How High Freight Costs Impact Your Small Business

The pandemic caused such a sudden disruption to the global supply chain that is still unsteady nearly two years later. 

One of the most obvious effects of this lasting ordeal is the high cost of freight. The cost of shipping and transporting products to businesses, carriers, and customers is higher than ever. 

There are a few causes for this. One is rising gasoline prices, and another is the imbalance of supply and demand. As more people are staying home, they are shopping more online. But there is also a labor shortage, which means there aren’t enough workers to help deliver the goods.

Large companies have a better chance of taking on the increased cost of supplies and continuing business as usual. But for small businesses, these challenges are more threatening. 

Read on to discover how high freight cost impacts your small business – and your customers.

Increased Prices of Goods

Business owners understand the importance of balancing low prices with high profits. But as freight costs increase, this margin is growing slimmer and slimmer. 

The only option some businesses have is to respond by increasing the price of their products. Because this is the case in most industries, customers are relatively understanding that their favorite businesses are charging slightly more. 

But even the most loyal customers have a limit when it comes to increased prices. Try not to pass the full burden of freight costs on to the customer. Instead, look for other places you can save money and search diligently for cost-effective freight options. 

Changes to Customer Behavior

That being said, customers are more lenient on higher product prices than they are for higher shipping prices. Research shows that customers tend to see free shipping as a better deal than greater amounts of savings offered in the form of discounts. 

This subconscious thought process can be used as a promotional tool to your advantage. Offering free or discounted shipping whenever possible will increase customer interest. 

Another factor of behavior to consider is how many products people buy at once. Customers tend to be making larger purchases of multiple items so they only pay once for shipping. Offering flat-rate shipping and other incentives for this purchasing habit can help boost your sales. 

The Need for Flexibility

In the past, high availability and low transportation costs made fast and frequent deliveries the norm. This method, known as “just-in-time” delivery, was the most profitable way to deliver products. 

But the pandemic has shown that this business model is extremely precarious, and when unexpected disruptions arrive, the process of recovery is very difficult.

This has shown small businesses the need for flexibility. For example, working closely with carriers and considering multiple suppliers can help ensure there are multiple methods of delivering your products. That way, if one route is unavailable, the supply chain can still continue. 

Businesses should also consider nearshoring sourcing strategies to minimize the distance traveled by their products. Designing packages to be more shipping-friendly is another way businesses can be more flexible.

How Small Businesses Can Adapt

Here are a few other ways small businesses can adapt in the age of soaring freight costs:

  • Shop around to make sure you’re receiving the best freight prices 
  • Book freight orders early 
  • Buffer expected delivery dates for possible transit delays
  • Stay informed and communicate with your freight supplier regularly
  • Hire the manpower you need to accept goods in a timely manner
  • Use a third party logistics provider to minimize inventory management costs 

Read more tips for how to make your supply chain more resistant here!

Your 3PL Partner on the East Coast

Here at Cannon Hill Logistics, we have more than 30 years of experience helping small businesses reach the East Coast and beyond. Our strategies are optimized to withstand recent supply chain disruptions, including high freight costs. We can help your small business offset costs and deliver products more efficiently. 

Call now to learn more!