Freight brokers coping with Fuel-Price hike | Freight Broker Training

Skyrocketing fuel prices and the weak U.S. dollar are creating unanticipated new opportunities and challenges for local freight brokers and forwarders.

Since the cost of diesel fuel has risen 135 percent in the past year, these shipping intermediaries are watching customer loyalty erode as local manufacturers and importers struggle to find cheaper transportation for their goods.

“Because of the escalating fuel prices, manufacturers and shippers are breaking out of their routine because they’re being forced to look for more competitive pricing,” says Mel Eardley, owner of America Transport Systems (ATS), a San Antonio freight forwarding company with 14 employees. “Some of the loyalties built on customer relations are bending a little. We’re also getting calls from completely new customers, too.”

Freight forwarders are third-party logistics companies, also known as “3PLs,” that negotiate shipping arrangements and prices. They are the middlemen between two types of customers: those shipping goods and those who own and operate road, marine or air vehicles.

For example, if a local business needs to ship products to Buffalo, N.Y., a freight broker shops huge international databases for trucks and airlines that frequent that San Antonio-to-Buffalo “lane” for the best price and then coordinates the pickup and delivery of the goods.

In addition, the freight broker arranges for these same trucking and airline companies to refill their vehicles with cargo for the return trip.

Forwarders charge their customers a percentage of the cost of the total transaction, which is based on existing fuel prices and a variety of other factors, including the type of transportation, distance and delivery complexity.

So when fuel prices rise, these forwarders pass the cost on to their customers in the form of carrier fuel surcharges, calculated by using fuel indexes. These flat-fee surcharges have risen 11.5 percentage points in the last six months from 18.5 percent in November to about 30 percent today.

So, a $10,000 shipment in November that yielded a $1,850 surcharge would now have $3,000 tacked on to the price. Customers are not happy, but freight forwarders hands’ are tied.

“We’re in a very competitive business, and it is very difficult to retain customer loyalty when prices are an issue,” says Oscar Garcia, president and CEO of Global Highways Inc., a San Antonio freight-forwarding company with five employees. “On the flip side, we’re getting calls from customers who have never contacted us before. They’re shopping around now purely for price.”

Pamela Grzonka, a San Antonio branch manager for the four-employee broker and freight-forwarder Pioneer International — Texas, concurs.

“I can’t say people are happy about it (the surcharge). I get a lot of complaining about it.

“But if they’ve got to move their freight, they’ve got to move their freight,” she says. “I feel bad. But the price of fuel gets passed on to everyone. I’ve got to feed a family, too.”

Exports flourishing

While these fuel surcharges are most burdensome to companies shipping domestically and local importers, they are not affecting exporters. Thanks to the weakened U.S. dollar, exports are soaring.

“The dollar is so low that exports are booming,” Grzonka says. “Europe is paying for the freight because they’re getting more for their dollar.

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Niche Marketing for Freight Brokers - Freight Broker Training

AppId is over the quota

One of the hurdles for entrepreneurs fresh out of freight broker training is establishing a solid reputation as a reliable service provider. Shippers want to be sure that you can guarantee their loads’ safety and carriers want to know they’ll get paid on time.

 

Small or new brokerage companies have a way of addressing these concerns and at the same time jumpstarting their earning potential the first year. They find a specific segment in the market that larger firms have overlooked or ignored and specialize in servicing that group. It’s called niche marketing and it’s the easiest path to beginning your brokerage business.

 

One, you get to know your market really well. Serving that market day in and day out, you learn about its standards, idiosyncrasies and special needs. Such expertise goes a long way in acquiring your customers’ trust and in establishing a solid reputation for yourself and your business. Eventually, you develop a profitable network of shippers, carriers, and strategic partners which you can easily tap for business and which can also be a springboard for future expansion.

Two, you can focus your marketing efforts with laser-like precision. Marketing dollars are usually wasted when you market to a broad audience that may not even be listening to you. Targeting a specific slice of the market helps in creating a characteristic customer profile, enabling you to craft messages that push their emotional hot buttons every time you reach out. And because your messaging resonates with their pain and pleasure centers, you get more positive response and more business.

How to Choose a Market Niche

Some freight brokers already know what markets to target even before they get the necessary knowledge from freight broker training. For others not so lucky, they start from the ground up.

If you’re from the last group, there are two ways on how to choose your market niche:

Make an honest assessment of your skills, talents, interests and personality and determine how this will come into play in your freight broker business; or,Scope out the segmentations in the industry, choose a specialty, then learn everything you can about how to service that sector.

In deciding on a niche, find one that you like but have enough potential for growth to sustain your business over time. Some freight brokers, for example, choose to serve market niches or segments related to their passions and interests like antiques, microchips or cars.

By focusing on a niche that you’re enthusiastic about, you’re able to differentiate yourself from the competition with a can-do, bend-over-backwards type of service. And you know how it is: a satisfied customer is a happy customer is a repeat customer.

Freight Broker Niches

There are many ways to zero in on your market niche and find customers. Here are some techniques that old-timers use in finding their captive market and growing their business:

Focusing on regional niches. Find customers in your immediate vicinity, whether it’s in your city or state. Your particular location may be a manufacturing beehive for cars, microchips, semiconductors, and other goods.Working with shippers who ship your favorite things. If you’re passionate about cars, you probably know a lot about their makers and can easily gain access to a contact person who can connect you to the decision-makers. Make sure you can grow with these customers and not spread yourself thinly—your enthusiasm must match your capability so you don’t destroy your reputation when you can’t handle loads satisfactorily.Servicing niches according to type of trucks used. Dry vans, flatbeds, tankers, dump trailers and everything else in between. You can choose to focus on using one or two types of trucks so you’ll be able to find shippers much more quickly.Brokering cargo that needs specialized handling. When you focus on a particular type of load, say dairy, you can quickly handle truck type to use, climate requirements, shipper preferences and the like.

When serving a particular niche, you become an expert on it over time. Before you know it, you become the go-to guy in your space for certain types of cargo. Once you’ve established a reputation for solid dependability, you can bet broadening your market or your reach becomes much easier.

There’s one danger in niche marketing though—you can become so focused that your total revenue could end up coming from a few sources. Learn from the niche haulers of the trucking industry. Less than 25%-30% of their revenues come from a single source; they keep it diversified even within the niche. With the vagaries of the economy, putting your eggs in one basket can spell disaster when something bad happens…a reality that even large freight broker companies are not immune to.

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