Light-asset agency companies are a further refinement of the industry division of labor. More than 80% of my country’s import and export trade transportation and transit business are completed with the assistance of freight forwarders. The rise and fall of import and export trade is synchronized with the rise and fall of the freight forwarding industry. The first-level international freight forwarding market is basically a monopolistic competition.
International freight forwarding is between the supply and demand sides of cross-border transportation. There are forwarders between shippers and carriers. They are mainly oriented to air and sea transportation channels. Even in the field of cross-border e-commerce, the cargo and mail throughput of sea transportation is far greater than that of air transportation. A container ship can carry thousands of containers, which is equivalent to hundreds or thousands of aircraft. It is precisely because of the development of foreign trade that China’s sea transportation ratio is much higher than other markets.
Maritime transportation itself is a giant industry. Maritime logistics is a barometer of the world economy and the aorta of international trade. Looking outward, in terms of capacity and volume, the global logistics industry can actually be regarded as a large logistics system with ocean shipping as the mainstay and supplemented by aviation, rail and road transport.” Ocean shipping mainly solves the problem of port to port. Various types of logistics companies cooperate effectively to provide comprehensive services such as sea-air transport and sea-rail transport, and ultimately form door-to-door logistics capabilities. At present, domestic large-scale shipping has initially formed a star-shaped shipping network centered on China. In the future, it is necessary to strengthen overseas layout planning and strive to create a mesh shipping network system with multiple central nodes around the world, similar to multinational giants such as Maersk, MSC, and CMA CGM. The world’s top international freight forwarders include DHL, UPS, Panalpina, Kuehne + Nagel, Schenker, Tesa, Burlington, and Nippon Express. Domestically, there are Sinotrans, COSCO, C&D, JC, Kerry, etc. In the international small-package industry, there is “no distinction between post and customs”, and Sinotrans is known as the “second customs”. It is naturally backed by a state-owned enterprise and has strong capabilities in port services and overseas connections.
According to the 2014-2018 Aviation Industry Outlook Report released by the International Air Transport Association (IATA), the value of air cargo accounts for about 35% of global trade, and only 1% by weight, with express delivery accounting for a large proportion. The air transport industry has a small capacity, and air cargo has the characteristics of strong timeliness, high value of the cargo itself, and relatively small size and quantity of cargo. The international air cargo market has the characteristics of unstable demand, unpredictable and relatively insufficient transport capacity, and a dispersed customer base, making it difficult for airlines to independently complete the entire industrial chain, resulting in a strong demand for freight forwarding.
90% of air cargo requires the participation of international freight forwarders to varying degrees, and the two are highly correlated. The international freight forwarding industry mainly provides intermediary services. The company has very few dedicated fixed assets and is a light-asset operating industry. It provides extended services such as door-to-port, port-to-door, door-to-door, warehousing and tallying, peer consolidation, overseas distribution and supply chain financing. The profit model is mainly to earn booking commissions, price differences and value-added service fees. There are three major factors that affect freight costs: the overall price of freight space, the method of booking freight space (fixed and non-fixed) and space loading efficiency.
In terms of international air transport, there are problems such as few routes, few cargo planes, and insufficient transport capacity. 80% of it relies on belly cargo transportation, and the transport capacity is limited. This has also led to long-standing problems in international air transport such as unclear routes, inefficient efficiency, and opaque prices. . Freight for cargo planes and land transportation paid by freight forwarding companies are the main operating costs, of which air freight accounts for more than 90%. Traditional freight forwarders, freight forwarders and air transport companies have a short settlement period, and a long settlement period with cargo owners, requiring freight forwarders to make a large amount of advance payment, and the operating capital chain of small and medium-sized freight forwarders is relatively tight.
The significance of freight forwarding services is to help cargo owners save energy and focus on undertaking cargo orders, helping cargo owners to handle documents, exchange orders, pick up goods, inspect, clear customs, and most importantly, book space, choose the right ship date and price and other core businesses. However, the multi-level agency and subcontracting in the freight forwarding industry have damaged the service quality and end customers to a certain extent. The transformation of traditional foreign trade enterprises and the rise of cross-border e-commerce have led to a more fragmented structure of cargo owners, and the importance of small and medium-sized enterprise customers and “long-tail customers” will be strengthened.
The Internet platform provides real-time and transparent order information, and omissions, errors and information asymmetry are weakened. It has become a trend to eliminate agents and freight forwarders. On the one hand, the transformation to integrated logistics is inevitable, satisfying one-stop service for corporate customers, standardizing freight products to accumulate customer data, and achieving optimal configuration in time and space. Large domestic and foreign freight forwarders, such as DHL and K+N, have developed new trade industries by developing diversified products, combining air and sea freight forwarding and logistics services.
On the other hand, from the perspective of the development of international air freight, the rise of international express delivery with fleets will be the mainstream. With the advantage of global network, in recent years, the strategic development focus has been directed to the Chinese market. Although the overall situation of China’s imports and exports has caused the air freight market to continue to be sluggish in the past two years, and several state-owned cargo airlines have been weak in recovery, express delivery self-operated airlines have been significantly boosted, and the impact on international express delivery such as DHL and FedEx is even less.
Their customers are mainly high value-added products, and they have significant advantages in routes. Since air express is mainly used for high-end cross-regional products, the market entry threshold is high, and all-cargo aircraft operations must reach a certain scale to show operational efficiency. The value of export e-commerce products is generally low, making it difficult to become a direct commercial express customer resource.
International integrators and resource integrators who have transformed from freight forwarders will share this market, and develop according to the model of “local economical couriers receiving goods, charter flights and trunk transportation – overseas economical couriers delivering goods”. In the cross-border field, UBI, Shunyou, RPX, Octopus, Cacesa, etc. are representatives of the transformation of dedicated logistics.
Overall, international freight forwarders are still limited to making their own money. Air transport capacity, channels and routes are the foundation. A few will eventually become line operators that grow and develop. Even fewer are willing to step out from behind the scenes and directly serve merchants. At most, they provide self-operated points and collection warehouses. Simply put, international freight forwarders have transformed into cross-border e-commerce supporting service providers in recent years, relying on industry advancement, geographical advantages, and government relations such as customs and the Economic and Trade Commission.