Loadstar Leader: Diversification is built-in in forwarding

News that shippers are looking to diversify their supplier mix following the takeover of DB Schenker by DSV will come as no surprise, in a market in which diversification of tradelanes, revenues, and risk is at the forefront of minds. 

The Covid era was good practice for learning risk mitigation strategies. Trump has offered another lesson in the same. 

But consolidation in the very fragmented forwarding market has not, in fact, led to huge market-share grabs: even after the integration of Panalpina, Agility, and DB Schenker, DSV will still only have some 7%. 

That figure lies in stark contrast to liner shipping. A flurry of takeovers at the turn of the century was followed by a decade-long lull, until the bankruptcy of Hanjin in 2016 triggered another round of consolidation. But then, faced with the need to offer global networks, the largest lines took to alliances as a way of expanding coverage. Market share has shifted from about 12% controlled by the top 10 some 25 years ago, to more than 80% now. 

So shippers have little choice. 

It’s a big difference from the current forwarding market. Several mid-tier, privately owned forwarders are, simply, not for sale. Consolidation is going on at the bottom, rather than the top, with numerous bolt-on acquisitions of regional forwarders by the big boys.  

In forwarding, the assets are people. A salary is a lot cheaper than buying or chartering a ship, and the main reason why the barriers to entry are so markedly different and why M&A strategies – call it capital allocation – vary so greatly. Sell your forwarding company to one of the beasts – and simply start another. 

Perhaps DSV’s insatiable appetite for inorganic growth has halted with the lack of a player big enough to swallow. But those looking for bolt-on deals will keep finding new feedstock in a market which simply renews itself.  

Forwarding, after all, is essentially just a byword for reinvention. Some may go, but inevitably, new ones will be born.  

And that way, the forwarding market will remain fragmented. Shippers can sleep easy. 

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