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Is the pricing right for e-commerce cargo? ǀ Air Cargo News

Would it make more sense to set rates based on volume? Should they differentiate their pricing, levying different rates based on commodity and density?

The traditional dollar-per-kilo formula looks ever more obsolete. The need to look at volume for pricing is set to rise exponentially, given the rapid growth in e-commerce.

David Shepherd, commercial director of IAG Cargo, noted that international e-commerce has grown in excess of 30% in each of the past three years. “We look to sell more,” he added.

“Our volumes are up 17% this year,” said Roger Samways, vice-president of cargo sales at American Airlines.

Mail used to be dense when it consisted mostly of letters, but the rise of e-commerce has changed this to predominantly lightweight and fairly bulky traffic, he pointed out.

These developments raise question marks over traditional pricing strategies, said Robert van de Weg, managing director of consultant AirWay Cargo.

However, many carriers live in the past in this respect, stuck in old habits, he observed.

There is not going to be a concerted move to change pricing. Industry veterans remember a push by IATA back in 2006 to change the conversion factor for volumetric cargo from 6,000 cu ft per kilo to 5,000, an initiative prompted by the rise of volumetric freight.

The drive fizzled out after the US Department of Justice opposed it, calling it “effectively a price fixing agreement”.

Antitrust regulations prevent any collective move regarding pricing.

“Airlines have to find their own pricing policies,” van de Weg stressed.

“This is a commercial matter. Each airline will come up with its own solution to revenue management,” agreed Shepherd.

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Is the pricing right for e-commerce cargo? ǀ Air Cargo News.