Freightos: Changing market dynamics online will upend air cargo

MIAMI — Key business functions are turning into commodities, “where it basically does not matter to the shipper who is selling, as the product is so interchangeable,” said Phillip von Mecklenburg-Blumenthal, head of U.S. operations for Freightos at yesterday’s ELEVATE 2016 presentation.

“Think of milk or gas in your daily life,” he suggested. As a result, he said, “there are few incentives to stay with one provider.”

Expanding on the conference’s focus on innovation and change, Mecklenburg-Blumenthal told the audience that current trends – such as e-commerce, the entry of small- to medium-size entrepreneurs (SMEs) into the online marketplace, and expectations from emerging classes of consumers, such as millennials – were changing the nature of freight, and creating an environment that was growing increasingly challenging for legacy companies, such as freight forwarders.

“This pressure creates spaces for new players that create processes and value propositions to customers faster than the existing players,” he said in his presentation, titled “The Future of Airfreight.” Freightos is an online marketplace that enables shippers to receive instant quotes from forwarders.

During a Q&A session held after the presentation, Mecklenburg-Blumenthal was asked about the threat that online pricing posed to forwarders and carriers, prompting him to say that such companies were, in fact, worried. He also noted that, “if they don’t, someone else will.”

The scenario represents a classic market disruption, and air cargo is one of the few remaining industries that is relatively opaque when it comes to pricing, he told the ELEVATE audience. Unlike the passenger side of aviation, shippers are unable to easily compare rates of carriers and forwarders, which the latter has used to their advantage over the years.

During the Q&A session, one forwarder pointed out that the model that Freightos and other online pricing platforms were promoting was “impersonal,” and that forwarders delivered value by offering quality and relationships with shippers.

However, data from Freightos presented at ELEVATE underscored the market shift and should be cause for concern for forwarders. A survey of shippers found that 95 percent said that reliability was important, and that 86 percent said that cost was important. Only 50 percent place importance on relationships.