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April 30, 2021

Global shipping crisis and customer satisfaction: Why businesses may struggle to keep customers happy

David Vanamburg

The Ever Given, the 220-ton cargo ship that can carry 20,000 containers, is no longer wedged in the Suez Canal. That’s the good news. The bad news? The six-day blockage of one of the world’s largest container vessels could have long-lasting ramifications.

According to Northeastern University professor of political science Stephen Flynn, “The disruption of a week of this size is going to continue to have cascading effects … it’s got to be at least 60 days before things get sorted out and appear to be a bit back to normal.”

Ports will see added congestion, and ships will be thrown off their usual schedule. And worse, supply chains, which had already been heavily disrupted since the beginning of the COVID-19 pandemic from a worldwide container shortage, will be further compromised. Eventually, the consumer is going to bear the brunt of this dilemma in the form of higher prices.

When this inevitably comes to fruition, customers, who have dealt with their fair share of goods shortages over the past year, are not going to be enthusiastic about the additional strain on their wallets.

It starts with freight costs

The reason consumers will be facing rising costs of goods stems from increased freight costs.

Over 80% of global trade is transported by sea. And supply chain disruptions have made this process much more expensive.

In June 2020, the average cost to ship a 40-foot container was $1,040. On March 1, 2021, that number soared to $4,570, per S&P Global Platts. This caused container shipping costs of U.S. imports to jump from $2 billion in February 2020 to $5.2 billion in February 2021, according to S&P Global Panjiva.

“At the moment a lot of these costs are within the supply chains,” said Chris Rogers, a research analyst at S&P Global Panjiva. “I think it’s inevitable that it will be passed on to consumers — it’s just going to take time.”

Supply shortages already a problem

Peloton has experienced the double-edged sword of high demand. While customers crave the bike and exercise equipment, they get equally enraged when these products are delayed, or worse, don’t show up at all. According to a New York Times report, Peloton customer service can’t help much of the time.

But Peloton isn’t the only retailer feeling the supply chain squeeze.

Despite leading department and discount stores in customer satisfaction for the fifth straight year with a score of 81 (out of 100), per the most recent Retail and Consumer Shipping Report, Costco is having difficulty stocking imported cheese and patio furniture. Its customer satisfaction has also decreased 2% year over year.

Meanwhile, Dollar Tree, which also experienced slumping satisfaction, down 4% to 74, reveals its supply chains have “been stressed.” According to CEO Gary Philbin, the retailer has “$1 billion in the pipeline somewhere,” and more products are on their way. Foot Locker’s inventory was down nearly 24% at the end of Q4 because of port congestion.

The list goes on and on.

The biggest loser in all this is going to be the consumer, who may be forced to pay more for high-demand products on short supply.

What can businesses do to soften the blow to their customers?

Manufactured goods like food items and appliances typically score higher for customer satisfaction than service-oriented businesses, like banks, airlines, or subscription TV. But delivery delays and rising prices threaten that favorable position.

The last thing companies need in these trying times is for customer satisfaction to wane amid frustration with supply chain issues. The question is what can businesses do to soften the blow?

Peloton’s answer is to invest $100 million into air cargo in the hopes of speeding up delivery. Said Peloton CEO John Foley:

“On average, in the coming months, we will be incurring a transportation and delivery cost that is over ten times our usual cost per Bike and Tread, including, in many cases, shipping them by air instead of by sea. We are making this investment because we are as frustrated as you are that you don’t have your Peloton Bike or Tread yet.”

While this investment might not be enough to curb the current crisis, it’s a step in the right direction. Customers want to believe their voices are being heard and businesses are taking steps to fix the problem. Organizations that fail to even address the issue are going to struggle to maintain the trust of their customers. This could cost them now and in the future.

Consumers should expect to see the price of goods go up. But businesses – especially retailers – have a responsibility to try to lessen the effect. Those that do will, hopefully, earn the patience, respect, and good will of their customers. Those that don’t, well, your brand reputation will be like that of the Ever Given in the Suez Canal: in need of a rescue.

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