Logistics, Pricing Wars and a Lack of Innovation…

The Logistics industry is lagging far behind in both innovation and price innovation a new report has said.

Price wars in the logistics industry

Simon-Kucher & Partners – a global strategy consulting firm, has published its latest Global Pricing Study. In it, it found that logistics firms succeed with only 40 per cent of their planned price increases. And almost 80 per cent of the companies are experiencing higher price pressure compared to last year. Logistics providers say these poor results are due to fierce competition and the fact that customers have more negotiating power now. As a result, the percentage of logistics companies that only compete on price is twice as high as in other industries.

Dr. Philipp Biermann – Partner, Simon-Kucher laments  that blame is quickly placed on the competitors, although the inability to raise prices is generally self-inflicted: “Logistics firms often lack confidence and negotiation tactics. They are 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!”

The price isn’t right

Kornelia Reifenberg – Senior Director, Simon-Kucher, comments that the combination of external pressure and low confidence in their own performance has caused almost two-thirds of the respondents to suffer from price wars: “The phenomenon that companies make concessions to their customers in the heat of the moment that they actually cannot justify is very widespread in the logistics industry. In the process, they often don’t see the signals that their dumping prices give to the competition. They don’t grasp that these ‘isolated cases’ ultimately have a negative impact on the market price level.” 

Top of the flops

The study also provides some colour when it comes to charting the success of new products and services. Stating that only 18 per cent of all new products achieve their profit targets, which is the lowest rate that has ever been recorded (considering that in all industries, it’s 28 per cent). And 35 per cent of logistics companies haven’t even been able to reach the anticipated profit targets for any of their new products (compared to the overall percentage of 24 per cent), although these new products and services could well be used to shift the focus of negotiations away from the price and towards value, Reifenberg says.

The results contained in the study were based on responses from approximately 1,600 managers (of which C-levels made up 39 per cent), from over 40 countries across Asia-Pacific, the Americas and Europe.

Unilever China and Alibaba are building something big together…

Unilever China and Alibaba hope to innovate in Big Data, cross border e-commerce and supply chain management.

Alibaba and Unilever China work together

We’ve been watching Alibaba with increased fascination during the last twelve months: Rakuten, Alibaba and Amazon: the battle of the electronic storefront, and Sourcing things differently: the world of alternative storefronts.  

Unilever China and Alibaba Group recently signed a Strategic Partnership Memorandum of Understanding (MOU). Under this the two companies will make a joint effort to build the biggest online and offline platform for sales, branding, cross-border ecommerce and innovation.

The partnership provides Alibaba with the opportunity to develop a full channel, whole field group corporation with a FMCG company

Marijn Van Tiggelen, Unilever North Asia President, on the announcement: “Alibaba is the leading internet company in China, with the most innovative thinking. It’s not only an online store, but also a solution platform for online payment, e-finance, and e-commerce logistics. In cooperation with Alibaba, Unilever can provide more convenient services to consumers in China.”

“We are very pleased to amplify our partnership with an industry leader such as Unilever,” said Daniel Zhang, Chief Executive Officer of Alibaba Group. “We look forward to building on our success in sales over the years and taking the collaboration to the next level. Moving forward, Alibaba Group and Unilever will jointly innovate in Big Data analytics application, cross-border e-commerce, and supply chain management. In this rapidly changing business landscape, we are committed to continually provide greater value to merchants and better experiences to shoppers.”

In the years that follow it is hoped progress will be made in the areas outlined below:

  • An improved and expanded distribution channel, which will in-turn provide consumers in rural areas with more convenient access to Unilever products.
  • Unilever and Alibaba will further develop the cross-border ecommerce business.
  • The two companies will further develop the application of big data, with which Unilever China can optimise the online advertising strategy and drive online to offline sales.
  • During a trial period special QR codes developed by Alibaba will be put on the packages of Unilever products. This will help consumers easily identify counterfeit products with its mobile app and provide a safer shopping experience.