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10-22-2019

How E-Commerce is Changing the Freight Forwarding Industry?

E-commerce is growing at a rapid rate and, among the top trends in cross-border e-commerce logistics, the whole traditional international freight forwarding industry is now facing serious price competition and market leader shifting crisis. Most corporates are urgently seeking transformation of their business models to break through the bottleneck. How can freight forwarders not fall behind the trends while the number of traditional bulk shipments is decreasing and that of e-commerce deals is increasing?

In order to stay competitive, it is essential to have a good understanding of the trends within the industry.

3 operating models in cross-border e-commerce logistics

Generally speaking, there are three types of operating models in cross-border e-commerce logistics, namely FBA, overseas warehouse, and E-parcel (E-packet). If we rank these three models based on revenue, FBA is the prioritized selling choice when large traditional freight forwarding company transformed into cross-border e-commerce logistic company. E-parcel is a better target for investors than the other two options due to its high customer loyalty, fast connections with platforms and large amount of revenues. Overseas warehouse is an option that requires a lot of assets, involvement, and constant maintenance. In addition, it takes a long time for investment in overseas warehouse to really pay back. Most of traditional freight forwarding companies will feel overwhelmed to choose this kind of model as they just switch to this industry.

The distance between logistic service provider and end users

The trading process of B2B transactions is shorter than that of B2C deals in all kinds of scenarios. In the past, logistic service providers were much closer to the end business, such as retailers, as it did not involve an intermediate platform. However, B2C transactions involve a cross-border e-commerce platform in the whole trading path. The distance between logistic service corporates and end users seems much longer than it is in B2B transactions. As a result, companies providing FBA, E-parcel, and overseas warehousing need to start their integration of the whole trading process. Not only do freight forwarders have to combine every advantage they’ve got in freight forwarding business and make the chain longer to increase potential profit, but also have to specialize in some of the core steps and offer their own products. This is the largest difference between the traditional freight forwarding era and the cross-border e-commerce era.

How is freight forwarding industry changing?

Traditional freight forwarders found that they hear neither the market nor the user’s voice when the trend of cross-border e-commerce logistic industry is approaching. Forwarders also found that a lot of their customers, factory owners, turned into owners of companies specializing in cross-border e-commerce logistics. As the scale of their customers gradually increases, their bargaining power also increases. After the scale of these specialized companies expanded to a certain degree, they can just skip forwarders and contact airline companies directly to order air board package, air board module or even air charter. To sum up, traditional air/ocean forwarders should start to gain knowledge in the whole cross-border e-commerce industry as soon as possible and to deeply understand what kinds of impacts this trend will bring to the forwarding industry.

In addition to the change of traditional freight forwarding operational models and customer’s type, there are new businesses springing up like mushrooms. These new companies operate in the kinds of models that are favored by lots of institutions and investment companies. For example, DHL started providing multiple cross-border e-commerce logistics services and DFS was among the first ones to be part of the FBA shipping line.

How can freight forwarders stay competitive in freight forwarding industry?

It is hard for traditional freight forwarders to survive without any digital plans in the digital age. Forwarders have to force themselves step by step to become part of the e-commerce industry. There are still a lot of opportunities in the cross-border e-commerce logistic industry waiting for forwarders to seize. The shifting and integration of this industry is still ongoing. As a brilliant freight forwarder, you should have a progressive mindset to plan your bigger dream of business to avoid becoming obsolete.

References
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