In this article, Freightos‘ Director of Marketplace Supply Eze Fiszerman pushes back against the notion that transparency by definition drives bottom-of-the-barrel pricing. Using data from the Freightos Marketplace, he explores how users prioritize freight procurement and what it means for the future of international freight.
86% of importers and exporters say that cost plays a key role in their logistics provider selection. But there’s one factor that trumps price.
Reliability, which clocked in at 95%.
Logistics price savings can frequently end up costing a pretty penny but saving $800 on a container movement is worth nothing if it doesn’t show up where it’s supposed to, when it’s supposed to.
But let’s talk about E-commerce for a second. Digital sales are frequently perceived to be about a price race to the bottom. But, in reality, when it comes to the really successful companies, it’s anything but.
Amazon itself is proof of the balance. Over half of sales on Amazon come from third-party vendors. Many don’t realize that the seller who ultimately gets your business when you click “Buy Now”, is determined algorithmically by Amazon, based on many factors and certainly not just price.
Sticking with Amazon’s suggestions frequently mean that you’re not getting the best price. Instead, it’s a combination of the best price and service, all of which build up to the best customer experience.
Amazon’s $1.2 billion dollar acquisition of Zappos was likely guided by a similar principle. The shoe giant is famous for outstanding customer service (like going to a rival store to find a specific shoe brand, sending free shoes to a shoeless best man, or ordering pizza to customers).
The Secret Is In The Business Model
But aren’t low prices and exceptional customer service mutually exclusive? You get what you pay for after all. Well, this is where the marketplace magic comes into play. You see, in freight, as in shoes, low prices are what pique a buyer’s interest. They’re what help you get the buyers into the metaphorical shops instead of lingering outside on the sidewalk.
But, the internet has changed buyers.
They’re more savvy and empowered with information than ever before. Crowdsourcing and reviews are more accessible than ever.
From our experience, buyers will think twice before booking the lowest price, especially if it’s coupled with mediocre reviews. For any marketplace, great prices are worthless without reliable service. And amazing service won’t be discovered without good pricing.
The trick to maximizing both growth and revenue is reaching the balance, not, as some claim, just cutting prices. That works. Once.
The Data Proof
In any given month, tens of thousands of freight quote searches take place on Freightos. That gives us a ton of data to actually test the impact of pricing.
Specifically, we looked at roughly half our customers who book shipments without ever speaking to us.
About 45% of those bookings did not use the lowest price.
Just like Amazon, but with a higher focus on freight-specifics, our recommendation engine of best value, which combines factors like transit time, pricing, reviews and more tended to work. Over 80% of our freightos.com shippers trusted our Best Value filter when searching.
If you prefer to get more qualitative, an analysis of over 500 reviews on our platform didn’t even have and the word price didn’t appear once. Keyword density of third-party reviews show the same thing.
The top two-word review pair to appear in our Trustpilot reviews this year were:
- Great service
- Customer service
- Highly recommend
The most frequent meaningful word to appear was similar:
Importers need to focus on their products. Naturally, this pushes them to be more concerned about the quality of service, communication, and timing, than price.
Crucially, this doesn’t mean that price doesn’t matter; it means that it’s one, important component.
If general freight is being commoditized (and we think it is), logistics providers need to differentiate.
Low prices may seem like low- hanging fruit, but making sure your team is set-up to provide a stellar shipping experience is the only way to keep that buyer hooked.
A good digital back-end is one way, so is an old-fashioned focus on providing outstanding communication. In a world of last-mile and first-mile, today’s customer service in freight is about a combination of price, service, and the extra mile.