Observations and Reflections on the Ecological Transformation of Freight Operators Over the Past Three Years

Approximately 700,000 freight operators, ranging from small to large, handle more than 85% of China’s logistics cargo‑transport demand, serving as a cornerstone of the logistics sector and the broader economy. Over the past three years, the macro environment has undergone profound transformations. What changes have reshaped this niche industry ecosystem, and what lies ahead?

G7 Yiliu has served nearly 40,000 freight operators, and our data and insights can offer valuable conclusions and insights.

It is a fundamental fact that total demand is no longer growing.

Freight operators are also relatively pessimistic about demand over the next three years.

Freight traffic data, which reflects road freight demand, captures how broader macroeconomic shifts over the past three years have been reflected in the freight industry. Three points merit attention:

First, the marked slowdown in total freight volume began as early as 2019—before the pandemic.

Secondly, the most pronounced decline occurred in the second half of 2022—after the Shanghai lockdown had ended—rather than during the lockdown itself.

Third, since April this year, the demand curve has increasingly resembled that of 2022, indicating that the post-pandemic reopening has failed to deliver the anticipated growth momentum.

At the recently concluded Conference of Advanced Freight Operators, more than 800 well-performing carriers reported that fewer than 30% expect total freight volumes to surpass the 2022 trend line within the next three years. This indicates that market participants remain relatively pessimistic about future aggregate demand.

If we draw an analogy to the large-scale climatic shifts on Earth, it’s safe to say that the freight industry has entered a rather chilly “glacial era.” And since it’s an era, it won’t warm up overnight.

The ultimate structural question in the freight industry: Will the sector become increasingly concentrated?

Just like in the travel industry, are there only a few major companies left?

When the broader economic environment turns chilly and industry-wide growth slows, everyone can feel that making a profit has become increasingly difficult—indeed, even survival is becoming a struggle. Over the past three years, we’ve seen many freight‑transport operators exit the market. It’s easy to wonder whether small and medium‑sized enterprises that lack sufficient strength will ultimately disappear, whether the industry will eventually become as highly concentrated as the home‑appliance sector, or even, like the mobility‑services industry, end up dominated by just one or two platform giants—akin to Didi or Uber—creating a monopoly.

However, data from the past three years of G7’s logistics platform tell a different story. Over the last three years, roughly 30% of firms with revenues below 15 million have indeed exited the market; at the same time, more than 20% of large freight‑forwarding companies with revenues exceeding 1 billion have either left the market or ceased to operate as independent entities. The industry’s size distribution thus resembles a spindle rather than a dumbbell.

Last year, I spent 40 days traveling to numerous countries across Southeast Asia, the Middle East, Germany, and Japan. Whether in developed or developing economies, under monarchical, capitalist, or socialist systems, and whether in large or small nations, I found that no country or region has a logistics and freight‑transport market that is highly concentrated in just a few major firms—and there is no discernible trend toward such concentration either.

From the perspective of basic economic principles, extreme industry concentration—or even monopoly—is neither a widespread trend nor a common phenomenon; it arises only under specific conditions, namely when production exhibits very strong economies of scale. Within the broader logistics sector, only two sub‑segments—express delivery and ocean shipping—meet this fundamental criterion for scale effects. One is the express‑delivery industry, which leverages an extensive network to serve hundreds of millions of consumers; the other is ocean freight, where a single vessel requires investments exceeding one billion dollars, imposing substantial capital barriers. By contrast, the freight‑transport sector, which relies primarily on vehicles, warehouses, and labor as its key inputs, does not benefit from such straightforward “the bigger, the better” scale effects. Instead, cost advantages for freight operators typically emerge only within specific industries, regions, or value chains. For example, third‑party logistics providers like DHL have established competitive edges with global major clients, dedicated‑route carriers excel on particular fixed routes, and last‑mile delivery firms gain strength within individual cities. Similarly, in nature, each species occupies its own “territory,” with varying sizes and shapes, creating a rich, organic ecosystem characterized by diversity and differentiation.

