Price pressure in the logistics industry in virtually all global markets

According to a recent study by Simon-Kucher & Partners, increased competition have shrunk global price pressuremargins more in the logistics industry than other industries, all over the world. It seems like increased competition and the rise of outsourced logistics contracting is causing prices to fall, and forcing logistics providers to operate at dangerously low margins to stay competitive.

The global pricing study conducted by the well-known marketing and strategy consultancy concluded that “committed leadership” and “strong positioning” would be required for European, American and Asian logistics companies alike to resist the pricing pressure while staying competitive.

This study was based on questionnaires answered by more than 150 representatives of the transportation and logistics industry throughout Europe, Asia, and North and South America. According to this study, three out of four logistics forms report that they are unable to demand what they consider to be a ‘fair’ price for their services. The core reasons for this development are extremely stiff competition on prices, the prevalence of standardised, easily compared products and services, and the ease of ‘shopping around’ for a better deal that is a fact of life in the modern world.

Truly competitive, effective companies are those that have “pricing power”. That is, the clout to demand fair value for their services or products. This is true for any industry. Those logistics firms with the ability to set their own prices do so, showing 17% higher margins than the competition. Reputation is an asset in this business.

The goal, then, must be to achieve the kind of reputation and status it takes to demand a non-rock-bottom price for your logistics services. Easier said than done. The logistics industry has always been plagued with low margins, so the added pressure is even more likely to drive smaller or less efficient players out of the market here than elsewhere.

 

 

 

 

 


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