Squeezing the Most Margin Out of Airfreight Costs

The good news is business is booming. The bad news is margins are depressed because of additional maritime shipping costs!

In other words, as a retailer, I can sell all that I can get. It’s just too bad that the additional “getting it costs” are depressing my margins. This situation tremendously affects the vendors, both those that manufacture or import, as well as the jobbers.

What’s going on here? There seems to be a convergence of events and trends that are causing many vendors and large retailers to reassess their supply lines. The genesis of this situation primarily began with the COVID-19 crisis and was exacerbated by the growing tensions and problems with obtaining manufacturing capacity from China.

If you are in the fishing business and your supply line gets interrupted, the prudent importer of such goods must, of necessity, seek out new sources of product, inclusive of those manufacturers of tackle in other parts of the world.

The coronavirus pandemic is not only creating product shortages for U.S. importers and retailers, but it is also creating some negative and resentful feelings on the part of U.S. vendors, jobbers and retailers towards the Chinese suppliers. The situation is further amplified by the negative commentary between U.S. and Chinese politicians.

Meanwhile, as American suppliers seek production from other world countries, often the ocean freight option is abandoned because it’s too slow and the need is right now. Thus, U.S. vendors are opting for air cargo. That’s good but it costs much, much more than ocean freight. The net result is a severe squeezing of margins.

So, what’s the solution for both vendors and retailers. I am a firm believer that the first step for any business is the protection of your current customer base. It is much more expensive to garner a new customer than keep and existing customer. If the vendor is forced to live with reduced margins for six months or a year, then so be it. Raising one’s prices so as to match formerly available margins, might provide immediate gross margin dollars but, at the same time, force your customers to seek alternative suppliers.

The U.S. importer suppliers should take a variety of steps to both support their margins and, at the same time, keep their customer base intact.

Tips for Managing Increased Shipping Costs

  • Negotiate with your Asian tackle suppliers for price breaks or freight costs sharing.
  • Negotiate with the airlines for discounts; the airline business is also suffering.
  • Consolidate purchases with fewer vendors so as to increase your purchasing power.
  • See if production can be obtained from countries closer, such as Mexico.
  • U.S. vendors should consider placing consolidated orders with other U.S. vendors.
  • Tackle vendors should investigate having product produced in the U.S.A. Many factories have excess capacity which can be adapted to producing fishing tackle.
  • If the cost of freight goes up, test to see if these incremental freight costs can be shared with the retailers and consumers alike.

And finally, for both tackle retailers and vendors, if inventory is tentatively unavailable, then find and promote something else with sales potential. If you can find and sell $250,000 worth of face masks, hand sanitizers, hand wipes, Kleenex or toilet paper, then so be it. In these difficult times, all sales are made with dollars and will be accepted in your bank accounts.