Over the next five years, the industry’s major players are expected to continue growing through acquisitions, according to market analyst IBISWorld.
“In addition to increasing geographic spread, many operators have used acquisitions to provide more value-added services to clients. While the development of integrated logistic services does not necessarily determine industry concentration, it can influence a company’s market power. Large companies are generally more capable of winning contracts with major retailers and manufacturers,” IBISWorld noted.
“Once a contract is secured, it is often outsourced or subcontracted to companies with logistics services, enabling them to achieve higher profit than smaller industry players. Conditions are projected to improve slightly over the next five years. As the economy continues to recover, including improvements in manufacturing and retail spending, the industry is expected to grow because a greater number of goods will need to be shipped.”
Additionally, diesel prices will cause growth as companies heighten fuel surcharges to offset costs, although profit will eventually diminish, forecast IBISWorld industry analyst Lauren Setar.
The local freight trucking industry has not fared well in the five years to 2013; slow manufacturing production and retail spending reduced demand and hurt revenue for the industry during the economic downturn.
Declining demand caused greater price competition among operators, which limited profit. Additionally, soaring diesel costs dramatically reduced profitability in 2008, even though many industry operators implemented fuel surcharges. These surcharges increase revenue, but are not sustainable in the long term because customers will seek alternative modes of transportation, added Setar.
