Globalization, economic volatility and uncertainty have impacted global business markets. This has also had an effect on the logistics and supply chain sector. The third party logistics (3PL) industry is constantly changing due to global industry consolidation, technology integration, industry specialization, and industry alliance networks. The most significant changes have been in areas such as 3PL industry size and make-up, services offered, geographical reach, and the information technology (IT) support provided. Companies can survive in a highly competitive environment by creating competitive advantage. Literature presents three different strategies for creating competitive advantage. These are cost leadership, differentiation and focus. Furthermore, innovations and collaboration between companies can also be strategies for creating competitive advantage. The purpose of this paper is to analyse from the retailers’ perspective, how 3PL providers could meet the customers’ needs better and create competitive advantage in the 3PL market. Furthermore, the purpose of the research is to find out which are, according to the customers’ needs, the best directions that 3PL providers should follow. This research contains both inductive and deductive research approach elements. The empirical data is collected through a survey and interviews. In total 45 retailers took part in the survey. Moreover, five of the survey respondents were selected for additional interviews. The collected data have been analysed by using theories and previous studies in the literature. The main findings from analysing the empirical data and the existing theory are that in order for 3PL providers to create competitive advantage, they should focus on the three elements: selection criteria, incentives and barriers. These influence their relationship with the retailers. 3PL providers should also try to enhance the service quality and satisfaction level in the fields of transportation, warehousing and reverse logistics activities. Most importantly, 3PL providers should provide logistics services and solutions that are in the same level with the retailers’ objectives. Furthermore, 3PL providers can also improve their efficiency and become more competitive by having deeper co-operation with other logistics providers.