Market share can't always be 'acquired', says leading freight forwarder

The number of acquisitions by the largest players in the freight forwarding sector is having the opposite effect from that intended - with many customers being driven away from the bigger players towards smaller forwarders competing on service rather than cost.

That's the view of Kulbir Sohi, Managing Director of West Midlands based freight forwarder FCL UK, who says: "Rates are so low now that in order to gain their desired market share, the bigger forwarders are having to acquire smaller players as they cannot make inroads to SME businesses who are all too wary of discounted pricing (initially) and/or mediocre service.

"They are satisfied with a low margin from each customer but what is often forgotten is the service element offered by mid-sized forwarders. In effect, the big players in the industry have reached critical mass. Their buying power does not improve in proportion to new client acquisitions, because even the shipping lines have set margins to work to. This results in carrying low margin business, almost for the sake of growing sales revenue, however there is no incentive to provide the resources to facilitate the appropriate service needs of each new SME client.

"Customers whose forwarder is acquired can suddenly go from being a 'top five' account with that forwarder to being a very small fish in a big pond in terms of their account size with a large international forwarder.

"Even the revenue from a customer with a requirement to move 1,000 containers each year is a relative drop in the ocean compared to massive international blue chip accounts - while the very small or occasional users barely feature at all.

"Furthermore, if the customer has previously had a bad experience with a larger forwarder which takes over its existing supplier, then that customer is very likely to move its business anyway. Customers need to feel valued and will go where they feel their business is important to the forwarder and that the forwarder is keen to add value to that customer."

Sohi concludes: "Even smaller forwarders can offer competitive rates through economies of scale, while the personal service through dedicated account managers, who develop a relationship with customers and handle all queries rather than simply passing them on to other departments, is so often the difference between them and the larger players, who compete primarily on cost.

It's a compelling business argument - if smaller players can match or better the larger forwarders' pricing, and maintain it over a significant duration while offering value added services and dedicated account contacts, there is every incentive for customers to move from a larger supplier."