Maersk Spot: Dead End to Traditional Freight Forwarding?

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Maersk Spot: Dead End to Traditional Freight Forwarding?

1. What is Maersk Spot?

Shipping a container has been a complex process for many years. Manual and inefficient, the buying and booking process has been often full of surprises. With the launch of Maersk Spot, Maersk aims to introduce a truly online product that can break the cycle of overbookings and offer a much simpler way to ship a container with load guarantee.For detail, please check: https://www.maersk.com/news/articles/2019/06/25/maersk-introduces-maersk-spot
According to the vision of Maersk’s CEO, the group’s revenue shall be composed of 50% from the shipping business and 50% from the non-marine business within a few years (accurately within 3-5 years). MAERSK SPOT is one of many star services launched to achieve this big goal. Through this service, Maersk hopes to obtain more orders from small and medium-sized customers.

2. Features of MAERSK SPOT

After the actual operation, we concluded that the main features of the MAERSK SPOT booking are as follows:

1) The price you see is the price you pay

Once the customer has successfully booked online, the freight provided by MAERSK will be locked. No change will occur, which will help the customer’s cost control.

 2) Through this service, MAERSK and the customers are mutually constrained.

When a booking is confirmed by the customer, Maersk commits to load and grants certainty in operational execution. This is a mutual commitment between the customer and Maersk which guarantee that the vicious cycle of overbookings is addressed. In case of booking cancellations, fees apply at the customer’s charge. If cargo is rolled, Maersk compensates the customer.
    Such a two-way constraint will greatly reduce the empty rate of containers, which will help MAERSK improve its own position management efficiency, balance the proportion of positions among various customers, and thus improve their profitability.

 3) SPOT price adjustment based on different seasons helps to maximize profit

Based on our observations and practical experience, the price of MAERSK SPOT will basically be adjusted according to market conditions. For example, in the traditional peak season from Asia to Europe (generally in July and August), the price of MAERSK SPOT will be higher than the average market price. Because MAERSK SPOT needs to ensure the timely delivery of SPOT booking customers with the limit of tight positions, and the solution is to raise the price. Correspondingly, if the route is in the off-season, the SPOT price will be lowered.

 4) MAERSK SPOT service will use price means to compete in the field of its opponent’s traditional advantages.

For example, in the Australian route in July, the price of MAERSK SPOT is 200-400 USD PER TEU lower than the prices of other shipping companies such as CMA. Attracted by such a large price gap, some CMA customers will switch to MAERSK SPOT service. In this way, MAERSK can achieve the goal of market share expansion.

 3. The threat of MAERSK SPOT

The MAERSK SPOT service based on the digitalization of MAERSK greatly simplifies the traditional container export operation procedures. In fact, MAERSK SPOT provides both the services of shipping companies and a large part of the traditional services provided by our freight forwarders. If MAERSK promotes this service to our customers, our role as a freight forwarder will be worthless. This threat is fatal and unsolvable. More worrying is that other shipping companies will launch similar services sooner or later. At that time, is there still room for our China freight forwarders, especially small and medium freight forwarders? Therefore, the MAERSK SPOT service is a chronic poison for our small and medium-sized agencies.
  Taking history as a guide, you can learn the trend. In those days, the popularity of digital cameras put Kodak’s film business to a dead end. So when the trend of shipping digitalization comes, who will be the biggest loser? I don’t have to say more.
   Of course, not all are pessimistic voices. Finally, let’s listen to the speech by Tim Power Managing Director of the Drury Group at the Hays Forum 2019:
   Maersk intends to create a new business model – becoming an integrator of maritime logistics, from the cargo owner’s warehouse to the buyer’s warehouse, the entire value chain will participate and integrate. My personal opinion is that the business model won’t work. First, Maersk will compete directly with its freight forwarding enterprise customers. Many freight forwarding companies have a great market voice. They will switch container goods to other liner companies, and Maersk will lose both customers and business, which is a big risk for Maersk. In addition, in the field of traditional advantage, Maersk may lose the advantage and cause direct economic losses.

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