International Business/Transportation costs effect on prices
I´m wondering how relevant can transportation costs be for export businesses. Since nowadays the economy is global, open and transportation costs have been greatly reduced compared to a few years ago, how relevant, from your experience, can transportation costs be in setting prices? Should I expect higher prices for imported goods in my country? How do companies typically deal with this issue in the real world?
Transport costs are always very important to pricing decisions in imported goods. It is true that with a more globalised economy rates are lower, however this also makes rates more volatile, although in the last year or so they've been somewhat stable. As far as how it will affect retail price that is really difficult to predict, as it is highly subjective and based on a variet of factors mainly dealing with the importer's management and the carrier contract structures. Most importers have buffers in place to mitigate slight fluctuations in pricing, so they likely won't effect the retail prices. The best way to deal with it is to structure your carrier contracts in a way that the price is controlled, of course with that you would need leverage in terms of volume moved. Also building in buffers in your pricing models will allow you to absorb some impact of rogue fluctuations