In this blog post we explain why Open Benchtable will continue to offer free shipping despite the COVID-19 impact on freight costs.
How Does International Shipping Work?
In normal times there are multiple ways of shipping a product from the factory to the customer. The most common methods are shipping by air and shipping by sea. While shipping by sea is much cheaper, it takes a lot longer to get the package to the final destination. Furthermore, to achieve a much lower transportation cost you want to ship out products by container. Since Open Benchtable ships directly to the end-user, this is not an ideal option.
Air freight is typically more expensive than sea freight, in particular when shipping with companies like DHL that have their own fleet. However, the cost can be reduced by working with transportation companies that use the empty cargo space in passenger planes. According to Flexport.com, “More than 50% of airfreight flies in the cargo holds of passenger planes. For Transatlantic lanes, that number rises to about 80%.” Sadly, due to COVID-19 most passenger planes are grounded.
According to the April 3 Seabury global capacity report, global air cargo capacity has dropped 35% from last year.
At the same time, the demand for essential personal protective equipment (PPE) has skyrocketed. Especially the Chinese producers have ramped up production as COVID-19 spread globally. The PPE demand is urgent and requires priority shipping, meaning it eats up any space on the sparsely available passenger airlines. According to Neel Jones Shah,EVP, and Global Head of Airfreight at Flexport: “Demand for PPE has ratcheted up the usual level of demand for air.”
The rapid decline in supply of air freight options and rapid increase in demand for PPE shipments has caused a big shock to the logistic cost. According to Flexport.com:
What we see in the air freight market is unprecedented. Pricing is breaking all records and falls well outside the past five years’ range of prices. But nowhere is the exponential increase more dramatic than in the Transpacific trade lane. China to North America spot airfreight pricing is now well north of 10 USD per kilogram, and full freighters are selling above 1M USD per flight—and increasing every week. Looking at the China to Europe airfreight rates, the news is not much better, having seemingly tripled in the past month. On top of that: Some ground-handlers in North America and the EU are imposing COVID-19 emergency support surcharges.
Impact on Open Benchtable Free Shipping Policy
Our own experience is similar to what is reported by Flexport. The transportation costs have increased across the supply chain: from factory to warehouse, from warehouse to forwarder, from forwarder to warehouse, and from warehouse to the final customer. Even for popular routes like China to USA, we’ve seen quotations for logistic double over the past couple of weeks!
Just like any responsible business, we considered how this sudden increase in freight cost has impacted our operational costs. The profit margin per sale will decrease significantly if the logistic prices remain elevated. While we are certainly not happy about the situation, we have decided to continue to offer free shipping to our customers for the foreseeable future because two main reasons:
- We are successful thanks to you, our customer. We feel that in challenging times, it’s up to us to give back to the community and take the hits from increased shipping costs for as long as possible.
- We hope that the increased demand in the market will incentivize new players to join the global logistic industry and that logistic prices will come down on the short-term (3 to 6 months)
While we maintain the free shipping for the foreseeable future, we will keep a close eye on the logistic cost. In case the prices increase further we may need to revisit this decision. As per usual, if you’re in the market for a premium benchtable you can check out the variety of options on our Where To Buy page.
We wish everyone who is affected by COVID-19 to stay safe and healthy, and make the best of a bad situation!
(Picture by Dominic Alves)