Freightos interview: ‘Forwarders are much happier than I thought they would be’
Shippers and forwarders are both set to benefit from online transactions, according to Freightos, the online booking platform for shippers which launched last month.
The company, which has been developing the platform for the past four years, aims to make booking freight services much like booking a holiday or flight – simple and fast. But there is still much work to do in changing the mindset and culture of both buyers and sellers.
“Forwarders are much happier than I thought they would be,” said chief executive Zvi Schreiber told The Loadstar. “They were nervous about transparency. But their desire to get new customers is greater than their nervousness.
“Selling online is a great way to get new customers – and it’s cheaper. You can spend a long time and a lot of money trying to get a new sale, but there is no guarantee of success. This has no upfront cost of a sale, and we only take 2%.”
The launch of other online platforms, such as Kuehne + Nagel’s FreightNet, has helped the industry move on, said Mr Schreiber.
“Everyone now understands that this is how it’s going to go,” he said. “Everyone is also nervous about Amazon – it’s a huge wake-up call for the industry.”
There have been a few hurdles to get over. Forwarders have naturally been nervous about a potential downward pressure on rates that could come from an online booking service, as well as the fact that it is harder to offer a costlier but higher quality option online, and harder to upsell. But Mr Schreiber argued that the benefits outweigh the negatives.
“The service you give is rated online. And shippers say the service is as important as the price. We introduce forwarders to the shippers and they are free to upsell, offer warehousing and so on.”
However, he added: “There has been a fear of transparency within companies – they have different P/L centres in different offices, so they don’t share rates between offices. It’s been difficult to change that, but you can, by showing people how much money they are losing by working like that.
“Forwarders being opaque brings about more of a risk of shippers going directly to carriers.”
He claimed that automation takes out mistakes as well as the cost of a sale. The benefit for shippers is an instant quote, using the optimum routes – something that is hard to work out manually.
“This lowers the costs of doing business. Yes, there could be some downward pressure on price – but there is anyway. Freight has always been a commodity – a 20ft container is a 20ft container.”
Freightos began its online launch six months ago, and Mr Schreiber admitted it has been a steep learning curve.
“We’ve been working on payments. Things like demurrage and extra charges have been difficult. We now have an SOP [standard operating procedure] where the rules are very clear; it’s one of our key commitments. What you’ve been quoted is what you’ll pay. Every charge must be predictable. All-in is all-in. And it’s working now – forwarders have got used to it and shippers know they need to be accurate with size and weight. And we do the basic documentation.”
One of the biggest advantages, noted Mr Schreiber, is that it puts forwarders in touch with small shippers who were previously hard to reach, while they also don’t need to worry about extending credit to unknown SMEs.
“One third of importers in the US are small shippers, and we aggregate small shippers for forwarders – it’s a pot of gold. They can’t approach SMEs to sell to.”
One forwarder working with Freightos agreed that access to SMEs was a useful tool. “We have been happy with the experience. We can give faster quotes that before. It’s best for simple and transactional shipments – it won’t replace how we do business with larger customers. But it’s a handy, immediate tool.”
But he also added: “It’s too early to tell how this will develop. We may build our own version, or plug into an off-the-shelf product like this. It’s to be discussed.”
Another problem often cited about online sales is how to book non-standard cargo. Freightos has options for various products – hazardous, refrigerated and so on – but it doesn’t do express. “You can already get a price online, so we don’t add much value there.”
Over the past four years, the company has been working with major forwarders including Nippon Express, Hellmann and CEVA, getting a database of rates and routes while also helping the forwarders manage their own rates.
“The challenge for forwarders is keeping track of rates. It’s important for them to get rates in a database so they can quote door-to-door. By automating routing and pricing, they can have worldwide access to their own rates. The information used to be emailed, which could take three days, even on major lanes. And then you wouldn’t get an optimised rate.”
Mr Schreiber is a serial entrepreneur, who at one point ran a company selling lights, sourced from Guangzhou and shipped via the UK to the US. He had to learn how the forwarding business worked, and found that it could take days to get a quote, usually just for one lane and one mode, when he wanted his customer to have a choice. “You could lose a sale because it would take so long to get an estimate for shipping,” he said.
As a software entrepreneur, he decided to do something about it. As he had already raised capital for other ventures, finding investors was relatively straightforward.
“Four years ago it would have been hard to raise money for this industry. Venture capitalists (VCs) didn’t look at logistics, so when we started I had to rely on my connections. Now VCs look at logistics, and logistics has an awareness of the tech sector, so it makes it easier.”
Freightos, which has raised $23m, appears to be one of the stronger players in this new market, but Mr Schreiber said there is room for more than one.
“We are all trying to educate a huge industry. K+N’s FreightNet, and other start-ups are good for the market. There are other companies which do trucking rates, and there is Flexport, which is a forwarder with technology. It all helps to educate.
“We want to be a leader, but there is room for two or four companies like this.”
Freightos at first focused on the China-US trade, but it is now adding the UK and India – “we follow the searches we’ve had”, said Mr Schreiber. It now has thousands of rates for various port pairs, as well as air and land.
But its focus right now is attracting more shippers to use the service.
“We have a waiting list for forwarders at the moment. The key is to get the shippers before the forwarders – we need to make sure it’s a balanced service. Once we have more buyers, then we can bring on more sellers.”