Online shopping threatens logistics sector

Disruptions in the global
logistics sector are likely
to spur further mergers
and acquisitions as multinational
firms seek to buy
market share in difficult
economic times.
But SMMEs that have
the agility to adapt to
change can thrive during
the downturn and even
outfox some larger firms.
Stephen Morris,
chairman of the
International Federation
of Freight Forwarders'
Associations (Fiata)
Customs Affairs Institute,
raised concern that one
disruptor, the rapid
growth in online shopping,
while impacting bricks
and mortar retailers could
also have a negative impact
on the logistics sector as
well as governments which
stand to lose out on tax
revenue.
Morris is a keynote
speaker at next week’s
SA Association of Freight
Forwarders’ conference
in Johannesburg where
he will address delegates
on the World Trade
Organisation Agreement
on Trade Facilitation
among other topics.
Morris said global trade
continued to be “ just
hanging in there” post the
2008 recession.
“Airfreight capacity is
down. Shipping capacity
is down, and while trade
in commodities in some
places might be okay,
changing patterns of
people’s personal consumer
preferences is having an
impact. E-commerce is
having an impact,” he said.
“And while you might go
‘that’s great it’s growing
we have this wonderful
world of shopping online’,
in some cases there is
a leakage of revenue in
terms of VAT or GST from
economies because certain
economies like Australia
don’t collect it under one
thousand dollars,” he
said.
Morris said this was not
good for world trade and
societies because as the
Amazons and Alibabas of
online shopping expanded
with their offerings of
cheaper goods, traditional
bricks and mortar shops
would shed jobs.
“It is good for the
people who are selling
goods offshore but it is
not really good for SA
or Australia in terms
of business investment,
business opportunity,
community obligations and
employment – and there
are changing business
models. People now do
JIT shipments a lot more;
they will even back out of
airfreight and go to two
seafreight arrangements
every three months because
they know what their stock
holdings will be and they
can fulfil any shortfall
through the express
carriers industry – so the
dynamics are changing
for the logistics industry,”
Morris said.
“Large multi-nationals
have an ability to meet this
challenge.
“Usually with online
trade the parties integrate
the whole process from
pick-up to delivery so the
UPSs, the DHLs and the
TNTs control the process
from beginning to end,” he
said.
Large multi-national
freight forwarders such
as DB Schenker, Ceva and
Panalpina also had the
ability to control their
destiny from beginning to
end, he said.
“Small and medium
enterprises have to work
on the basis of agents’
agreements with other
parties in other
economies
– and
that is
not to say
the SMEs
are not good
at what they do because
some of them have that
niche operational part and
deliver extremely well and
can outlive, outrun and
outfox the express carriers
industry or large multinationals
but they are the
exception,” he said.
Morris said he expected
there would be further
mergers and acquisitions
in the sector such as DSV’s
recent acquisition of UTi
as firms sought to buy
market share in difficult
economic times.
“The market at the
moment is finite but once
upon a time it was a little
bit infinite and there was
a lot to go around but
now people can’t generate
market share so acquisition
is the way to go,” he said.
“As these larger
companies coalesce and
buy market share unless
they get it right they
lose that service delivery
methodology,” he said.
Morris
cautioned
that once
service
was
turned
into “ just a
commodity price” and a
race to the bottom it would
spell disaster for the ideal
of a fair day’s pay for a fair
day’s delivery.
Similarly, Morris said
tax revenue lost on
retail sales due to online
purchases could force
governments to increase
taxes to raise the
necessary funds for public
services.
INSERT & CAPTION
As the Amazons and
Alibabas of online
shopping expand
with their offerings
of cheaper goods,
traditional bricks and
mortar shops will shed
jobs.
– Stephen Morris