On the face of it, logistics looks like a commodity business. There is no reason for a customer to pay higher price. However, such companies have a benefit- from the customer’s point of view it is “salt in the kitchen”. Cost of logistics is miniscule as compared to the cost of goods. Thus, customer’s may not be very price conscious in this business, and an efficient player can gain an upper edge.
Vegetables are important too, yet you buy them from a vendor who offers a reasonable quality at the lowest price. Logistics is a plain fragmented commodity business where pricing power is never in the hands of the players except in squeeze scenarios. Most vendors are clearly not finicky about logistics or else we’d only have a few high-quality firms in the sector, not hordes of small players. Yes, there is a shift from unorganised to organised but its likely to be slow. We have no way of quantifying the shift. Even in a developed market like USA the top 10 logistics companies do not control more than 30-40% of the market – so good luck finding pricing power.
The scenario where your logic makes sense is perhaps a chip for a car that only a few players manufacture, and the car OEM doesn’t mind paying $10 more since the chip is critical and a small component of the car’s overall cost. Logistics is critical, but there are many players ready to offer decent services at good rates.
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