The world is living at inflation levels that weren’t seen in decades. The previous recession, which came with covid, has impacted the logistics market positively because consumers shifted from services to materials. And this increased the need for logistics services enormously. I made predictions in 2020 that the 2021 year will be one of the best for logistics businesses (you can find it here), and it came true. The first half of 2022 was also very good, but the second half and the beginning of 2023 can lower the demand for logistics services.
Why is this happening?
First, during the covid, consumers spend a lot on hard merchandise. As many of us were at home most of the time, the budget was relocated to building materials and various home appliances. Many of us have already acquired everything we need so these merchandise groups will close the growth cycle for a year or so.
Moreover, as we all have had enough of sitting home, many of us have shifted the spending budget towards services. As a result, the travel industry is booming, bars and pubs are full all the time, in summer there will be many leisure activities, in other words, there will be lesser funds left for buying something else.
Then, of course, we need not forget the inflation. Prices are skyrocketing. And this price hike is affecting all the merchandise and some service groups. So this will have a huge impact on consumers. If you entered any food store, you would see that one day we have skyrocketed prices, and the other day huge discounts, which means those businesses are facing hard times, predicting demand. And, of course, it signals to us that the demand is going down.
Will the recession for logistics businesses be as hard as in 2007?
I think not. Because first of all, we all are in a far better position if talking about savings. The population has saved many funds during the pandemics, which will soften the recession. Secondly, logistics businesses are far better prepared in the sense of cash flow than they were in 2007. Moreover, businesses worldwide haven’t made any stupid investments as it was with the housing bubble. I believe that some investment funds made stupid investments in supply chain tech, but the impact if some of them fall under will not be big. And some small market players can have problems as well. But, generally speaking, every company is in a far better position than in 2007.
So I believe there will be some downturn in the spending shift towards services and decreased consumption, and we see this already today. But this will not be a tragedy. Moreover, we will see a fast recovery when the war in Ukraine ends, as there will be a huge demand for materials and other services to rebuild the country. Hopefully, this will happen someday in 2023.
But of course, logistics businesses need to put more effort into their business development to hedge the risks and use the market fluctuations to take away customers from other players.
Business development will not be as easy as it was in the previous years. Because first of all, shippers will try to take revenge for the inflated prices, and competition among logistics service providers will be super active.
What advice can we give to logistics businesses?
It’s obvious that logistics organizations need to speed up their new business development. It’s a perfect storm for that, as there are many possibilities during market shifts.
Do not forget that as market activity has increased, you must pay huge attention to your sales process to be top of the game. I mean, use all the available tech today to make your sales employees more efficient. Work on prospecting scrips to as not to sound like everyone else. Have a long-term sales process with multiple sales touches that creates value and generates deals. And do not forget to train your employees, moreover, do this constantly. Because we haven’t seen a recession in the last 15 years, most logistics industry sales managers haven’t seen a recession during their carrier. To survive and thrive in this environment, organizations need to produce hunters. For this to happen, logistics companies must provide sales employees with the sales process and motivational training. You can read more about tips for selling logistics services (here and here).
If your organization is thinking of creating a killer new business developement system that would drastically reduce sales cycles and position your organization as a thought leader in your industry, let’s talk and screen possible synergies. You can arrange a time with me by pressing here.
And if you want to produce hunters that would get more new business almost automated, and outpass your competition by ages, stay tuned. We will share our training calendar soon.
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