Digital forwarder job cuts down to investment slowdown and over optimistic forecasts
18 / 07 / 2023
Photo: Travel mania/ Shutterstock
Recent job cuts at digital freight forwarders were caused by over-optimistic growth expectations and investment slowdowns, according to consultant Transport Intelligence (Ti).
Although “digital forwarder” is an increasingly difficult term to define, Ti outlined a series of job cuts at companies that have been labelled as such over recent years in a new white paper.
The consultant said that in June 2022 Convoy laid off around 22% of staff, followed by a second round of an unknown number of cuts in October; Forto laid off around 10% of staff in November 2022; then in January 2023 Flexport cut around 20% of jobs and Uber Freight around 3%, there were further cuts at Convoy again in February while Coyote cut around 200 jobs followed by an undisclosed amount in May.
The cause of these cuts, according to Ti, has been a slowdown in investments and over-optimistic expectations for the market.
“Most of the digital forwarders grew significantly during the pandemic and expanded their workforce to accommodate surging demand driven by the Covd-19 pandemic,” Ti said.
“It appears though that their forecasts were too optimistic and over-hiring was implemented to meet the current surge of demand rather than as a response to a forecasted continued or sustained growth.
“With consumer spending cooling down, their strong growth quickly turned into high operating expenditures to which start-ups responded by laying off employees.”
The consultant pointed out that layoffs were not just confined to the digital forwarders and job cuts also took place among large freight forwarders such as FedEx, DHL and DSV as well as large shippers, to offset the decline in volumes.
However, digital start-ups were also affected by a tougher venture capital investment environment that forced companies to re-evaluate their plans.
“We are seeing a shift in the venture capital landscape with investors being more cautious and slowing down the deployment of capital,” Ti said.
“During economic downturns, investors reserve more capital to back their best-performing start-ups, further reducing the number of new financings.
“Considering that access to capital has become more limited, growth-stage start-ups will have to optimise their resource allocation.
“The layoffs are thus a key element of the cost optimisation process and the reduction of the cost structure.
“We might therefore expect to see more layoffs in the coming months among the digital forwarders.”
