Digitisation and the threat to the middleman

Digitisation and the threat to the middleman

At Splash we always enjoy any contributions from the founder of Futurenautics, K D Adamson – whatever she has to say is both prescient and a must-read for those rare folk in shipping who actually think more longer term.

Late last month, while she was in her own words “knee-deep in giblets” preparing the family Christmas lunch, we asked the self-described ‘blue futurist’ for her predictions for 2017; little did we know that much of what she laid out has already materialised in the first four weeks of the year. Adamson wrote about the imperative for all in shipping to embrace digitisation this year or risk becoming irrelevant.

Recent news substantiates this point of view – and begs the question what role middlemen have in the future of cargo transportation.

The most read article on Splash this week was the news that miner BHP Billiton has developed an online auction platform whereby owners bid for shipments, negating the need for a shipbroker.

Reacting to the news on LinkedIn, Splash columnist Kris Kosmala said the development was long coming. “In a market awash in supply, shippers cannot resist squeezing more net margin contributions for themselves and truly commoditising shipowners,” he commented.

Athanasia Panagiotopoulou, cofounder of online chartering tool VesselBot, chipped in on the discussion, saying digitisation is now irreversible.

“We believe,” she maintained, “that the change in the market will most likely come even quicker than many market players expected.”

BHP is in effect following the lead taken by online retail giants Amazon and Alibaba who have of late taken the first steps to truly revolutionise the container trades by also omitting the middleman.

Splash reported earlier this month on how Chinese online retail giant Alibaba has concluded a deal with Maersk Line to take space on its boxships, negating the need for freight forwarders, while yesterday our site carried a report on how Alibaba’s American rival Amazon has started operations as an ocean freight forwarder.

The Amazon news had some on LinkedIn wondering if this was a first step by the American online giant into vessel ownership. It won’t be, says our columnist Kris Kosmala rather emphatically.

“Why would Amazon buy their own ships to be stuck with pieces of aging and depreciating hardware?” he mused. “They can remain a freight forwarder, first for themselves and then as a platform for others who cannot get leverage with the big shipping guys – just as Uber did for independent drivers who could not negotiate with taxi fleet owning companies. Amazon simply assume that their mathematics (seafreight allocation algorithms) are better than any other platform or existing freight forwarders’ systems (that one is 100% certain). Reselling that capability is far more profitable than buying ships under any circumstances.”

Another LinkedIn user commented that all these new platforms coming into shipping are no different to websites which he claimed have taken away the pain and expense of having to deal with travel agents or property brokers, a point of view bitterly opposed by Gary Stiegler, president of an Alabama-based freight forwarder, who questioned all this rush to ditch the human touch in sealing deals, leaving a comment on our site in which he elaborated: “There will always be room for the small, family owned forwarders and brokers who give personalised service and protect the interest of their customers, rather than the alternative of having a lot of young, inexperienced people trying to do everything online. This trend for texting, instead of talking and having human intervention will continue to destroy the customer service that we were accustomed to in the past.”

Stiegler, whose family firm dates back to paddle steamers in the early 1800s, is of the opinion that carriers who respect brokers and forwarders will end up with their support and, he says, “hopefully win out against this monopolistic trend”.

Reader comments are very much the life and soul of this site and are always gratefully appreciated. Dotting the i and crossing the t on this particular debate I’d like to refer you to a great comment left by Andy Lane from CTI Consultancy, who had this to say on box shipping and innovation: “Maersk and their peers (MSC, CMA, Hapag, OOCL, etc) need to innovate to stay in business. Where as many others just claim state bailouts instead. Subsidies are addictive and breed incompetence, not sustainability and superior service.”

Wishing all our readers a happy, healthy and if at all prosperous Year of the Rooster.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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1 Comment

  1. Avatar
    Joseph
    January 27, 2017 at 9:15 am

    Good read, particularly on Amazon.
    It will be interesting to see how big acceptance of their service is truly going to be. Quite a lot of larger shippers have already said that they will surely not adopt their service as that would mean disclosing their producers to Amazon which has been known to e.g. simply start selling their own brands on well performing products on its Amazon Marketplace.

    After all, which producer is going to turn Amazon away as a customer.