The freight forwarding market is changing. A large logistics company acquiring a smaller freight forwarder is no longer surprising news. Shipping lines and major logistics companies are expanding beyond transportation into integrated logistics services. Meanwhile, tariffs and international conflicts have made it difficult for shippers to make medium- and long-term plans.

For smaller freight forwarders, size can seem like a disadvantage. They cannot easily match a large company’s bargaining power with shipping lines or assign a team to evaluate every new technology.

But are small and midsize forwarders really being pushed out of the market? And how will freight forwarders make money in the years ahead?

Acquisitions Continue, but the Number of Freight Forwarders Is Not Falling

Dan March, CEO of WCA World, addressed these questions in a podcast interview with logistics publication The Loadstar. WCA World is an independent forwarder network with more than 12,000 member offices worldwide, giving March a close view of what smaller forwarders are experiencing.

Large companies are still buying smaller forwarders. The pace even picked up briefly in some regions after COVID-19. The entire market has not moved in the same way, but it is easy to see why these deals might suggest that forwarding is consolidating around a few large companies.

According to March, WCA World’s members see something different. They are not especially worried about the acquisitions. That may sound surprising, but forwarders have been bought and sold for years. Many of today’s deals look more like individual companies changing hands than an industry shrinking into a handful of players. If that were happening, there would be fewer forwarders and more cargo moving to the largest firms. That is not what members are seeing.

Some WCA World members do lose their membership when a multinational acquires them. Yet new forwarders continue to open and join the network at much the same rate as in previous years.

March points to the nature of freight forwarding to explain this cycle. Because the business does not require substantial assets, a buyer is largely acquiring the experience and relationships of the people who work there. The acquisition agreement usually binds the founder or senior executives to stay for a year or two. It may not bind the middle managers and salespeople who have worked directly with customers, and many of them do not want to work for a multinational. The buyer cannot count on keeping everyone.

So where do those employees go? Some start their own companies; others join smaller forwarders. This is closer to a natural cycle than a threat to the survival of independent firms. A founder who built a company from scratch and sells it before retiring gets a return on decades of work. There have also been cases of younger, motivated founders starting over. When a growing forwarder becomes an attractive acquisition target and is sold, other forwarders continue to rise behind it.

Carriers Have Tried to Take Forwarders’ Cargo Before

A more direct source of pressure is the move by large shipping lines and logistics companies into integrated logistics. Some shipping lines have acquired aviation assets or even set up their own airlines. Port operators are expanding too, and one Middle Eastern port has been particularly aggressive in making acquisitions.

Carriers moving into forwarders’ territory is nothing new. The relationship between the two has long been uneasy, especially in ocean freight. Shipping lines have repeatedly tried to win cargo handled by forwarders, including large multinational forwarders.

According to March, those efforts have never truly succeeded. The reason is the shipper. A market controlled by a few large companies would be bad for shippers, freight rates and competition. The very largest shippers might still negotiate favorable terms, but midsize and smaller shippers are far better served when multiple providers compete for their business.

That remains true today. If shipping lines keep moving into services traditionally provided by forwarders, friction is hard to avoid. March believes carriers need to decide how far they can go in dealing directly with shippers if they want forwarders to keep bringing them cargo.

Fewer Carrier Choices Do Not Automatically Mean Losses for Forwarders

None of this makes life easy for smaller forwarders. Consolidation among shipping lines has narrowed their choices. They cannot simply boycott a carrier they dislike. And this is not only a problem for small firms: forwarders of every size have to follow market spot rates to some extent.

March argues that higher rates do not automatically mean a financial loss for forwarders, because the shipper paying the market price ultimately bears the increase. That holds when the rate is passed through to the shipper. A forwarder that has agreed a fixed price with its customer and then buys at spot can still end up absorbing the difference.

In March’s view, the forwarder’s role is to secure better service and pricing on the shipper’s behalf. When shippers demand adequate capacity and service from carriers, smaller forwarders can stand with them and make the same demands.

Why Smaller Freight Forwarders Can Respond Faster to Disruption

Those are changes in the structure of the market. The challenge smaller forwarders feel most acutely right now is geopolitical disruption. Tariffs announced without warning, international conflicts and worsening relations among major trading partners are affecting logistics and trade routes.