The Evolution of the Freight Operator Ecosystem Over the Past Three Years

More than 15% still remain during the Ice Age.

Freight operators see both volume and profits rise.

In an extremely challenging environment, 700,000 freight operators have each found their own way to adapt; over the past three years, divergent business strategies have once again widened the gap between them. At the beginning of 2023, we conducted a survey of more than a thousand freight operators and arrived at several key findings.

We examine freight operators across two dimensions—revenue and profitability—and find that their distribution across four quadrants today differs significantly from what it was three years ago. First, 70% of freight operators are experiencing negative revenue growth, consistent with the broader market trend.

Asphyxiation

Forty percent of companies are experiencing shrinking revenues and declining profits. We characterize firms in this quadrant as “struggling.”

The proportion of companies in a “suffocating” state is so high because the once‑widely used business models for freight operations are no longer viable. During the decade of rapid economic growth, many freight operators could sustain growth and profitability by simply cultivating relationships with one or two major clients and steadily expanding their vehicle capacity. But as the industry entered a period of severe contraction, those few key customers—on whom these firms had relied—stopped growing and began slashing prices to cut costs. If freight operators fail to respond swiftly to this changing environment and remain stuck in the old profit‑driving mindset, they will inevitably find themselves in a “suffocating” situation, with both revenue and profits shrinking.

Fatigue

Thirty percent of companies report shrinking revenues but still maintain relatively healthy profitability. We classify firms in this quadrant as “underperforming.”

Healthy profitability indicates that these freight operators maintain a well‑balanced mix of cargo sources and resource allocation, enabling them to sustain profit growth even in the current environment. However, many such companies rely heavily on a small number of key employees or on the owner’s hands‑on involvement in every aspect of operations, resulting in insufficient institutional capacity. Consequently, they either hesitate to pursue new customers or, even when they do, struggle to retain them, ultimately leading to sluggish revenue growth.

All for nothing

Fifteen percent of companies report revenue growth, yet their profits continue to shrink; we describe this situation as “working hard for nothing.”

These freight operators have made breakthroughs in onboarding new customers, but their cost-control capabilities remain weak. Either their capacity‑sourcing practices have failed to improve, resulting in profit erosion due to excessively high procurement rates, or their management of in-transit expenses lacks sufficient granularity, leading to significant losses and inefficiencies.

Advanced

Even in such a challenging environment, 15% of freight operators have nonetheless achieved sustained growth in both revenue and profitability over the past three years. We have found that these operators’ success is no accident: they have moved away from simplistic business models that rely on a small number of customers or on heavy resource inputs. Their simultaneous gains in volume and profit stem from continuous learning and iterative improvement, as they have developed advanced operating practices tailored to the new era.

Three Common Traits of Advanced Freight Operators

We have found that leading freight operators share three distinct common traits. These traits are not short-term; rather, they represent the fundamental characteristics that freight operations should embody over the next five to ten years. As these features spread from a small number of operators to the majority, they will become the defining theme of the industry’s overall upgrade.

First commonality: an effective product assortment

In the past, an outstanding freight operator only needed to secure one or two major clients, as the growth of those key accounts alone was sufficient to fuel the company’s expansion. Today’s leading freight operators, by effectively aggregating shipments from both large and small shippers—across diverse routes and varying service requirements—they achieve superior resource‑allocation efficiency within their own “territory,” particularly in terms of vehicle‑capacity utilization. This enables a steady stream of customers to flow into their businesses.

It can be said that in the new era, easy money is a thing of the past. Creative sourcing and resource allocation represent the ultimate test of freight operators’ managerial acumen and operational capabilities.

Second commonality: Controllable capacity continues to accumulate.

In the past, freight operators either invested in their own fleets or simply sourced third-party capacity through online platforms. Both approaches were viable only during periods of steady cargo‑volume growth or in an era of high profit margins. Today, expanding proprietary fleets carries heightened risks, while straightforward outsourcing fails to deliver any cost advantages. By contrast, leading freight operators systematically accumulate and refine the transport resources they have cultivated over the long term, steadily enhancing their ability to control pricing and service quality for both drivers and capacity. In this way, every shipment and every day of capacity deployment strengthens their enduring competitive edge.

