Why Is Shipping So Expensive in 2024? [Reasons + Tips to Reduce It]

Over the past couple of years, international shipping expenses have surged. For example, according to thenationalnews.com, the price of shipping goods has soared by a staggering 250% as a result of Red Sea attacks

Yet, what puzzles both individuals and businesses is the reason behind this steep rise in shipping costs.

It's a ripple effect caused by the dwindling supply of goods being dispatched. Yet, it's not as straightforward as it appears.

Let's delve into why shipping expenses have skyrocketed in the past eighteen months.

TABLE OF CONTENTS:

• Understanding the Top 5 Causes of Rising Shipping Costs
• Determining Shipping Expenses: How Courier Companies Decide
• Ways Companies Can Lower Their Shipping Expenses
• FAQ About Why Shipping is Expensive
• Shipping Costs Remain Unchanged

Understanding the Top 5 Causes of Rising Shipping Costs

1. Shortage of Shipping Containers on a Global Scale

Over the 18 months of widespread lockdowns in many countries, Chinese shipping companies redirected many shipping containers to the markets of the USA and Europe.

Lockdown measures caused a buildup of consumer goods stuck in China.

To meet the surging demand for consumer goods in the US, shipping containers have been distributed across South Asia and Africa.

2. Rising Expenses in Transportation

Shipping costs have significantly increased. Presently, the shipping sector faces immense pressure to accomplish a large volume of tasks with restricted resources.

In 2021, the price of transporting a shipping container surged from $3,000 to $8,000.

This surge can be attributed to disruptions in the supply chain, high fuel prices, costly gas expenses, and limited cargo capacity.

3. Scarcity of Goods Supply

The production and shipment of goods both domestically and globally are experiencing significant growth.

With fewer commodities available for shipping to an expanding pool of buyers, the prices of these commodities have surged.

Courier firms face challenges in scaling up shipping volumes for goods due to various constraints within distribution channels.

4. Surge in Consumer Demand

Over the last year, a growing number of individuals have embraced eCommerce for purchasing various items. That includes clothing, digital products, meal kits, and groceries.

The increasing volume of products being shipped contributes to price hikes. To offset the rising costs of shipping and fluctuations in the supply chain, eCommerce enterprises adjust their prices accordingly.

5. Challenges from Emerging Covid Strains

The emergence of new Covid variants and the increasing incidence of cases pose a significant challenge for shipping firms globally.

Many nations that had recently eased travel restrictions are now reimposing lockdown measures. Governments worldwide are implementing lockdowns to manage the spread of the new variant. This has repercussions on shipping between countries.

Determining Shipping Expenses: How Courier Companies Decide

The following are the factors taken into account when calculating international shipping expenses.

• Courier Arrangements. Courier arrangements encompass various smaller elements of the delivery process, which may not be costly individually but collectively contribute to higher shipping prices.
• Fuel Surcharge Fees. Fuel surcharges entail extra fees to account for fluctuations in fuel prices. Although these charges are often overlooked by many ecommerce companies, they can significantly inflate shipping expenses over time.
• Value-Added Courier Services. Value-added services, such as delivery area surcharges and residential fees, can notably escalate shipping costs. Identifying these additional costs can be challenging, yet they accumulate swiftly for online merchants.
• Operating Expenses. Shipping entails multiple stages, each incurring its own set of costs. Operating expenses represent the ongoing expenditures required to facilitate the movement of shipments through these stages.
• Variable Charges. Variable costs fluctuate based on output levels or services provided to clients. Factors like parcel dimensions and weight are commonly considered when determining variable costs.
• Minimum Shipping Fees. Many courier firms impose minimum package charges, representing the lowest amount a shipper must pay to send a package through their delivery agreements. These charges ensure a base fee for shipping services.

Ways Companies Can Lower Their Shipping Expenses

Businesses have options to reduce shipping costs. Here’s how you can achieve that:

Move Your Manufacturing Closer

The global pandemic has encouraged countries to become more self-sufficient. Many are seeking manufacturing alternatives closer to home.

Relocating manufacturing units nearby has enabled businesses to continue operations smoothly, even during lockdowns in other countries.

By having manufacturing sites closer to your main market, you can save on transportation costs and significantly reduce labor expenses as well.

Opt for In-House or Self-Delivery

If your manufacturing units are local, you can provide direct-to-consumer services. Many local businesses are adopting this approach, offering in-house or self-delivery to ensure products reach customers faster than expected.

In-house or self-delivery gives businesses full control over their delivery processes, increases visibility, and enhances the customer experience. This allows them to avoid relying on third-party services.

eLogii Optimization Software helps you with exactly that. 

Utilize eLogii Route Optimization Software for Advanced Delivery Planning

• Schedule driver routes for several months ahead and retrieve them as needed.
• Automated route optimization ensures drivers remain on course. That provides the most efficient path from one delivery point to the next.
• Recipient notifications keep customers updated throughout the delivery journey.

Proof of delivery enables you to maintain records of each delivered package, mitigating potential false claims from customers.

FAQ About Why Shipping is Expensive

Shipping Costs Remain Unchanged

Shipping expenses are expected to stay elevated in the foreseeable future, necessitating readiness for businesses reliant on shipping channels.

Local businesses should proactively prepare to act as needed.

For businesses aiming to handle local deliveries independently, we offer assistance. Our route optimization solution simplifies and streamlines the entire delivery process.