COMMERCE
E-that these companies
will ultimately take the
delivery process in house
and simply cut out the
third parties. If that
happens, then the
forwarders and GSAs
are going to suffer.”
Burgin points
out that when TNT,
FedEx, DHL and
UPS rolled up their
corporate sleeves and
entered the fray, this
level of integration really
hurt the freight sector. He adds
that since the arrival of these
integrators, who wooed the
market with an all-inclusive
price and took the package
to the final destination, the
market dynamic has changed –
and those serving the industry
have had to adapt. But as he
explains, this quartet has really
sewn things up.
“Take Kuehne + Nagel,
which is probably at the top of
the tree. They cannot compete
with these big integrators since
they are unable to offer their
own door-to-door package
delivery. It’s the itemised stuff
that is the problem. If you’re
talking of 500 kilogramme
loads, that’s fine, then
these guys can get near the
integrators on price – but with
small parcels, it’s virtually
impossible. I truly believe that
Amazon and Alibaba, at least,
will be taking out the middle
men. If you have something to
sell that has a global market,
why wouldn’t you use these
specialists? This is why the
forwarders need to get in on
the digital act now – or in 20
years’ time, it will all be over
have the manufacturer
for them.”
dispatching the goods to the Is a page in the history book
being turned? Online buying is
detrimental to the High Street
Tackling the reality
Granted, the freight
forwarders and the GSAs
and the multi-nationals are
dragging their heels – but what
can or should they be doing?
“First, get rid of all that
paperwork. That will be a huge
step forward. It’s a serious issue;
if they don’t, then the big boys
are going to mop up all the
trade. An electronic presence
is vital. We’re seeing more
and more business conducted
online, to the detriment of
bricks and mortar retail. It’s the
future, but it’s happening now.
“Today, Amazon has
40 B747 aircraft operating
in the US, all aimed at US
order fulfilment. For their
international business they
continue to buy capacity from
established airlines. Equally,
Alibaba and Amazon have been
talking about shipping rates.
If you’re a small enterprise
and you want a future, then
a niche business might be the
only viable option: too many
doors have been closed already.
Whilst the small forwarders
can point to a personal service,
that alone won’t keep them
afloat. As usual, it all comes
down to investment, and they
are not all willing to spend.
But aside from this is the David
and Goliath metaphor: the big
guys can, if they want, squeeze
the smaller players simply by
dropping their rates for a time
and undercutting them. In a
nutshell, the sector is facing a
huge problem: those original
four integrators are now three,
so the pressure is on.
“In an ideal world, we’d
E-ASING OUT THE
HIGH STREET?
Data is not readily available,
but Amazon has a presence in 17
geographies around the world, says
a company spokesperson, with
five of those involving European
countries. UK market penetration
is just under 3%, which includes
both physical and online selling.
But its growth has been prodigious:
in under two years, it has captured
25% of the US e-commerce delivery
market. And in the fourth quarter of
2020 it is rumoured that it will be
investing US$1.5bn on its one-day
shipping initiative.
final customer, without the
middle man. That would
be perfect. The reality,
though, is different: would
you buy something from,
say, a company in China or
in India, about which you
knew nothing? Most people
wouldn’t – which is where
Amazon and the others
come in. They bring with
them the trust factor; the
buyer has recourse in case of
disappointment, or any other
problem. Looking at Amazon,
they are big in the US and the
UK and have an undoubted
European presence. So will we
be seeing regional Amazons
evolve?”
Burgin believes that given
the latter’s size, it has the
power to dictate exactly which
elements of the operation
it wishes to execute – and
which it will outsource. The
e-commerce giant can also call
the shots when it comes to the
optimum network routes.
“It will be interesting to
see what it does in terms
of the final delivery and
collection stage,” Burgin
concludes. “This may prove
too fiddly without a ground
infrastructure in place. But
should these operations be
outsourced, it would be able
to pin the contractors to the
floor. That’s what comes with
market dominance.”
Conclusion
E is here to stay – and it
still has a long way to go, if
current data is to be believed.
Consequently, the cargo
sector needs to appreciate
this changing dynamic – and
embrace it.
18 February 2020 www.airlogisticsinternational.com
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