221 logistics companies became insolvent in 2014, a figure that has more than doubled since 2010. Research from the accounting firm, Moore Stephens, suggests overcapacity is to blame for the rise in struggling companies, an example being City Link which fell into administration over Christmas due to tough competition. According to Jeremy Willmont, Head of Restructuring and Insolvency, ‘the traditional courier and haulage model is now under threat’.
As more and more customers choose online shopping, not only do systems have to be updated (at a costly expense) to support large volumes, the competition between couriers increases (which in turn means prices get lower and lower). This leads to too many companies scrambling to get enough work to cover their overheads as the result of charging very little. This has caused a number of firms to struggle and eventually go bust.
Willmont suggested this may be a good thing in the long term for the sector as prices will start to rise if there are fewer companies around to provide the service. Another example of a courier firm which suffered from online shopping pressure was Yodel.
Black Friday may have been a successful day for retailers but the extra large volume of parcels resulted in the courier firm having to delay delivery for two days in order to keep up with demand. Systems will need to be continually updated and improved to suit the change in consumer spending, inevitably causing some logistics companies to fail.
However, it’s not all doom and gloom! With the lowest inflation rate since 2000 due to falling petrol prices, companies in the logistics sector have a chance to benefit and save money in other areas.