How Are 3P Brands Handling Sharp Increases in Overseas Shipping Costs?
August 24, 2021
Sanjay Chandiram is the Co-founder and CEO of Kaliber Global, a premier brand collective and top 100 private label toy seller on Amazon. He also founded ProMark, a leading Amazon brand management agency, in 2018. Previously, Sanjay worked at companies including PwC, Kaiser Permanente, and Infosys BPM, where he gained diverse management consulting, process optimization, and project management experience. He holds an MBA from the Indian Institute of Management Bangalore.
Chuck Gregorich is the Co-founder of Net Health Shops LLC and Net Pet Shops LLC, multi-channel home decor and pet product e-commerce companies that import from several countries and sell on over 20 marketplaces in the US, Canada, and Mexico. Before this, Chuck was the CEO of Lorman Education Services, a national leader of continuing education seminars in North America. He holds a degree in accounting from the University of Wisconsin-Eau Claire.
Rick Fung is the CEO of MotoShield Pro, a company that offers revolutionary nano coating protection for your entire car, inside and out. For over six years, MotoShield Pro has been achieving its mission of bringing customers the most advanced formulations in ceramic coatings. As CEO, Rick is skilled in project management, strategic planning, sales, and more.
Here’s a glimpse of what you’ll learn:
- The shipping challenges Sanjay Chandiram, Chuck Gregorich, and Rick Fung have experienced during the pandemic
- Have Rick, Sanjay, and Chuck been able to find cheaper shipping options?
- How the sellers have been passing some of their increased shipping costs to customers
- The other costs that Rick, Sanjay, and Chuck have had to cut in order to reduce overall business spending
- How long are the shipping delays and high shipping costs expected to continue?
- What this experience has taught Rick, Sanjay, and Chuck about building a brand and sourcing products overseas
- Will the market go back to where it was in 2019?
In this episode…
Amazon FBA sellers that regularly source their inventory from overseas know the adverse effects that shipping delays and increased shipping costs can have on a business. They can lead to high unit costs, which may mean higher selling prices and, therefore, reduced sales.
These are the challenges most US-based e-commerce sellers have been facing since the outbreak of the COVID-19 pandemic. For over a year, there have been shortages and delays in getting containers — and even when available, the shipping charges have more than tripled.
In this episode of the Buy Box Experts podcast, James Thomson is joined by e-commerce sellers Sanjay Chandiram, Chuck Gregorich, and Rick Fung to discuss how shipping delays and increased shipping costs have impacted Amazon brands. The sellers talk about the changes they’ve made to reduce overall business costs, the lessons they’ve learned over the last year, and their thoughts on the future of the e-commerce market.
Resources Mentioned in this episode
- Buy Box Experts
- Controlling Your Brand in The Age of Amazon: The Brand Executive’s Playbook For Winning Online by James Thomson and Whitney Gibson
- James Thomson on LinkedIn
- Sanjay Chandiram on LinkedIn
- Kaliber Global
- Chuck Gregorich on LinkedIn
- Net Health Shops LLC
- Rick Fung on LinkedIn
- MotoShield Pro
- Amazon’s Multi-Channel Fulfillment (MCF)
Sponsor for this episode…
Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace.
The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace–not only producing greater revenue and profits but also reducing or eliminating your business’ workload.
Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management.
Learn more about Buy Box Experts at BuyBoxExperts.com.
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Welcome to the Buy Box Experts Podcast. We bring to light the unique opportunities brands face in today’s e-commerce world.
James Thomson 0:18
I am James Thomson, one of the hosts of the Buy Box Experts Podcast. I’m a partner with Buy Box Experts and the former business head of the selling on Amazon team at Amazon, as well as the first account manager for the Fulfillment by Amazon program. I’m a co author of a couple of books on Amazon including the recent book Controlling Your Brand in the Age of Amazon. Today’s episode is brought to you by Buy Box Experts. Buy Box Experts takes ambitious brands and makes them unbeatable. When you hire Buy Box Experts, you receive the strategy optimization and marketing performance to succeed on Amazon. We also support investors with due diligence services go to buyboxexperts.com to learn more.
