Dive Brief:
- Although air cargo volumes are expected to rise by 3% each year, air freight forwarders' "revenues may be almost flat," according to an analysis from McKinsey&Company.
- Traditional air freight forwarders must digitize to compete with digital freight forwarders and carriers improving their own digital channels. McKinsey predicts the role of intermediaries will shrink, posing a threat particularly to small forwarders that struggle to digitize their operations.
- To compete, air freight forwarders should emphasize offerings based on people, relationships and expertise, all of which are difficult to digitize and turn into commodities.
Dive Insight:
The entire business of freight forwarding, whether for air, land or sea, is at a crossroads as technology becomes a critical part of operations rather than a novelty.
More carriers and shippers are going through online channels to do business. Google searches for freight forwarding have increased by 16% every year since 2014.
In fact, cargo airlines "are exploiting digitization to move closer to shippers and avoid using forwarders as intermediaries for parts of the business," McKinsey's analysis stated.
McKinsey isn't the only research firm to paint a bleak picture for the future of freight forwarding. A report last year from Transport Intelligence predicted tech start-ups and carriers would disrupt the traditional freight forwarding market.
Direct online exchanges aren't perfect, however. Only 60% of carriers and forwarders offer online registration, and most don't provide an online quote. For the majority of providers, "telephones and email are still the dominant channels, just as they were decades ago," McKinsey said.
Online giants — such as Amazon and Alibaba — could also disrupt freight forwarding, especially through services like Shipping With Amazon (SWA). If third-party merchants sell and ship with Amazon, the site will wear many hats, acting simultaneously as the freight forwarder, 3PL and carrier.
