Commoditization in container shipping has led to reduced differentiation, schedule reliability, and poor customer service. Carriers exploit low prices to maintain market share, resulting in fewer product choices and less competition.
Fremont, CA: Commoditization has led to decreased differentiation, schedule reliability, and poor customer service, so companies have to prioritize high-quality products and services to keep customers happy.
Container Shipping Is Becoming Commoditized
As container shipping has been commoditized, carriers have taken advantage of low prices to keep market share and use their capacity. Shippers aren't willing to pay a premium for superior service and quality because supply outpaces demand.
Why Container Services Are Commoditized
Now that we've covered the concept, background and prevalence, let's look at why container services are commoditized.
Excess Capacity and Vessel Upsizing
As carriers upgrade their fleets, container shipping has become commoditized, so product differentiation has eroded. Global trade and containerized transport sucked into a supply-demand imbalance, and then the recession exacerbated it. In order to get market shares, carriers cut prices and started price wars, resulting in standard services.
Low Barriers to Entry
A growing economy, potential, and easy ship financing brought about increased competition in the container shipping industry in the 2000s. Because barriers were low, carriers started their businesses with fewer investments, but expanded offerings resulted in fewer product choices and less price competition.
Container Alliances and Space-Sharing
Historically, carriers have joined forces through container alliances and slot-sharing agreements to optimize vessel utilization and geographical coverage, aiming to maximize asset turnover ratios and return on investment. But that's led to commoditization.
Think Long-Term Instead Of Short-Term
Shipping carriers prioritize short-term survival strategies because of the competitive nature of the industry. Long-term growth and vision are stunted by this myopic approach, which offers only essential services.
Efficiency Led To Standardization
There are only so many ports with draughts big enough for mega vessels to call at because of their size and weight. Due to the natural characteristic of draught, which is only practical to a certain extent, there aren't many ports in each region that can accommodate mega vessels. By reducing direct port calls, customers can select fewer port-pair combinations and routing options, leading to a commoditized service.
