Fears that transparent online freight rates only lead to competition on price may be unfounded after a new study showed almost half of customers choose not to book at the lowest rate
Fears that transparent online freight rates only lead to competition on price may not hold water after a new study showed almost half of shippers choose not to book at the lowest rate.
The analysis undertaken by Danish consultants Sea-Intelligence concludes that for at least half the market other parameters provide for an opportunity to charge a premium.
Using data supplied by Cogoport, an online freight platform through which more than 100,000 teu has been booked, Sea-Intelligence found that in the case of 780,000 offers, when presented with multiple rate options as many as 48.8% of shippers chose not to book at the lowest rate.
“Given the fact that these shippers indeed had a transparent choice to actually book the lowest rate, this clearly shows that price is not the only determinant when selling freight online,” said Sea-Intelligence. “Half the spot market is perfectly willing to pay a premium even when it is evident to them that they are not choosing the lowest price.”
The rate offers covered around 5,800 port combinations predominately on the India trade lanes.
An analysis of those that decided not to go with the lowest available rate found that 24.4% of shippers were willing to pay a premium of up to 13% and 24.4% of shippers were willing to pay a premium of more than 13%.
However, when taking into account the actual volume associated with each booking Sea-Intelligence said that the revenue obtained was only 6% higher than what would have resulted from always booking at the lowest price.
Sea-Intelligence said that this, unsurprisingly, suggests that high volume shippers and shipments pay the lowest freight rates, and that the smaller shipments pay higher premiums.
Therefore, it explained that there is a limit as to the magnitude of premiums that theoretically could be gained.
“But the very presence of the premium is a strong indicator to the freight providers that in the dawning era of online freight, it is of paramount importance to be able to gain brand recognition for offering premium services, in order to tap into the freight rate premium,” said Sea-Intelligence.