Third commonality: Cost and expense management is refined down to the level of each individual trip.

With total volumes remaining flat and overcapacity the defining feature of the new era, the days of high‑margin freight transport are behind us. Today’s leading freight operators have refined cost management down to the granular level of each individual order, enabling them to respond swiftly and maintain control over their margins even as customer needs, cargo sources, and routing patterns evolve.

In summary, the advanced freight operators have all achieved significant upgrades in their business models by excelling across three key dimensions: customers, capacity, and costs. Beyond these three commonalities, such operators also place a strong emphasis on safety and compliance—cornerstones that underpin sustainable, sound operations.

What impetus do data intelligence technologies provide to advanced freight operators?

Connection and sedimentation capabilities, intelligent data accumulation

Although the broader macro environment exerts a negative impact on overall demand, there is another highly positive factor: digital and intelligent technologies. Data‑driven intelligence will deliver substantial momentum across the vast majority of industries, and the freight sector is no exception. So how exactly will these digital‑intelligence technologies drive transformation in the freight industry?

Through an in-depth analysis of freight operators’ core business processes, we found that freight operations differ fundamentally from manufacturing: the most critical activities do not take place within the company itself, but rather in the connections with upstream and downstream partners. The relationship with upstream customers shapes the overall customer experience, while the link to downstream transport capacity determines the bulk of cost structure. Within a freight enterprise, customer service and dispatch are typically the two most pivotal roles, with their primary responsibilities centered on these upstream–downstream interactions. Consequently, for freight operators, the most essential management tools are often not internal accounting systems, but rather communication platforms such as phone calls, WeChat, and DingTalk groups.

The most critical data for freight operators—data that directly shapes their business outcomes—are not internal enterprise metrics at all; rather, they consist of order data, capacity data, and fuel‑consumption data. These essential insights either originate with upstream customers or stem from the carrier’s own transport capacity, and they can only be captured through seamless connectivity.

Therefore, freight operations are fundamentally supply-chain‑driven, connectivity‑based businesses. With shippers and carriers at both ends, this holds true across processes and data alike. Freight operators whose core value lies in connectivity still rely on tools like phone calls, WeChat, and DingTalk groups—methods that are neither cutting‑edge nor equipped to meet the operational challenges of the next five to ten years. They need a fresh infusion of digital and intelligent technologies.

Among the advanced freight operators that have emerged over the past two years, many have adopted G7 Yiliu’s connected transportation system—“Caiyun Tong”—enabling digital connectivity across the supply chain and laying the groundwork for initial levels of intelligence. By examining the practices of these leading freight operators, we can identify two key pillars of digital‑intelligence technologies:

Capability accumulation within the enterprise:

Only by leveraging a system to establish connectivity can an enterprise institutionalize its capabilities, thereby amplifying its ability to acquire customers and control costs, and achieving sustained revenue growth.

Highly effective operators of connected systems often empower young, entry-level employees to manage established client accounts, leveraging the system’s built‑in processes and operational capacity to ensure a seamless customer experience while keeping costs under control. Meanwhile, the company’s top leader can guide a seasoned team—equipped with deep insights and the ability to drive innovation—to explore new business opportunities, ensuring the organization remains in a state of sustained growth.

Data accumulation enables intelligence.

We found that advanced freight operators have all their orders enter the system within the first second, maintain continuous connectivity and real-time visibility, and track in-transit costs down to the second. Compared with freight operators that offer a single service and rely on rudimentary management, this operational model generates data volumes that are a hundredfold—or even a thousandfold—greater. By leveraging this vast trove of data, freight companies can continuously refine key performance indicators, optimize pricing ranges, enhance customer‑service experiences, and drive ongoing improvements across every critical process, thereby sustaining steady profit growth.