Forwarders: building a B2C product is 'a very different ballgame'

© Krichathon Pairat |

The Loadstar is running a series of reports on the ecommerce sector, which has been driving growth in air cargo. Here we discover why forwarders have been hesitant to embrace a new product

Traditional forwarders have been slow to embrace ecommerce as a dedicated vertical. Most, in fact, have morphed into it owing to customer demand, as traditional retailers sought to move into online sales. Others have bought-in expertise, acquiring ecommerce-focused distribution companies. 

But there are pitfalls for forwarders eyeing the sector, warned Lars Svinth Thomsen, director of contract and ecommerce logistics for Scan Global Logistics. 

“Forwarders have to have a strategic approach to ecommerce because it’s a completely different ballgame. There’s a lot of investment needed in automation, but also in IT systems, processes, people. It’s a completely different type of operation. 

“This is why I think a lot of traditional forwarders are quite hesitant about ecommerce.” 

Investment requirements can vary, he added. “If you’re going to automate from the get-go, it’s going to be a heavy investment. But I think if you want to start out with a kind of basic product, you can. You don’t necessarily need a huge investment in machinery. It’s more in IT and in people. You need to be strong on processes, you need to be strong on IT, you really need to dedicate resources to those areas.” 

Customer demand initially came from retailers and wholesalers, particularly in fashion and textiles, that were trying to adapt to changes in the market, and approached their forwarders for help. That paved the way for forwarders to streamline the product and market it to other customers.

“It was important for us to have a scaleable product,” explained Mr Thomsen. 

But it’s not easy to build an ecommerce product, and is likely to take between six months and a year. He said: “Some of it is very practical; you need to build the infrastructure, you need to make all the integrations. But also you need to physically change the layout of the warehouse, because it’s got to be different from a traditional warehouse.” 

The harder part, he said, was getting the right mindset for a very different business.  

“If you say from the beginning that this is something we are going to do as a niche segment, you are not going to be very good at it. It is something which has to be very high on the strategic agenda of the company. You really need to be very close to the customer expectations.” 

And customer expectations in ecommerce can be markedly different from in B2B retailing. 

“It’s different because you are delivering to an end consumer who has different expectations from a professional party. You need to be very strict on deadlines, delivering on time, otherwise you might face consequences.  

“And if you haven’t fulfilled the orders, and haven’t communicated back to the marketplace, there’s going to be consequences. So you really need to be strong on the processes. 

“It’s similar to warehousing, but the processes are just a tad sharper.” 

Processes also vary depending on the ecommerce marketplace or platform. Customers will tell forwarders if they want to sell on a certain platform, and the forwarder must then align its processes with those prescribed by that platform. 

“If a fashion brand wants to put its goods into an Amazon warehouse, then we align all the agreements they have made with Amazon and make sure our operation runs with it. 

“If they are going on a marketplace, then we align with all the timelines, and how we are going to deliver it, and make sure we have communicated back when the shipment has been picked, when it’s left the warehouse and so forth. We really needed to do a lot of engineering work to make sure that we could meet those demands. Otherwise, our customers are going to face consequences with the big platforms.” 

Ecommerce’s B2C approach also requires a last-mile model that traditional forwarders don’t have in place. 

“Last-mile is about partnerships. For a lot of our customers, it’s very important that they have a wide portfolio of products for last mileage, because some of the providers are strong in some markets, and some are stronger in others, and that could be very different from customer to customer.” 

He pointed to the UK, a mature ecommerce market, where customers expect deliveries within certain timeframes.

“In other markets, it could be sustainability, for instance, that is an advantage [when picking a last-mile provider].  

“There is more than one partner for each market. Some brands want to offer their end consumer a very wide array of suppliers for each market. And, by market, who is strong is very different.” 

While platforms like Alibaba are looking to attract B2B customers, forwarders are now expecting to see more B2C in their portfolios. 

“But in the end it is driven by our customers’ approach. What is their strategy, how much do they want to push their growth and business onto ecommerce channels? We are seeing a lot of our customers and brands rapidly changing towards an even bigger part of sales being driven by ecommerce, and of course we are adapting to that, so B2C is going to be very much a part of our business, going forward.” 

He estimated that between a quarter and a third of shipments for Scan’s retail customers were now B2C. 

One advantage for forwarders in ecommerce is that they can offer a one-stop shop. 

“We recognised early on that we had an advantage. We need a strong ecommerce product, but it has to be linked to ocean and air, and last-mile products as well, because the customers should have an advantage in just leaving it with us.  

“We have seen a lot of 3PLs which are very good at ecommerce, but don’t necessarily link it to, or don’t have the portfolio of, other transport products. So all of our products are very much linked together.” 

A global presence is also useful.  

“We can see that a lot of retailers are looking into new regions. If, in the past, you could serve countries in all regions from a central hub, now they are looking into being close to each market, to set up local fulfilment centres, because time is crucial – delivery speed is a very big competitive factor.” 

Mr Thomsen predicted continuous growth in the number of customers looking to sell online and deliver direct, although he noted that the pace had slowed since the pandemic rush. And it differs from customer to customer, and from region to region. 

“Even within Europe, there’s still a lot of differences between the markets; the UK is probably the most mature market, but then there’s Scandinavia, which has big growth potential,  and that goes for Central Europe as well.  

“But they are all moving in the same direction.”