Frequent Freight Forwarder Scams: How Can Cross-border Sellers Avoid Them?

Tech 2024-08-02 12:30:55 Source: Network

Frequent Freight Forwarder Scams: How Can Cross-border Sellers Avoid Them?In recent years, the cross-border e-commerce industry has experienced rapid growth, attracting more and more sellers. This has led to a surge in logistics demand

Frequent Freight Forwarder Scams: How Can Cross-border Sellers Avoid Them?

In recent years, the cross-border e-commerce industry has experienced rapid growth, attracting more and more sellers. This has led to a surge in logistics demand. Freight forwarders, serving as the bridge between sellers and overseas markets, are undeniably crucial. However, lately, the freight forwarding industry has been plagued by frequent scams, causing significant losses for numerous sellers and drawing widespread attention within and outside the industry.

Freight Forwarder Scams Are Rampant, Sellers Suffer Heavy Losses

Since last week, news of freight forwarder scams has been unceasing, with affected companies primarily located in Shenzhen and Shanghai. Within a mere week, over ten freight forwarders have gone under, a phenomenon unprecedented in the cross-border e-commerce sector. Insiders reveal this is only the tip of the iceberg, as numerous other scams remain undisclosed, potentially far exceeding the known number.

Each freight forwarder scam delivers a crushing blow to numerous sellers. Hard-earned goods are seized, payments are unrecoverable, businesses grind to a halt, and losses are substantial. The freight forwarder companies, meanwhile, have absconded with the funds, leaving behind a trail of helpless sellers in disarray.

The Root Cause of Freight Forwarder Scams: Broken Capital Chains

What exactly is driving these frequent freight forwarder scams? Broken capital chains undoubtedly stand as the primary culprit. In recent times, international shipping costs have been steadily climbing, creating a facade of prosperity for many freight forwarder companies, even as their financial situations become increasingly precarious.

1. Low Profit Margins Amidst High Shipping Costs

Despite exorbitant shipping rates, freight forwarder companies are not reaping substantial profit margins. Industry insiders disclose that the average gross profit margin for freight forwarding currently hovers around 10%, with net margins even lower, with many companies struggling to reach a 4% net margin.

2. Slower Capital Turnover

Given the extended international logistics chain, capital turnover speeds are sluggish, requiring many freight forwarders to shoulder considerable upfront costs. When faced with price fluctuations, client defaults, or other unforeseen circumstances, the risk of a broken capital chain emerges.

3. Blind Expansion and Investments

In pursuit of rapid growth, some freight forwarder companies engage in unchecked business expansion, utilizing client advance payments for high-risk investments. Investment failures directly lead to broken capital chains.

4. Poor Business Management

Certain freight forwarder companies lack a robust business management system, leading to internal chaos, inadequate financial oversight, potential financial leakage, and management loopholes, all contributing to broken capital chains.