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Major contract logistics providers could see their turnover suffer, thanks to a failure to react fast enough to the changing retail environment.

A new report by Transport Intelligence reveals that the growth of e-commerce and changes to fulfillment are likely to hit the bottom lines of key logistics companies, while many smaller companies have positioned themselves better.

“The problem is that the changes are happening so fast that it is hard to detect,” said Thomas Cullen, analyst for Transport Intelligence.

“Although expenditure is growing on IT and fulfillment, it looks fairly static as they are losing market share and being displaced.”

The report notes that traditional markets, such as automotive and pharmaceuticals, are growing, but consumer-facing industries face profound change, with emerging markets catching up with modern retailing. By far the largest vertical in logistics is retailing, including groceries and fast-moving consumer goods.

The changes “promise huge potential for contract logistics providers, but also substantial threats,” warns the report.

But it is not just logistics companies struggling to keep pace with the changes, their paymasters too, in many cases, are challenged. While companies such as Amazon had spent “colossal capital” on fufillment, high-street retailers had been less confident.

“It is unclear what the final destination of e-commerce will be,” says the report. “Retailers themselves are struggling to find the right business model, including the appropriate level of ownership of property and of physical logistics assets.. This has major implications for the future structure of outsourcing.”

Mr Cullen noted the growth of companies such as DOCDATA, which has a strategic partnership with ASOS for its distribution. He attributed the best model to DHL, however.

“It has positioned itself pretty well. It realised there was no money in last-mile delivery and exited that. It is focusing on high service level international air freight, and it benefits enormously for that.

“FedEx and UPS are less well-positioned, as they have just continued to do what they did before, hoping e-commerce revenues will fill up their planes and trucks.”

DP DHL is the biggest provider of global contract logistics – four times the size of its nearest competitor, Kuehne + Nagel.

The report indicates that information management is key to tapping into these growth markets – but adds that as retailers outsource less, particularly in Asia, revenues for logistics providers would be minimal.

“The retailers seem wary of buying in large-scale fulfillment,” added Mr Cullen. “They are wondering if the LSPs have the right business models, and don’t seem to have faith in them. They don’t believe they have the capability to implement they change that is needed.”

The end result in the near term, he suggested, was an impact on the bottom lines of major contract logistic companies.

Ti’s report adds that the retail logistics spend is changing.

“Spend on IT, fulfillment services, last-mile and global express has grown, reducing the proportion on road freight and conventional outsourced warehousing.

“However, the level of spending may be higher overall, mitigating the effects of change on the more traditional areas of logistics.”

The 184-page report, which examines individual markets and companies, also reveals the massive changes in emerging countries. By 2017, Asia Pacific will surpass Europe as the world’s biggest contract logistics market, with more than one-third of the global share, while the US is also expected to grow.

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