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How rate transparency grows SMBs: Introducing the FBA Index

2020 was a critical year for small importers. Even before this year, 97% of US importers are small businesses, bringing in about $50 billion in imports.

Of course, COVID-19 has accelerated this trend, with more consumers working from home and ordering online, while it’s also become easier for sellers to source on Alibaba, import, and then sell on Shopify or Amazon.com. So, not surprisingly, Q3 saw a massive spike in small businesses being formed in the United States.

That being said, shifts in demand, fulfillment capabilities, and sourcing challenges have converged to create additional challenges for small businesses. It hasn’t stopped them though;  small businesses have stayed incredibly resilient in this challenging year.

Adaptability of SMBs

Among the over 10,000 small businesses on Freightos.com, the world’s largest digital freight marketplace, many are small eCommerce businesses who use Freightos.com to ship directly to Amazon FBA warehouses and other fulfillment solutions.

Despite the challenges during the year, shipments by these businesses to FBA warehouses (a major eCommerce channel throughout the pandemic) were up year on year from May through July by an average of 15%, showing resilience as consumption shifted from services to goods. It wasn’t all rosy though; FBA imports dropped off in July and August, likely in response to new restrictions Amazon placed on how much inventory third party sellers can hold in its warehouses. 

In other words, while demand and sourcing was able to keep up, last-mile distribution became a key bottleneck for SMBs.

And since overall Freightos.com marketplace shipments remained strong in August and September, it is likely SMBs selling on Amazon began using other fulfillment solutions or digital sales channels in one of many pivots SMBs have had to make this year.

Similarly, when Amazon introduced a policy in March which allowed only essential goods to be fulfilled through its warehouses, FBA shipments on Freightos.com dropped, but then recovered a week before Amazon announced the termination of the policy, possibly indicating that SMBs were able to quickly pivot to selling essential goods. 

So, beyond adapting to timing of shipping, early sourcing trends in 2020 showed sellers able to rapidly shift to sourcing COVID-relevant goods – with healthcare-related imports jumping from 7% of all shipments in February to 14% in April. 

But importing is still an uphill battle.

Beyond fulfillment and sourcing bottlenecks, extremely volatile shipping rates made planning a major challenge for importers too. As a mix of limited supply and surging demand combined to push rates up almost uninterrupted from June until September, ocean prices from China to the US West Coast doubled from the end of May to August, and increased by 138% (compared to end of May) by September, triple the rates for September of last year. 

With passenger jets and their bellyhold cargo capacity missing, air cargo rates reached record highs as well. Air cargo rates from China to the US increased more than 300% from March to May before falling but remaining very elevated compared to normal levels through much of the summer and into the fall. 

So while importers were able to, for the most part, shift to new goods and continue to import to fulfillment channels, razor thin margins were at risk of further erosion.

With a typical 30% spread in freight quotes, transparency into global logistics costs is critical, perhaps especially for smaller businesses.

This is why Freightos.com has begun to leverage its data to provide insight for small eCommerce sellers. The FBA index (FBAX) , currently in beta, analyzes real-time pricing data on China to US FBA warehouse shipping costs to provide FBA importers more clarity on what to expect from the market.

The FBAX  is the only door-to-door freight index for shipping to Amazon FBA warehouses, based on actual rates from common export cities in Southeast Asia to the most popular Amazon FBA warehouses.

How does this help importers?

Well, this index will help eCommerce sellers who are importing products from southeast Asia to easily see shipping cost trends to Amazon FBA warehouses in the USA, determine whether to ship by air or ocean, and provide guidance on shipment timing.

With access to FBAX, FBA importers will have a benchmark provided for different shipping modes which will help them estimate shipping costs, compare and choose between modes, and determine if now is the right time to ship by comparing historical rates.

Now for the details

So how does the FBAX actually work?

The index is updated once a week, and is based on price analysis of thousands of data points from multiple logistics providers offering live quotes on the Freightos.com marketplace for shipments of both containers and loose cargo to Amazon warehouses. This includes all costs, except for FBA handling fees.

FBAX aggregates real-time pricing data offered by logistics providers on the Freightos.com marketplace for door-to-door air, Less than Container Load (LCL) and Full Container Load (FCL) ocean shipments from four major origin cities in China to the eight Amazon FBA warehouses across the US most-frequently selected by Freightos.com customers (32 lanes total). 

The index rate for each mode is calculated as the average of the median prices provided for each origin-destination combination for which there are rates from more than one provider.

Rates per mode are presented as:

  • Air: $/250kg
  • LCL: $/Cubic meter
  • FCL: $/FEU

Select origin cities from key large export regions in China:

  • Guangzhou
  • Ningbo
  • Shanghai
  • Shenzhen

Destination Amazon FBA Warehouses were selected based on those with the highest volumes of orders on the Freightos.com marketplace and include:

  • Charlotte, NC
  • Dallas, TX
  • Joliet, IL 
  • Phoenix, AZ
  • Los Angeles, CA
  • Moreno Valley, CA
  • San Bernardino, CA 
  • Stockton, CA 

It’s also worth noting that costs are generally higher to the US Midwest and East Coast destinations compared to West Coast destinations and therefore may consistently be above the index price by comparison.