Pandemic Shipping Costs Explained

What goes in to shipping guzheng internationally?

Alright folks you’ve probably heard by now: “Massive Shipping Delays Raise prices” and “Huge delays at ports amid pandemic”. But what does all that actually mean? Well, today we’re going to talk about containers , shipping, and prices.

Tl/dr: Shipping supply chain costs are 10x more expensive than they were in 2019, meaning if a guzheng cost $12 to ship from a manufacturer to a store back then, it now costs $120. We’re seeing the effects, with most stores raising guzheng prices 10-20% on most models.

Some Background

First some background: starting in the 1950s and really taking off in the ‘60s and ‘70s, container shipping is the concept of packing stuff in a large metal box, loading that on a ship, and moving the contents between ports. After a few decades of confusion and fighting, by the 1970s countries had built out the basics. By the 90’s / 2000’s they had made a full system including:

  • Shipping containers

  • Container ships

  • Container ports

  • Container yards (for storage)

  • Container cranes

  • Container trucks

  • Container trains

  • Container shuttles

All these are used in sequence to get what you buy from where it is made. This sequence is like links in a chain - so we call it the “Supply Chain.”

Steps in a (shipping) Supply Chain

A modern shipping supply chain looks something like this:

  1. Factory loads goods into normal truck

  2. Truck drives to warehouse

  3. Warehouse moves packages from truck into container, does paperwork

  4. Container trucks moves full container to container yard

  5. Container shuttle moves container from yard to dockside at port, ready to be loaded

  6. Container crane places container on ship

  7. Container ship sails across the ocean

  8. At new port, ship waits for its turn at the dock

  9. Crane unloads container

Then things switch up depending on where it’s going.

  • Shuttle -> Train -> Warehouse for long distance

  • Shuttle -> Truck -> Warehouse for short distance

  • Shuttle -> Yard if it needs to wait for some reason… and then -> train or truck -> warehouse.

Whatever happened above, the container is unpacked at a warehouse. And:

  • If you’re a big company, you own the warehouse and your internal teams takes over.

  • If you don’t own the warehouse, then goods are unpacked into another truck -> your store -> customer buys (eventually).

  • If you already have a customer’s address, the goods go warehouse -> mail carrier -> customer.

And finally

  • Empty container waits at warehouse to get loaded for next journey.

That’s a lot of steps! And each step has the potential for delays. So what’s our current problem?

So Many Delays

People are moving more stuff than the world has ships and containers. Further, some ports are getting more ships than they can handle, so the ships are creating long lines as they wait. If a ship is waiting, it delays:

  • Delivery of its goods

  • Reuse of the container for a new shipment

  • Every trip afterwards

And, any delay to the following trip means we cycle back through these issues - goods don’t get delivered, meaning containers can’t get unloaded meaning we don’t have empty containers to load for the next trip.

Starting to see the problem? So that’s the Delay side of things. Your stuff is on a ship waiting to get unloaded. But what about the cost?

The Curse of the Empty Container

Well, you see that last step? “Empty container waits”? In an ideal world, it’s loaded immediately, put on the next ship out, and everyone is happy. But what if no one at the next stop wants something from this stop? The next stop NEEDS more containers to load their goods - so a shipping company takes the empty container back, loads it on the ship, and sails an empty container to the next stop.

With nothing inside the container, no one is paying the shipping company for the trip. If we pretend the entire ship is empty containers, that means the shipping company lost a lot of money on that trip. To make up for it, they say the next customer has to pay more. After all, it cost the ship fuel and staff wages to get the empty container to you. You’re going to pay for that right? We can see that by the reverse - countries that sell a lot of stuff are expensive to ship from, whereas countries that buy a lot of stuff are cheap to ship from, since so many of their containers are being returned empty. Right now - it is 16x more expensive to ship from China (major seller, too few containers) than it is to ship from the USA (major buyer, too many containers).

How much of a price change are we talking?

