Freight Forwarder Keeps Losing Power

Posted by Radhe

Why do Freight Forwarder Companies keep losing their power and market share year on year?

There are 2 major factors that contributed to this downfall.

The first one being the rise of “Courier” Companies.

Let’s not forget that courier companies were just delivering letters and documents for most of their existence. It is only after the arrival of the then startups like DHL, Federal Express (FedEx), UPS, TNT during the 1980s that the old-fashioned Freight Forwarding Companies started losing their power in almost every segment.

The major issue with these freight companies has been the lack of proper door-to-door tracking even after 4 decades of technological progress. THat’s where these “integrated companies” are winning single-handedly.

With freight companies, it was common to face situations such as missing documents upon delivery, missing duties, and taxes, customs clearance problems, and delay costs. Courier companies took great advantage of these loopholes and became the market leader.

Another major existing problem for Freight Forwarding companies is shipments that cost higher on DDU/DDP (below 150kgs) that cannot beat the prices of the “courier” companies.

In the 2000s the digital era revolutionized everything that is there in the world. E-Commerce especially, which came into the picture and started eating more market share of the freight forwarders. People adapted instantly to e-Commerce services and started ordering products online. That’s why the number of shipments has drastically increased with the fulfillment. But the real concern with these shipments is that these shipments are not handled by Freight Forwarding Companies but instead these shipments are coming from their precedent Containers directly shipped to wholesalers.

With continuous new changes and updates in the market, nowadays the consumer also understands the power and importance of e-Commerce. Here manufacturers have direct contact with the final end consumer. Such a direct relationship forces them to split their shipment into thousands of small shipments which are helping these “courier” companies grow on a large scale. But still, some freight companies are handling the competition in a decent manner. However, after the Covid-19 global pandemic hit us, it gave a massive boost to the growth of e-commerce companies and in turn boosted the growth of “courier” companies and they started stealing the market share on a large scale.

Recently, the new trend has come up with the Digital Platform which is proposing direct access to link the customers with the carriers. Customers can get their tracking code through which they can track their courier and get to know about each and everything about the courier from where it departed and when it’s going to arrive at their doorstep. Companies like Freightos are even clearly highlighting the lack of service provided by Freight Forwarders to the customers on their website. But when we know such companies are funded at more than $95 million, we believe there is a certain demand for this new trend.

So what can Freight Forwarders do in order to increase this market share? Why is the Freight Forwarders always behind the trend? The future looks gloomy if we look at the market share sliding down month after month.

As the saying goes “be where your end consumer is”. In the present era, end consumers are aware and alert and have access to world-class services at the tip of their hands. Legacy logistics companies must start being a part of the ongoing trends right from the beginning.

We believe it’s time for Freight forwarders to catch up with the trend and work with a futuristic vision – not thinking of short-term opportunities anymore and plan long term. The least they can do is start matching their services with the ongoing trend and they might just come out victorious.