It is a difficult situation for the industry as a whole. Markets are changing so quickly that shippers struggle to make medium- and long-term plans. The Middle East has already seen major disruption, as have parts of Asia. Relations between the United States and other countries continue to shift.

Yet smaller forwarders have an advantage here. They can make decisions quickly and stay close to their customers. March sees them becoming people shippers turn to for advice: How will a new tariff affect our cargo? When will it take effect, and how long might it last? Could we change our trading arrangements or routes to avoid it?

This does not mean large forwarders cannot give that advice. With dedicated teams, they may have deeper expertise in trade rules and tariff interpretation. A smaller forwarder offers something else: a shipper can get the person responsible on the phone, and that person already knows the details of the shipment. For midsize and smaller shippers, that can often be the more useful kind of help.

Either way, the forwarder’s role has expanded. It is no longer limited to securing a freight rate; it also involves helping shippers make decisions. That change leads directly to the question of how forwarders earn revenue.

From Rate Margins to Services and Specialization

Forwarders already earn revenue from more than freight rates. March’s warning is direct: a freight forwarder that continues to say, “We live on the margin we make on freight rates,” will face difficulties, regardless of its size.

What should it offer instead? Customers need more than a rate. Forwarders need to provide information, services, insurance and a range of options, with risk management playing a substantial role. They need to become broader service providers. Securing the best available rate still matters, of course. It just cannot be the whole customer relationship.

March also sees specialization as another way for smaller forwarders to compete. A company that becomes a genuine expert in two or three niches can improve its margins and offer services a multinational may struggle to provide. Those niches might be pharmaceuticals, perishable cargo, live events or project cargo. Whatever the field, becoming known locally as the expert in it is likely to produce results.

Over the longer term, digitalization remains one of the clearest tasks for smaller forwarders.

The Digital Challenge for Small Freight Forwarders: Too Many Choices

Getting started presents a problem of its own. There is no shortage of technology; there is too much to choose from. For a small company, sorting through the options to find what it actually needs can be a burden in itself.

March’s advice is to set a digital strategy for the business before choosing a particular solution. Technology changes too quickly to commit completely to one system. Instead, companies need to keep asking what they need now, what tools are available and which tasks new technology and AI could improve. Without that preparation over the next five years, they could run into trouble.

The pace of change is clear. Before COVID-19, AI came up far less often in conversations about forwarding. Now it is at the forefront of efforts to improve efficiency and productivity.

This shift does not necessarily put smaller forwarders at a disadvantage. They may not have large IT teams to build systems or assess new technology, but they can move quickly and know what their own business needs. When they find the right tool, they can often put it to work faster. A large company may take months or even years to change a process or system; a smaller one may take weeks or months. With more ready-to-use solutions available, smaller firms can also switch tools quickly as their needs change, provided they have a sound digital strategy.

In March’s view, adopting technology need not mean cutting staff. Its role is to free people from repetitive administrative work. They can then spend that time finding new customers and generating revenue. Employees who have done the same work for years may understandably see a new tool as a threat. But the aim is to help them do more productive work, not replace them.

What Freight Forwarders Can Offer Beyond Rates: Information and Sound Advice

If technology gives a forwarder more time, where should that time go? The answer follows from its changing role: beyond securing rates and earning a margin, toward giving shippers the information and judgment they need. Smaller forwarders continue to emerge despite acquisitions. And even as carriers expand their services, shippers have little reason to want a market without competition. The question is no longer whether forwarders can survive, but how they will earn money.

To give shippers useful information, forwarders first have to gather it. That is no small task. When routes and carriers keep changing, someone has to check each shipment to find out where the cargo is and whether its expected arrival has been pushed back. This is exactly the kind of repetitive work discussed earlier.

Tradlinx Ocean Visibility helps forwarders see the current locations and schedule changes of shipments spread across different carriers in one view. They can spend less time checking each shipment and use that time to tell shippers what they need to know before they have to ask.

Company size is unlikely to decide who succeeds over the next five years. The deciding questions are where a forwarder will build expertise, what it will offer customers beyond a freight rate and which tools it will use to do that work. Being small may help it find those answers sooner: decisions can be made quickly, and customer relationships are close.

Further Reading

• SME Freight Forwarders: Challenges, Opportunities and Advice (The Loadstar Podcast)
• The Loadstar Podcast with Dan March, CEO of WCA World (video)

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