Before I introduce our guests today, I want to send a big shout out to the team at GETIDA, a global leader in Amazon FBA auditing and reimbursements. GETIDA analyzes your Amazon data reconciles your FBA inventory and files claims reimbursements on your behalf. To learn more, check out getida.com. Today is a very unusual podcast for us. We are joined today by three large private label sellers, all of whom import products from Asia. All three are seeing firsthand the challenges of the shipping delays and increased shipping costs coming out of Asia. We’re looking at major shortages of raw materials and shipping containers slowing down everyone’s ability to get their products out of Asia on a timely basis. Before we go too far into these issues, let me introduce each of our three guests. Sanjay Chandiram is the CEO and Co-founder of Kaliber Global, a premier brand collective and top 100 private label toy seller on Amazon. Chuck Gregorich is Co-founder of Net Health Shops LLC and Net Pet Shops LLC, a multi-channel home decor and pet product e-commerce company that imports from several countries and sells on over 20 marketplaces in the US, Canada and Mexico. Rick Fung is CEO of MotoShield Pro, a revolutionary nano coating protection for your entire car, inside and out. MotoShield Pro is a client of Buy Box Experts.
Gentlemen, welcome and thank you for joining us today on the Buy Box Experts Podcast. I want to start with talking about what’s happened since the start of COVID. Back in q1 2020, we’ve seen significant increases in shipping costs bringing products from Asia, to the US and Europe. And not only have the costs increased by four to 10 times, but it’s also becoming rather unpredictable around when brand owners can expect to get their products delivered to countries where they plan to sell their items. Let me start by asking each of you what you’ve experienced around shipping issues so far since the start of these challenges last year. Rick, why don’t you start us off?
Rick Fung 3:02
Yeah, sure. Thanks, James, for having me. today. Your broadcast? Um, yeah, so a large part of it, honestly, last year was bad. But in terms of freight and delays, just with COVID ports being delayed and things like that, but this year has been a nightmare, I would say I mean, total container costs were $3,000. Now we included upwards, a little over 20,004 40 foot container. And we see some of the port delays of being a little maybe a week last two weeks last, okay. But with Covid now with Delta just reemerging, we still see more costs going up because a lot of these Southeast Asian countries are being affected that you hear on the news right now lately China’s has been hit again with COVID so now some of the ports are being affected as well. And that’s adding to more delays but it’s not just code affecting the freight costs. But raw material costs a lot right and for everything every sector metals, plastics, everything just not out production costs everything’s gone up. So it’s been it’s been a little I mean last year was hard to navigate this year is just nuts. I think my last container was 6000 April Yeah, now it’s 22 so like this is a major change and this there’s no way to forecast this right here. It’s a free for all bidding war. Even some of your freight forwarders I don’t know if they do this practice where they just take your price and send it somewhere else and it just becomes this continuous bid over each other like someone else’s paying 500 more you want to up it another 1000 just to get a container spots, but it’s been crazy. Amazon used to have a program Where they had shipping rates where you can use your service and they cancelled all that, because they’re booking their own containers for their own products and stuff like that, which is understood.
James Thomson 5:11
Sanjay, would you give me your take on you know what, what’s happening with your business? And what are you seeing so far over the last six months or so,
Sanjay Chandiram 5:19
versions. So last year, we saw an increase from an average of about 1800, a container, and by the end of the year was around 5500. Right that we paid was around 4000 through the year. So we expected that things are going to continue, prices are going to continue rising, and there are likely to be delays. So we’ve moved up our ordering to April for the fourth quarter, which is when we do a lot of our sales. We’ve already shipped, I would say about 60% of our orders for q4. And there’s still quite a lot that’s still in production and getting shipped. But now, just as Rick mentioned, there are production delays out of Asia. And that’s causing some causing us to end up paying higher shipping rates or rates went up quite a bit in the last four to six weeks. So we were in the eight to 10,000 range for a while. And that was comfortable. We had forecasted out and assume that you know it will top out at about 16,000. We are way past that. We have three different scenarios right now. And going up all the way up to 30,000. A container and
James Thomson 6:42
up to 1500. Last year.
Sanjay Chandiram 6:45
Yep. Wow. And we are getting quoted 23,000 was the last ones I saw out there, you know, different rates from different forwarders. For products which have batteries, which a lot of our products do, the rates are higher, because fewer carriers are willing to guess those. So we have started increasing prices gradually. Really, it’s driven by the market, we can’t just say okay, this product went up 50% in landed cost. So we can pass that on completely, it’s not going to happen one shot, it’s a phased price increase. And I expect as prices normally increase in the fourth quarter, we’ll have to put off some of those increases, so then Otherwise, the market just isn’t going to absorb those. So that’s really the challenge. And then we have also dropped certain products which were larger. The good thing is we don’t have too many oversized products. But for the products, which are the largest weight and volume wise in our portfolio, the landed cost has doubled almost. And so we’ve just scaled back on the quantities for those and the inventory that we have. We’re just keeping it for fourth quarter when we know we will get a higher price. And yeah, it doesn’t, you know, make sense to sell stuff at a loss or near breakeven track. What