Logistics are a tough topic for retailers and e-commerce companies. Everyone in the business starts with a look at Amazon and Alibaba for how they approach warehousing, packaging, shipping, tracking, returns, technology and customer service. What they see are huge scales of operation and cost efficiencies that give the smaller competition a headache and a pain in the bottom line. So what are competitors doing to try and run with the big dogs? We’ll help you with today’s look at Amazon, Alibaba, global innovations and insight into the logic in free e-commerce logistics.
Amazon’s DC lobbying efforts grew with more than 60 employees and contractors and spending doubled to $9 million in 2015 as it looked for ways to gain favor and influence with lawmakers. CBRE estimates for a warehouse operation with 500 employees, a $1 increase in average hourly wages could raise costs by $1 million annually. PropertyEU estimates Amazon accounts for 10% of existing warehouse and logistics space in the UK. Technavio expects the e-commerce logistics market to grow at 9.69% through 2020. With e-commerce growth, shippers struggle to balance services and costs. SJ Consulting Group calculates the value of global Shipping at 350 billion dollars annually and Amazon’s new marine shipping license gives it a foothold into the industry.
Retailers offering low or zero shipping fees for orders and returns will face increased shipping according to FedEx. On-demand delivery app Shyp announced a partnership with eBay, promising pickup for eBay sellers within 20 minutes for up to 20 items. ATSG’s Cargo Aircraft Management will lease 20 Boeing cargo aircraft to Amazon as it builds its air cargo capacity. British retailers, including Tesco are trying to manage empty space inviting rival brands to fill their empty spaces. Cainiao Logistics, Alibaba Group’s logistics affiliate, has agreed to work with the United States Postal Service to speed delivery of merchandise ordered by U.S. consumers from Alibaba. Global shipping will grow from $230 billion in 2014 to $1 trillion in 2020, according to a report from consulting firm Accenture and AliResearch. Think you’ve got it tough? Deliverymen in Delhi face any number of challenges from stifling heat and heavy traffic to assault, robbery and theft. Not an easy job!
Amazon’s Push into Logistics Faces Costly Government Roadblocks
Amazon (NASDAQ:AMZN) has spent over $9 million in 2015, on its Washington staff to lobby for delivery via drones, improve the national highway network, and push other favorable infrastructure improvement agendas, reports the New York Times.
The e-commerce giant’s success can be attributed not only to a robust online-market place model, but also to an increasing number of customers, who demand cheap and fast product deliveries. The latter, however, require a state-of-the-art infrastructure, which is why the company has spent a significant amount of money on the lobbying efforts.
This expenditure figure, compiled from the public records of Center for Responsive Politics, shows that Amazon’s lobbying costs doubled from 2014. Although the amount is lower as compared to Google and Boeing’s expenses in Washington, it still represents the highest annual cost growth in comparison to other tech-giants. The online-retail giant now has a staff of over 60 employees and contractors, who serve as lobbyists. This is more than twice the number of people employed for the same purpose, in 2014. A notable lobbyist for the company is former Senate majority leader Trent Lott. Via bidnessetc.com
Rising Minimum Wages Impacting E-commerce Ops
The minimum wage increase is set to affect many industries, and eCommerce is no exception — particularly in the realm of logistics.
The Wall Street Journal shares that a new report from real estate brokerage firm CBRE estimates that, for a warehouse operation with 500 employees, a $1 increase in average hourly wages could result in $1 million in additional annual costs. That number could be even higher for warehouse ops at eCommerce companies, notes the report, given that those can traditionally be two to four times more labor-intensive than other types of businesses (particularly during the holidays).
Spencer Levy, CBRE’s head of research in the Americas, posits that the confluence of the demand for faster eCommerce delivery service and a higher minimum wage occurring simultaneously in urban centers could result in a notable effect on eCommerce companies’ labor costs, commenting (via WSJ) that “eCommerce and other businesses that are tied to these dense locations will see the greatest impacts.” Via pymnts.com
2016 E-commerce reinvents logistics space
Speaking at the PropertyEU logistics briefing on 17March at MIPIM, Kevin Mofid, head of logistics research at Savills said: ‘As the CEO of UK retailer John Lewis said recently, “Those who win in logistics win in retail.” Disruption is the new normal in retail.’
Driving the logistics sector is online giant Amazon, which accounted for 10% of all logistics space in the UK last year. ‘How other retailers react to what Amazon does will be crucial to the logistics space,’ Mofid added. Via propertyeu.info
Growth in global e-commerce logistics may approach 10 percent in 2016-2020 period
Despite a slowdown in world trade this spring, the e-commerce logistics market is expected to grow at 9.69 percent through 2020, maintain analysts at Technavio, a leading market research company with global coverage, based in London. Researchers say cross-border online shopping is particularly strong in emerging markets.
These countries have recorded an increase in foreign goods consumption and are driving the demand for e-commerce logistics. During the forecast period, China is expected to emerge as the largest market for online shopping, as their growing middle-class population is increasingly spending on foreign products. Thanks to this development, the logistics market in China is predicted to exhibit significant growth and contribute to the overall revenue of the global e-commerce logistics market. Via logisticsmgmt.com
E-commerce reshaping logistics
The flowering of e-commerce—while welcomed by most manufacturers and retailers—has introduced far more risk and complexity for logistics managers. Determining the optimal distribution network has never been more of a challenge, as shippers strive to strike a delicate balance between service and cost.
Parcel express providers have been ahead of the game for some time now, and are adding a new dimension to the scenario as volume cargo playing fields are reconfigured. Amazon, for example, may have startled many when it announced its intention to become a non-vessel operating common carrier (NVOCC), but some industry analysts saw it coming all along.