Prices to ship a pre-packed container from China to the US went from around $2,000 per 40-foot container in Dec of 2019 to $20,000 in Dec 2021 per FreightOS. That’s 10x the cost!! A 40-foot container can carry around 360 guzheng. In 2019, that would mean an importer paid $5.50 per guzheng. But now? $55.00 per guzheng. On a $2,000 guzheng that might not feel like a big increase - but on a $400 guzheng, that’s huge.

Line graph showing shipping price increasing 10x

FreightOS shipping ticker showing costs raising 10x in last 2 years. This index does not include other shipping costs.

But what happens if you don’t have the container? If someone needs to find you a container and pack it for you then prices double again - to around $45,000 for the same trip. That’s $125 in shipping costs alone. And let’s be real - you probably don’t have a container.

Now what if your order only fills part of a container? Maybe you only have an order for 50 guzheng? Well shipping costs don’t drop that much - FreightOS suggests it would cost about $6,000 to ship those 50 guzheng by sea- $120 per guzheng.

So if you go by ship, you’re likely to hit weeks of delays. But what about by air? Well, it’ll be faster - on the order of 1-2 weeks instead of 4-8. It will also be costlier - around $34,000 for those 50 guzheng or $680 per instrument. Flying is pretty much off the table. (And in case you are wondering, I also checked prices for individual guzheng on their own as a priority package - $700 from FreightOS, $940 from FedEx, and $1,900 from DHL.)

How can sellers offer less than $500 for a guzheng?

Partially, it’s about acceptable loss and profit levels. If the store is filling a container it may be $120 to ship each guzheng on average, but they could put most of that markup on more expensive guzheng so you don’t notice. IE, the $2,000 guzheng goes up 10% to $2,200, the $400 guzheng goes up 10% to $440. If the seller sells both, they made $240 on the markup - which covers the $120 to ship each guzheng, while keeping the cheapest guzheng cheap enough that people buy it.

There are other questions to - for example, how much does it cost to buy a guzheng from a manufacturer, in bulk? Less than the $400 one would assume, with markups added to pay for the running of the store. If that’s the case, a seller can choose to make less money on each sale in an effort to keep guzheng prices lower. In theory, making less but selling one is better than keeping the price high and selling none.

I am not saying this is how your favorite store handles the rising shipping costs, just that these are examples of strategies stores everywhere can use to help spread the cost of running their business and getting you the goods that you want at prices you can pay.

Incidental Inference

This also suggests why recent newcomer Eight Tones has such high international shipping - they are quoting the per-package price assuming it’s a one-off to your country. Larger companies (perhaps like their neighbor, Eason) may ship via freight consolidators instead of directly. A freight consolidator will get the per-container rate from a big shipping company, then put a slight markup on that to pay for their staff. The end result is a rate that is cheaper than the public, per-package price from a company like DHL or FedEx.

The consolidator makes it happen by getting many companies worth of goods to fill a container, and does the work to coordinate load and unload. The original store pays less than the per-package price but doesn’t have to fill a container all at once.

What about Amazon?

Sound of Asia and The Bamboo Grove sell on Amazon and they are great! The following is about other sellers not based in North America.

A, many of the guzheng on Amazon from non-North American sellers have much high prices which suggests they may be paying their shipping fees from a markup on the list price.

B, Amazon runs “Fulfillment by Amazon”, a program sellers can opt-into. The seller agrees to put their inventory in Amazon’s control so that Amazon can act like both a freight consolidator and distribution center/warehouse. Amazon ships their package alongside everyone else’s inside a full container for maximum savings, then holds it in their warehouses until final delivery.

C, Amazon owns or leases its own ships, airplanes, and containers, making them their own shipping company, so they can customize everything to lower their costs.

D, Amazon forces its warehouse employees to work so hard that they hurt themselves while paying them less than local standards. Their package system is faster at the cost of underpaying and hurting its employees. (Most recently, Amazon refused to close its warehouse during a Dec 10th 2021 tornado warning in Illinois and required its drivers to keep delivering during the tornado. The Tornado hit the warehouse and killed six people. Amazon warehouse pay in Illinois is between $12-15/hr per ZipRecruiter; median per capita income in Illinois is $18/hr per US Census.)