Bloom of the E-Commerce rose…For now
E-commerce was supposed to lift the air cargo business to new heights while fattening profit margins and eliminating tiresome paperwork and the laborious business of establishing personal business contacts. The days of the fax, the phone, the slap on the back would be gone for ever, and the small- to medium-sized freight forwarders? Dead in the water! ITJ correspondent Patrick Burnson discovers why it all turned out so differently.
After an initial boom, the industry that coined the term vapourware appears to be vapourising at a terrific rate. "It had to happen eventually said Michael Galardi, a partner with consulting group Accenture. "The marketplace was far too crowded with pure play Internet companies that had the necessary software but not the proper market connections. The freight forwarder is not going to disappear after all, and the air carriers have learned a great deal from the recent start-up failures."
According to Galiardi carriers may also be in a good position to team up with brokers and forwarders in the future as more consolidation takes place among major middlemen. Kühne and Nagle. Panalpina and Expeditors International are among the likeliest candidates for this kind of partnering: We'll now see a slow building of horizontal alliances that will provide a larger global footprint for both carriers and intermediaries. An airline like Lufthansa, for example can serve as an anchor for such consortia.
Back to basics
In the meantime, however, venture capital that once was funneled into the proliferating number of auction sites and rate exchanges has all but dried up. Jeff Pribor, managing director and group head of ING Barings Transportation and Logistics Group noted that venture capitalists are starting to make sure start-ups
finally generate revenue -an aspect that up to now has been totally overlooked in their models. -We're not even speaking of profit'. said Pribor. 'but the investment community now wants to see some return on the many promises e-companies have been making for the past few years.
The Global Electronics Trade Alliance (GETA) based in Washington DC has been championing the world-wide potential of e-commerce. It is backed by a board of directors including former U.S. customs officials and prominent trade law attorneys. However, at its recent conference in San Francisco. even GETA's usually ebullient general counsel. Robert Pisani. was sounding slightly chastened. It's tied directly to the health of the economy.>' he said. And that certainly does not look good right now. People are doing hack to basics and reestablishing relationships before setting off again on building efficiency strategies".
Steven Kott. director of regulatory compliance with
Thomson Consumer Electronics, concurred. Many of these young entrepreneurs were just techies, who developed their tools in a complete vacuum. On the other hand, we realised early on that the integrated express carriers such as DHL. FedEx and UPS had control of their product ranges and won the day". The major airlines have had difficulty in replicating that success, and the exchanges that hoped to team up with them are instead teaming up with themselves. The company From2 was recently purchased by Arzoon:
iLink Global now belongs to Descartes, and Vastera has taken over its former competitor. SpeedChain.
Survival of the Fittest
All logistics exchanges have modified their business models so that they now include the offer of logistics
software." said Robin Roberts. a partner with Stephens Inc. "That list in-cl udes Neumodal. Celarix. and Gocargo." The days of immediate liquidity and abundant funding seem to be ending for these new comers and the survivors must find ways to define their mission clearly and in detail while there is still time. Roberts added: "It takes a long time to unify data and business processes, and many of these executives don't seem to know what they want. I do not need a high performance sports car if I never drive over 100 km per hour". Roberts' automobile analogy seemed an apt one, given that Ford Motor Company recently abandoned its plan to offer nationwide online purchasing through its web site FordDirect.com.
Julian Keeling, president of Consolidator's International in Los Angeles, does not even think that c-commerce presented a real threat. Exchange start-ups took a couple of customers away. but the number was insignificant. It soon became apparent that they could not handle any of the physical distribution of goods. And as everyone in the air freight industry knows, once you ye lost control of that, you're lost.'>
As bleak as the prospects now appear, air cargo analysts maintain that c-commerce providers offering airlines some benefit beyond simplifying their services will win through. "The Internet is ubiquitous and cross-platform strategies are going to win this battle", said Accenture's Galardi. "And when airlines discover the strength of working together with a few anchor clients, the high tech industry will become attractive again.
