After the epidemic, in addition to soaring raw materials, ocean freight has also risen all the way, which always affects the hearts of foreign traders.
From the beginning of this year, until now, the ocean freight for exports from China has remained high, and the highest period has even exceeded the value of the goods themselves. The ensuing problem is that it is difficult to quote, and a little carelessness will cause the customer to postpone the order, or even cancel the order.
I believe everyone is familiar with the following problems encountered by our salespersons. I will share with you, and hope to bring you some references.
01
Worried about continuing to rise
How to quote?
A salesman asked me:
Boss, a customer asked us to quote stretch film with the CIF freight, and the current price is 8000 a cabinet.
Because of the epidemic, shipping costs have increased a lot, and now it’s more difficult…If you ship in 3 months, you don’t know how much you have to report. According to the current report, you are afraid that the shipping cost will increase a lot by then?
What should I do if I quote a double price and I am afraid that the customer cannot afford it?
Regarding this issue, I feel that we have no way to predict the future.
It’s just a high probability. I think the shipping costs are already very high today.
Is it possible to be higher in the future?
Of course there is a possibility, but no one knows where the pressure on global trade is.
After 3 months, I believe that the epidemic will be under control and everything will get better.
So my suggestion is to still follow the current quotation.
Of course, after 3 months, the shipping fee may be lowered a little, and if you refund some to the customer, people will feel your sincerity; but if the shipping fee rises sharply after 3 months, you can adjust the price at that time. Although I think the probability of the latter is not high.
If you are really not at ease, then talk about a range of ocean freight charges. Your price will remain unchanged within the interval. If the ocean freight rate drops by that time, you will refund half of the customer for the part outside the interval.
If the ocean freight price increases, the customer will bear half of the increase outside the range.
This is also a fair negotiation idea.
02
The price is too high after the freight is divided
The customer wants to cancel the order?
In addition, the salesman’s question is like this:
Boss, when we sell packing tape Jumbo tape. Because of its large size, one container can only hold a limited number of products.
Now there is a customer who wants to buy our products, but the ocean freight is allocated to each product, and the price is not competitive.
The customer wants to cancel the order now, what should I do?
In fact, when I do business by myself, I have encountered the same problem as a salesperson.
For bulky goods, when the price of freight is very expensive, customers basically disappear after inquiring, because the freight is simply too much to bear and the allocation is too high.
But now that the freight has risen to the sky, it is even more difficult to receive orders. Therefore, the customer wants to cancel the order. There is no good plan at present. I suggest that you may wish to study with the customer. We will temporarily shelve this item. After the freight has been adjusted, I will update the quotation for you.
03
The initial quotation is critical
Do gradient quotes
What I want to emphasize is that the initial quotation is very important. Gradient quotation is required, and then different ranges are guided according to different specifications and requirements.
The initial price is too low, the subsequent negotiation will be very difficult, because it is difficult to increase the price.
Although exchange rate factors, ocean freight and other issues are real, customers are aware of and easy to understand, but even so, it is still difficult to talk about price increases.
What’s more, the real situation now is that after the sea freight has soared, it may far exceed the customer’s price tolerance.
Coupled with exchange rate turbulence, if the exchange rate range and the principle of apportionment were not locked in the beginning, there is no reason to discuss price increases with customers now.
04
Sea freight skyrocketed
The order cannot be shipped?
In addition, some friends asked me that ocean freight rates have skyrocketed, and many customers’ orders cannot be shipped. They can’t be shipped all the time, and they can’t be cancelled. What should I do?
On this issue, my suggestion is to proceed in three steps:
The first step is to discuss the real situation with the customer and understand whether the customer’s needs are urgent.
The second step is to explore the best solution that can be accepted by each other according to the actual situation of the customer.
The third step is to support each other and be considerate of each other.
Perhaps many foreign trade friends, in the face of this situation, want to reduce risks through appropriate delays to the extent possible.
IN ALL, The following are the more authoritative values of the website, and they are also pasted for your reference:
A few days ago, Fitch Ratings (Fitch Ratings) announced that after the completion of profit in 2020, the sales performance of container shipping companies around the world will continue to increase strongly in 2021. The short-term swap freight rate will maintain high quality, and the contract freight rate in 2021 will also rise steadily. However, because this field is vulnerable to fluctuations in freight rates and its economic recovery and trade softness, the current freight rates cannot be maintained in the mid to late period.
Product requirements picking up in the third quarter of 2020, supply chain management termination (such as container shortages and seaport congestion), and more strategic transportation capacity management methods have all contributed to the increase in container freight rates, especially in China Waterways to Europe and the United Kingdom. According to data from the Freightos Baltic Index, the freight cost of a 40-foot container from China to Europe and the west coast of the United States is now over US$8,000 each (the average freight rate for the week of February 26 is US$8,308, which is more than Last week 1%) and nearly 5,000 US dollars (the average freight rate of the week of February 26 was 4922 US dollars, an increase of 6% from last week), which is far less than the 2,000 US dollars a year ago.
The changes in customer consumption habits during the pneumonia epidemic period (buying a large number of products, and reducing the cost of services such as leisure and entertainment and restaurants) have promoted the regeneration of trade. In addition, companies that have suffered more severe supply chain management terminations and increased requirements for personal protective equipment have further supported this development trend. According to the analysis of container trade statistics, in 2020, the total transportation volume from Asia to North America exceeds the level of 2019, and the growth rate exceeds 7%. In 2020, the volume of waterway traffic in Asia and Europe will be reduced by about 5%, indicating that with the demand for regeneration, the potential for improvement in 2021 is very large.
The shortage of container containers and congestion in the seaport caused by the termination of operations related to the pneumonia epidemic has increased the capital turnover time of container ships and further increased transportation costs. The quiet period of the Spring Festival holiday is generally likely to relieve some traffic jams, but as China maintains its manufacturing standards, the requirements are still strong. In many overseas regions, continuous outbreaks of epidemics and liquidity restrictions are likely to maintain an abnormally high level of freight rates in a short period of time.
At this stage, the contract rate is blocked, and this higher than normal swap price will be converted into a higher contract rate. According to the latest data from Xeneta, a resource company in the international shipping sales market, with the steady increase in container shipping requirements, interest rates on long-term contracts are soaring to unprecedented levels. According to the report, due to the soaring requirements, the insufficient supply of machinery and equipment and the maintenance of the highest swap rates, all key waterways have increased substantially since the beginning of this year.
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Stay Healthy and take care!
Shenzhen World Packing Industrial Ltd
Stretch Film & Packing Tape Specialist , Top China manufacturer