The State of Online Logistic Sales: the $6.7 trillion opportunity
The freight sector is a major contributor to the world economy, handling over $19 trillion annually in global exports. But with changing demands from shippers, a competitive sales environment and dropping profits, what is the current state of online...
Whether it’s Amazon or Alibaba, the United States or China, consumers turn to their web browsers and smartphones when looking for goods or services. Around the world, people consume news online, stream videos online from Netflix, buy food and groceries from Amazon and book vacations on Priceline.
What is less known is that in multiple industries online business-to-business (B2B) sales are growing even faster than B2C. B2B e-commerce is predicted to reach a whopping $6.7 trillion by 2020 - equivalent to a full 27% of global manufacturing trade. This shift is a natural extension of both changing customer preferences and new online sales platforms. But whether it’s B2B or B2C, speed counts: 32% of online buyers will abandon a website if they have to wait more than five seconds for it to load!
So what happens for those modern day consumers who have jobs in procurement? When they call their 3PL or forwarder for a price quote, are they going to patiently wait for three days? Will requests to compare multiple lanes or modes significantly slow down the quote response rate? Will they tolerate quotes that are messy or inaccurate?
Or will they prefer to work with the forwarder who can quote instantly, maybe even online? There is a huge and immediate opportunity for forwarders to cater to the new generation of instant-gratification buyers by quoting quickly.
But the real opportunity is even bigger. More automated quoting is not just about new sales opportunities. It also means a far lower cost of sale, and fewer data entry mistakes. Every B2B transaction depends on shipping. Forwarders who can quote not just quickly, but instantly and automatically, can play a more dominant role in the rapidly growing world of online B2B transactions.
The State of Online Freight Sales Survey...
So what is the state of online freight sales in 2015?
We set out to discover, using a mystery shopping method, whether the top forwarders are using their websites as a sales channel. Identical quote requests were submitted via the websites of the top twenty freight forwarders in the world, all from a (realistic looking) fast-growing wholesaler based in the US, who requested an LCL quote from China to Chicago. We measured 12 key metrics across the inbound sales experience, logistic vendor responses, and details of the received quote.
Our key conclusion is that most leading global forwarders are not leveraging online sales to anything like the full extent enabled by technology. Only 9 of the 20 forwarders successfully provided freight quotes, with an average freight quote turn-around time of over 90 hours. One outlier, which was not included in this average, took just over a month! Just imagine logging onto Amazon, clicking “Buy” and then waiting a full month to get the price for the item. Would customers wait around? Or would their competitor, AliExpress, pick up the slack?
The top forwarders websites are not optimized for online sales either. They currently act more like a corporate business card than a salesperson. Only 40% of the top forwarders have optimized their websites for new inbound customers, while a surprising 20% don’t even have a contact form to request quotes.
And these results are just the tip of the iceberg.
What does this mean for forwarders?
Back to that upcoming $6.7 trillion of online B2B sales. With more B2B buyers than ever closing deals online, it is clear that the web is the next frontier of freight sales. But freight forwarders who want to expand sales need to leverage new levels of quoting and booking automation. To do so, forwarders will need to overcome the technological challenges of speedily providing competitive quotes from near-infinite routing and pricing options that are based on ever-changing carrier rates. And there are already signs that some forwarders are adapting.
The 2015 EPL Report concludes, “...the 3PL industry is coming to a crossroads where the path of margin squeezes, etc. is paved with new technologies, new business-models, new approaches to customer relationships and the prospect of growth in the coming year.” There is a huge potential in the market. Customers of logistics providers are increasingly looking online for better service, driven by more fluid supply chains and the search for efficiency. Freight forwarders have significant incentives to optimize their sales process to cater to this demand, while also benefiting from reduced costs. As B2B sales companies like Alibaba continue to flourish, the logistics providers that adapt to this new reality of online sales stand to dominate the next generation of freight sales.
Freightos will be presenting the results of the 2015 State of the Online Freight Sales study at the 3PL summit in Chicago this June. To download the full whitepaper, click here.
About the Author
Zvi Schreiber is the CEO of Freightos, a technology company bringing freight quoting, rate management and tender management online. He started Freightos after experiencing slow freight quoting as CEO of Lightech. He has founded and led multiple high-tech companies, which have been acquired by top companies including IBM, GE and VerticalNet. Zvi has a PhD in Computer Science and has written and spoken widely.