This is a story of big forwarders and small forwarders, big shippers and small shippers. Bigger has always meant better for international freight … but that’s changed.
From what I’ve seen helping dozens of forwarders prepare to sell online, smaller forwarders may have just got their biggest break from the internet, not unlike the 100,000+ online retailers that are netting over $100,000 in revenue monthly from selling on Amazon.
The Way It Is …
Larger forwarders have advantages of size, complexity and reputation. With these benefits, they get invited to tender for big customer freight contracts. But they don’t so much win them on service – they win on price (that’s something that Freightos research actually showed too).
That’s good for the big customers – the Starbucks, Walmarts and Apples, who demand (and get) business class service for an economy price ticket. It’s good for the larger forwarders too, who win much of their business this way, as they sacrifice profit margins but compensate by selling to small customers at much higher rates.
Larger forwarders have another advantage – their brand name recognition.
Familiar brands attract small customers, anxious about international shipping and having no real way to compare service levels. For larger forwarders, then, publishing rates would be counter-intuitive. So, when it comes to small customers, they get a raw deal – higher prices and no real way to compare service or rates.
… But It’s About To Change
So, what happens when rates finally become transparent, like they are in other digitalized industries.
Over the past couple of years at Freightos, I’ve gotten a front-row seat to the freight industry going online. To sell online, means publishing rates. That’s great news for customers, who can now start comparing rates, and like any other online business, they can soon compare service quality.
Surprisingly enough, it’s great news too for smaller forwarders, if they are good enough. They stand to overcome two existing handicaps – lacking visibility when competing on service, and lacking visibility when competing on price.
Larger Forwarders (May) Have More To Lose
Being big has it’s drawbacks, and big forwarders tend to move slowly.
That’s even more understandable when it comes to public freight pricing. Like, how do you define an online sales strategy if success has always depended upon the opposite – zealously keeping rates private? And what about risk analysis – how many customers might you win, and would they compensate for the lost profit margin and the customers you’re sure to lose?
Things are starting to change, but so far very few larger forwarders have published rates.
Smaller Forwarders Have More To Gain
Smaller forwarders are better at pouncing on an opportunity. I’ve helped dozens of smaller forwarders go live on the Freightos Marketplace. The well organized ones publish their door to door rates in short order. My record so far has been just two hours.
Compared to larger forwarders, they have much to gain and little to lose by publishing their rates online. What’s in it for them is, quite simply, visibility. Suddenly, they can reach many more potential customers.
Up until now, getting global reach meant spending big, like setting up offices in many countries. Getting big is a risky game. And it takes time and a lot of hassle to secure finance and expand an operation. But none of that is necessary when they are setting up on our marketplace. At virtually no incremental cost, and no risk, smaller forwarders can publish rates to instantly respond to quote requests. Suddenly, they are competing with the big boys.
A lot of smaller forwarders have already gone online. Over half of the sellers on the Freightos Marketplace (which you can see here) are medium size or even smaller forwarders. They all provide great value, laser focused customer service, and the sky’s the limit for them as they get access to the tens of thousands of global potential customers that search on the marketplace.
It makes sense that they are playing a major role in defining the online freight market. Not only are smaller forwarder rates already competitive, they also have more incentive to cut rates: the more business they win, the better their reputation, the more they grow.
So Have The Tables Turned?
Don’t get me wrong. Being a larger forwarder comes with massive advantages. Their breadth of service and specialized support is still exactly what large customers need. And, if they get their online strategy right, they’ll continue to do well with small customers. But from now on, they are competing on a level playing field.
Online sales is a big break for those smaller forwarders who know they can compete on service. And they get two bonuses as well – they are quicker to pounce on a new opportunity, and they stand to gain more.