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Love your freight forwarder, soon they may not be there to love you back

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Kris Kosmala on the similarities between container and passenger transport.

Outrageous container rates between Asia and European and American ports may be what has riled all shippers, but it’s not what carriers care about. Their shopping sprees reduced the market to a few networks virtually indistinguishable from each other. Although they appear to be profitable over two years, even five years of incredible profits cannot mask the inevitable periods of lower rates and high operating expenses in the future.

In fact, the commoditization of container shipping has not faltered in response to the pandemic. It’s a cruel process of bigger and bigger companies trying to divide the market in any way they can by any possible differentiation. Forget differentiation with digitalization. Carriers know this asset-based game and they know, primarily, the assets needed to move cargo from land origin to land destination. In today’s very cozy club, no action goes without reaction.

Curiously, with enough business missteps in its history to fill a shipping encyclopedia, Maersk continues to be the most scrutinized company of them all. Maersk buys ultra large ships? Everyone else steps in, even surpassing the original first player. Maersk is reintegrating into Damco’s carcass to bring capacity and capacity consolidator closer together? CMA CGM responds with the acquisition of CEVA. Shortly after, MSC acquires Bolloré. Not to be outdone, Maersk responded by acquiring LF Logistics. Did I mention Maersk is adding aircraft to provide options for time-pressed shippers? MSC is trying to buy one too.

These tit for tat actions are typical of a commoditized market, which raises the question of whether container shipping has reached the level of commoditization seen in passenger transport.

No one in the traveling steel box business likes this comparison, but how ridiculous are the similarities in travel?

Building a bigger network served by bigger planes? To verify. Acquiring struggling competitors who couldn’t afford to build a bigger network with bigger planes? To verify. Increase volumes with the help of semi-loyal customer agencies? To verify. Reduce the influence of said agencies by taking over their biggest customers and sending the smaller ones to the electronic ordering portals owned by the carriers? To verify. Trying to offer ground services without actually owning the ground assets? To verify. Charge exorbitant and inexplicable fees for any customer action, justified or not? To verify. Buying a hotel chain to house customers once they get off the planes? Well, that was PanAm’s failure, but we have to give him a check, don’t we?

From the freight forwarders’ quarters, we only hear the same refrain. They claim to be smarter, closer to the customer, more attentive to customer needs, offer a wider range of services, etc. The process of agency reduction has also occurred in passenger travel. There used to be a travel agency on every street corner offering plane tickets to cheap travelers and “sophisticated” travel packages to travelers who hated the self-service of consolidation websites. They are now history, being squeezed out by carriers offering their own direct “package” sales and no-frills digital self-service consolidators doing the rest.

It’s a miracle the Flight Center logo is still there in the fog of the pandemic, maybe not on the high street, but they’ve somehow evolved their offering to earn a living in light of airlines slashing their commissions to the bare minimum. . Their smaller competitors can’t even convince the airlines to answer their calls. Have you noticed how, during the pandemic, business fares increased fivefold and economy fares quadrupled, but the airlines didn’t even promise that the flight you booked would even go? As airfares skyrocketed, agencies would only receive a flat fee per booking, not the full fare percentage reduction. This is the world of constant, unsecured spot prices. The passenger air transport market has become the perfect mirror of the container transport market.

Where is the humble forwarder? As long as the shortage of capacity continues, carriers will have the advantage over freight forwarders. The great ones will continue to fight another day. The very small shops will also continue. But the big middle will fall victim to the same process the carriers have been through – streamlining and consolidation.

As the pressure mounts and differentiation becomes rarer, consolidation becomes the only viable path. As less nimble operators with small customer bases falter, those with the money will keep coming. Inevitably, these acquisitions will be paid for by job losses because the acquirers will eliminate the duplication of positions and staff. The year 2022 is the Chinese year of the tiger. I wonder who will have the last roar in the freight forwarder attrition wars.