“This gives Amazon a foothold in the $350 billion a year ocean freight business,” says Satish Jindel, president of SJ Consulting Group, a transportation and logistics analyst firm. “This makes perfect sense for Amazon. It will not operate ships because they would rather subcontract that work.” Via logisticsmgmt.com
FedEx warns cost of online deliveries will rise
FedEx’s results and challenges reflect many in retail fulfillment. While e-commerce continues to grow, in large part buoyed by omnichannel efforts at many brick-and-mortar stores, the costs are great, especially for retailers offering low or zero shipping fees for orders and returns. “We can’t build these networks and spend this kind of capital and not get a return on it,”Graf told the Wall Street Journal.
FedEx CEO Fred Smith also said that the company will increase its fees for shipping large items and items that don’t fit into its ground network, and said that the USPS is partially to blame for encouraging customers’ expectations for low-cost delivery. “The postal service’s rates, which are the primary driver of e-commerce…they’re going to have to go up as mail service goes down,” Mr. Smith said. Via retaildive.com
New Partnership With Shyp Looks to Make eBay Selling Way Easier
Before founding Shyp, Kevin Gibbon was a power seller on eBay. He said he made more than $100,000 a year importing and selling goods on the ecommerce platform. But Gibbon ended up closing his eBay store because he was spending a prohibitive amount of time and money packing and shipping items.
If Gibbon still sold goods on eBay today, he may not have the same problem. That’s because he built a solution to this quandary. The on-demand delivery app he went on to found, Shyp, has today announced a partnership with eBay.
With the integration, eBay sellers can connect their accounts with Shyp and an itemized list of all of the items that seller has recently sold will automatically populate within the app. The eBay seller can select up to 20 recently sold items that they want to ship and within 20 minutes of requesting a pickup, a Shyp delivery courier will arrive at the seller’s door. Via entrepreneur.com
Amazon’s air cargo deal with Air Transport takes off
Amazon.com Inc. is stepping up plans to build its own air delivery network, saying it will lease 20 Boeing Co. 767 freighters from Air Transport Services Group.
The agreement shows Amazon’s commitment to building out its own logistics network as it seeks to make an increasing amount of deliveries faster and more efficient. The Seattle-based online retailer wants to free itself from its dependence on the shippers it relies on now, United Parcel Service Inc. and Federal Express Corp., which have sometimes run into delays during the busy holiday season.
The commercial agreements will include the leasing of 20 Boeing 767 freighter aircraft to Amazon Fulfillment Services Inc. by ATSG’s Cargo Aircraft Management, the operation of the aircraft by ATSG’s airlines, ABX Air and Air Transport International, and gateway and logistics services provided by ATSG’s LGSTX Services. The 20 leases will be for five to seven years, and the agreement covering operation of the aircraft will be for five years, according to a statement released by ATSG. Via internetretailer.com
British retailers invite rival brands to fill their empty spaces
As online deliveries surge and shop sales fall, Britain’s retailers are looking to refit their once bustling superstores with new attractions such as rivals’ fashion brands to fill empty spaces and keep shoppers coming through the door. In a shift in strategy aimed at making the space profitable and avoiding store closures, retailers such as Tesco have also started experimenting with gyms and children’s play areas to entertain customers.
“You’ve got more choice. It’s a bit like a shopping mall where you can come and look at different things,” said healthcare worker Margaret O’Regan, who was browsing clothes from the privately-held Dorothy Perkins, Burton and Evans brands in a huge Tesco store in Woolwich, south-east London.
The brands have 20,000 square feet of the store’s 120,000 sq ft, replacing space previously taken up by Tesco’s toys, stationery and technology offer, some of which are now only available on its website. Via reuters.com
Alibaba Teams With USPS for International Deliveries
Cainiao Logistics, Alibaba Group’s logistics affiliate, has agreed to work with the United States Postal Service to speed delivery of merchandise ordered by U.S. consumers on Alibaba’s international online shopping platforms.
Under a memorandum of understanding announced today, Cainiao and the United States’ national mail carrier agreed to collaborate on the development of enhanced shipping solutions for cross-border e-commerce. In addition to helping provide more efficient shipping channels into the U.S. for Chinese merchants and manufacturers selling on Alibaba’s AliExpress global-shopping website, the USPS will also work with Cainiao to expand its worldwide shipping capabilities, especially in South America, according to a press release.
The global B2C cross-border e-commerce market is expected to grow from $230 billion in 2014 to $1 trillion in 2020, according to a report from global consulting firm Accenture and AliResearch, Alibaba Group’s research arm. To reduce barriers to shipping small parcels quickly on a global scale, Alibaba and related companies have been working with several national mail carriers including Singapore Post and Spanish Post. Via alizila.com
India’s e-commerce boom breeds drama for deliverymen
NEW DELHI, India — Every morning Manzar Imam buckles his helmet and straps on a backpack that’s almost as big as a washing machine, girding for the battle ahead. The 45-year-old is a kind of modern-day gladiator, one of tens of thousands of “last-mile” motorbike deliverymen in India’s cutthroat and chaotic e-commerce industry.
Zigzagging through New Delhi’s testosterone-infused traffic on his 100cc Hero Honda motorcycle, he ferries clothes, electronics and household goods to homes and offices around the city, the last — and indispensable — link in a global chain of mostly Internet-directed commerce. It’s not an easy job. Via washingtontimes.com
The logic of free?
Free shipping is working as a competitive advantage for a few players but in the long run it’s not sustainable until the buyer pays. More logistics news and logistics insight in the weeks ahead as we cover the impact of e-commerce on the global industry and the challenges of balancing costs and service.