A recent survey among smaller UK e-commerce operations reveals that the biggest concern in the sector is the rising cost of international shipping. It wouldn’t be a surprise to learn that retailers have the same concern here in the States. Shipping is just getting more expensive as time goes on.
Even retailers choosing not to sell overseas are seeing higher shipping costs. But price increases are disproportionately higher for the international market simply because there are more things to contend with. Moreover, global commerce is subject to the ripple effect. An event in one country can affect commerce all around the world.
If you have shipped anything overseas this year, you know that prices are going up. Here are the top three things influencing international shipping rates right now:
1. Fuel and Surcharges
Higher fuel costs are arguably the strongest influence on shipping rates right now. Between labor and fuel, the two expenses make up the lion’s share of what companies spend to provide international shipping services. When fuel prices go up dramatically, shippers cannot afford to take the hit themselves. They need to pass it on to customers.
Much of the rise in fuel costs during 2022 has been blamed on the Russia-Ukraine conflict. But that conflict is hardly the only thing in play here. Fuel prices have been steadily increasing for the last two years. Along with those rising prices have been higher international shipping rates.
Right behind fuel prices and surcharges is inflation. Not only that, but the single biggest factor in this current inflationary cycle is also the cost of fuel. Why? Because it impacts so many other things.
Let’s say you work with Preferred Shipping to handle your international packages via DHL Export Express. Preferred Shipping will charge a high enough rate to cover its own costs and generate a profit. Their costs are higher due to inflation. One of their biggest issues is fuel.
It costs money to produce fuel. It costs money to transport it. All those costs are passed on to the customers who buy the fuel. That’s what inflation does. It increases prices across the board. It initiates a chain reaction in which everything costs buyers more because sellers need to pay more to produce goods and services.
3. Currency Fluctuations
International shipping is somewhat unique in the sense that shippers in different jurisdictions are working with different currencies. International shippers like DHL need to account for exchange rates and currency values in order to make sure they can absorb the ups and downs of currency fluctuation.
During inflationary periods, accounting for currency fluctuations becomes more difficult. In some cases, the disparity between two currencies becomes excessive. In other cases, daily fluctuations can throw off the value of a particular currency enough to cause problems.
Currency fluctuations are especially troubling to cross-border commerce because you never know which direction they are going to go in. Sure, Forex traders make a living predicting the direction particular currencies will take, but there are never any guarantees.
Make the Best of It
As unpleasant as it may be, the rising cost of international shipping is a reality of doing business cross-border. It is one of those undeniable truths of doing business on an international scale. So there’s no point in obsessing over it. If you ship internationally, make the best of it.
In the meantime, here’s hoping inflation and currency fluctuations will settle down a bit. Should they do so, fuel prices should stabilize as well. The combination of all three would ultimately be good for international shipping prices.