Rx for logistics startup success

Rx for logistics startup success

08 Mar 2018

"..the change that the logistics industry will experience over the next decade will be the most significant one that it has ever seen.."

Ten years ago it was almost unthinkable to imagine new companies entering the mostly asset-heavy logistics industry (apart from new brokers or freight forwarders). The entry barriers are high, and the rewards (i.e., profit margins) are lower compared with many other industries. Today, with digitalization and big data as two major trends, this paradigm has shifted though and suddenly even the old-fashioned logistics industry has become attractive to the Silicon Valley and beyond. So far logistics startups have received more than $1.5 billion in equity funding in the United States alone.

There are many startups out there already offering different value propositions to the logistics industry and its participants. And although they all have a clear unique selling proposition (USP), not all of them will be successful in the future. So before highlighting some of the key startups in the world, Simon-Kucher has evaluated the most important factors that will determine whether or not these startups will be successful in the long run.

Although most of the startups differ at least slightly in their offer strategy, history has shown that there will most likely be only one true winner per segment and market in the long run. So it is better to start bringing initial solutions to the market (of course no half-baked solutions) and establishing your space, than waiting another five years until all details and gadgets are fully ready. Because in five years someone else might have taken the spot already. The best example for this is Amazon. They have gradually moved into the logistics space (from being a pure online retailer), thus entering different (logistics) segments step by step: first warehousing, then air and ground transport, and soon ocean forwarding.

Sticking with the Amazon example, it does not really matter whether you consider them an innovator or a disruptor (one can make the case for both). They are already an 800-pound-gorilla, so they do not need to worry about industry perception anymore. However, many of those small startups do. So no matter if they are looking for equity investors, collaboration companies, or eventually customers, startups will much more likely be successful if they are positioned in a positive/innovative rather than a negative/disruptive way.

Startups are bringing a new customer experience to the logistics industry. They offer an innovative (and often unique) service to the shippers, forwarders, and other parties involved. So how would one charge for a new innovation (transaction-based, subscription-based, etc.)? Simon-Kucher has seen many innovations fail due to a poor monetization strategy. The same can also be true for the logistics startups if they do not think about it from the very beginning. In fact, Simon-Kucher recommends to think about the monetization strategy even before you think about which product you want to offer.

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