is sometimes

also appropriate when discussing the import of products. ;-)

 

When a company offers " Free Shipping " .. you can bet that the profit

margin they have settled on is not going to be reduced .. successful

companies cannot operate on a Mother Theresa mentality. Don't look

for free rides or free lunches.

 

Costs buyers can control:

 

If a company policy is to charge ONLY Actual Shipping Cost and still

remain competitive in their pricing (as is the case with my company)

you can bet that they are operating with a large volume of sales. It

costs mucho dinero to pay employees to look up the exact costs of a

shipment and then advise the customer prior to them paying .. its a

good policy for those who can operate on a lower profit margin and

stay in business because of a high volume of sales. I invite folks to

check with their Post Office or local FedEx and see if they can catch

us with our pants down .. its not gonna happen. Some companies tack

on handling charges or charge more than the shipping cost. I don't

know how one can run a business without handling their products .. and

paying more than actual cost of shipping would upset me. There are

fixed and known expenses one must pay to stay in business. Seems to

me that these costs should be included in the final price of goods

sold instead of tacking on some additional charges .. we must look at

how the buyer sees things if we want to win their hearts and minds and

their return business.

 

Understanding basic shipping costs saves time and money and can reduce

frustration for the buyer and the seller. I've considered not

offering the Rose Petal Jam I have sold since I opened shop in 1999.

Its shown at http://www.av-at.com/jam.html .. I offer it only because

its Turkish and fits the " Anatolian Treasures " trademark. Profit on a

jar is less than the labor cost to package and ship it and I get

frustrated when someone orders 1 jar of Jam and then complains about

the shipping cost, or worse yet, never contacts us again after we

confirm the order. The gross weight is clearly indicated on the site

and shipping costs are not based on value .. they are based on weight.

 

This company has laid it out well .. but some folks won't take time to

understand. http://www.cvfsupplycompany.com/shippingfaqs.html ..

Bottom line, the shipping cost per pound decreases as the gross weight

increases. To get the most bang for the shipping buck we must make an

order that is large enough to allow the seller to give us a lower cost

for shipping. If one purchases ONLY a jar of Jam with a gross weight

of 380 grams (13.8 oz) and cost of $4.99 .. it matters not where they

live in the USA the shipping cost will be more than cost of product.

 

So if anyone wants to order Rose Petal Jam from me .. its wise to

order 2 or 3 jars with other folks or include the Jam with a larger

order so we can give you the benefits of lower cost FedEx Ground

shipping .. but FedEx rates are not gonna save you money on a single

jar of jam. ;-)

 

I became tired of the import-export business 3 or 4 years ago .. but I

keep it up .. for now. Just today the Turkish shipping company I

arranged to ship my household goods to Clarksville, TN, called and

said their agents could get the shipment to Norfolk, VA, but not

beyond. So I must coordinate Customs Clearance and forward shipping

myself or go back to the drawing board and find another company.

Guess all this is just grousing out loud but it makes me feel better

to do it. ;-)

 

A short recap of the long winded spiel above would be:

 

1. Shipping costs will always continue to rise and people will always

be willing to pay because they have no other options.

 

2. Free rides and free lunches of any kind always have hidden costs

to the recipient.

 

3. We can't avoid Death, Taxes and Shipping Costs.

 

4. We get more bang for our shipping buck if we use our noggin for

more than a hat rack.

 

Y'all keep smiling. :-) Butch http://www.AV-AT.com