Logistics firms blame fierce competition for failing to implement higher prices

12 August 2015

Logistics firms are not good at implementing higher prices and only 18 per cent of all new logistics products achieve their profit targets, according to research.

The Global Pricing Study by Simon-Kucher & Partners based on responses from approximately 1,600 managers from different industries in 40 countries, found logistics firms succeed with only 40 per cent of their planned price increases. But almost 80 per cent of the companies are experiencing higher price pressure compared to last year.

Logistics providers blamed fierce competition and an increase in customers’ negotiating power on the poor performance. The study said the percentage of logistics companies that only compete on price was twice as high as in other industries.

According to the report, the combination of external pressure and low confidence in their own performance caused almost two-thirds of respondents to suffer from price wars, although they all blame the competition, not themselves for starting it.

The research also found that only 18 per cent of all new logistics products achieve their profit targets, compared to 28 per cent in all industries. And 35 percent of logistics companies failed to reach the profit targets for any of their new products, compared to the overall proportion of 24 percent.

Philipp Biermann, a partner at Simon-Kucher, said logistics firms were frequently at the mercy of their customers' professional purchasing departments.

“Recognising the value of your services, developing a negotiation strategy and turning this into an implementable price - logistics managers must get this into their heads,” he said.

He added one-size-fits-all products are doomed to failure. "Cheap services are possible, but they require a narrower service breadth, for example when it comes to flexibility, payment terms or goodwill agreements. If customers want these premium services, then they should also pay for them."

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