The Factors Behind Shipping Cost Increases During The Holiday Season

Shipping cost increases can be a major concern for dropshipping businesses, particularly during the holiday season. This year, shipping prices have experienced more frequent rises compared to previous years. So, what exactly has driven these cost increases? We have summarized the following possible factors.

New eCommerce Giants are Squeezing The Shipping Space

The rise of new e-commerce giants like Temu and Shein has had a significant impact on the dropshipping market, particularly in terms of air cargo space. The surge in demand for shipping services combined with limited capacity has led to soaring shipping costs. Notably, both YunExpress and CNE have increased their shipping prices, especially on major routes from Asia to Europe and the US.

In addition, several shipping companies are now prioritizing larger clients and abandoning smaller ones due to space constraints. It's crucial for dropshipping businesses to stay loyal to trusted shipping companies to ensure timely and reliable delivery rather than solely focusing on pricing.

Air Cargo Price is Fluctuating Before Holidays

It is important to note that the increase in shipping costs is primarily driven by the shipping companies themselves, rather than our pricing structure. These price hikes are motivated by a response to the rising cost pressures imposed by airline companies, which are then passed on to customers.

Air cargo pricing operates on a floating strategy, similar to flight tickets, meaning that prices fluctuate throughout the year. During periods of high demand, such as the holiday season, prices can experience significant increases.

So, when calculating your margins and setting prices, it is crucial to consider these fluctuations in shipping costs, particularly during the holiday season.

Air rates – Freightos Air index

The Iceland Volcano Eruption Could Affect International Flights

The ongoing volcanic and seismic activity in southwestern Iceland has raised concerns about the possibility of a volcanic eruption. Scientists remain vigilant, highlighting the significant likelihood of an eruption in the coming days. 

Apart from the potential devastation to the town of Grindavík and its surroundings, international air freight could face disruptive consequences if a large ash plume were to emerge. However, recent data from the Iceland Meteorological Agency suggests that the risk of an explosive eruption has diminished, alleviating concerns about major disruptions to international flights.

Strategies to Navigate Shipping Cost Increases in Dropshipping

Facing the increase in shipping cost comes from the impact of the busy season, shortages in shipping capacity, and other uncontrollable factors, it is crucial for dropshipping businesses to maintain profitability and provide competitive pricing to customers. Here are some strategies to help you navigate shipping cost increases:

● Evaluate Shipping Options: Research and compare different shipping carriers and methods to find the most cost-effective options without compromising delivery speed and reliability.

● Optimize Packaging and Weight: Review your product packaging to ensure it is efficient and minimizes dimensional weight charges. Optimize packaging materials to reduce excess weight and size, which can help lower shipping costs.

● Implement Shipping Cost into Product Pricing: Calculate the average shipping cost per product and factor it into your pricing strategy. Adjust your product prices accordingly to offset the increase in shipping costs and maintain profitability.

● Communicate with Customers: Be transparent with your customers about any potential shipping cost increases or delays that may arise. Provide clear information on shipping policies, estimated delivery times, and any additional charges that customers may incur.