For Larger Freight Forwarders, Ecommerce is Impacting IT Investment
The ecommerce onslaught continued in 2020 and to get a sense of how big it was, here are two interesting statistics:
- 44% U.S. ecommerce growth in 20201
- 28% worldwide retail ecommerce growth in 20202
Whether Business-to-Consumer (B2C) or Business-to-Business (B2B), consumers and companies were buying online and many of these goods crossed borders. In particular, the volume of low value goods shipped directly to customers has dramatically increased over the last five years, prompting many governments to revise their customs programs to capture duties on these goods.
The natural assumption may be that forwarders and brokers are benefitting from the dramatic increases in ecommerce shipping; however, many who we talk to say that they are struggling to get into the ecommerce game. So, who is winning the ecommerce shipping battle? We set out to answer that question as part of the 6th Annual Forwarder and Broker Benchmark Study, which was completed in early 2021 in conjunction with the Airforwarders Association (AfA).
As part of the study, we looked at the financial performance and size of forwarders and brokers to see how they were participating in ecommerce and strategies to grow their share of ecommerce business. The results were compelling.
Figure 1: Ecommerce Impact
As just mentioned, Direct- to- Customer (D2C) shipping is a strong trend in ecommerce and, in 2021, was noted as the top trend overall (53%). It was closely followed by international shipping capabilities (<53%), which increased 21% from the 2020 benchmark. Large company respondents, however, indicated they were more impacted by D2C as their scale means they need real-time tracking and automation (59%) to participate in ecommerce, as opposed to small company respondents (33%). The most significant result was that over 2X of small respondents (36%) said they do not see any ecommerce impact as compared to large respondents (16%).
Figure 2: Ecommerce Growth Strategy
If we follow the impact theme into growth strategy, the picture becomes clearer. Overall, more than one-third of forwarders and brokers (36%) responded that they had no focus on ecommerce. The conclusions were stark when it came to company size: Small forwarders and brokers were almost 3X more likely to not focus on ecommerce than large respondents (59% vs. 22% respectively).
To see how ecommerce is impacting IT investment and ultimately business capability, invest in technology was the second overall response (35%) and change existing businesses and process was third overall (31%). Large respondents, however, are really gearing up to take advantage of ecommerce, citing they were almost 4X as likely to invest in technology and over 4X likely to change existing businesses and processes than small respondents (59% and 46% vs. 15% and 11% respectively). Financial performance also affected respondents’ decisions in similar fashion as top performers were almost 2X more likely to invest in technology and change existing businesses and processes than poor performers (32% and 34% vs. 17% and 20% respectively).
What does this tell us about who is capitalizing on ecommerce growth and making changes to get more ecommerce business? Large and better financial performers have taken advantage of ecommerce and are investing and changing to make further gains. Too many small forwarders and brokers are putting themselves at risk of missing out on one of the greatest growth opportunities of the century. In many cases, ecommerce is a “zero sum” game with respect to in-person sales, and smaller forwarders and brokers could see their market opportunity declining.
Now is the time for small forwarders and brokers to reconsider their ecommerce strategies as the larger competitors have already made the jump and are making it progressively harder to ride this wave.
In the 6th Annual Forwarder and Broker Benchmark Study, we examine trends like ecommerce and digital customer experience, and the impact of the pandemic on forwarders’ and brokers’ strategies, tactics and technology thinking and decisions. The study also covers even more perspectives of top and bottom financial performers and large and small companies.
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1 Source: Digital Commerce 360
2 Source: eMarketer
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In the 6th Annual Forwarder and Broker Benchmark Study we examine trends like digital customer experience, ecommerce. and the impact of the pandemic on forwarders and brokers strategies, tactics and technology thinking and decisions.
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