Global retail e-commerce sales are projected to rise to about 2.3 trillion USD in 2021, while revenues are expected to reach 4.88 trillion USD. In Australia, the e-commerce market’s annual growth rate is about 10%, potentially reaching the market size of 18.7 billion USD in 2020. Amazon, Alibaba, Wish, Lazada, and many other online marketplaces continued to gain traction because of their economic value gain to the consumers and retailers.
Online marketplaces offer accessibility, convenience, and global product choices that brick-and-mortar stores are unable to provide. There is no stopping the growth of online shopping and as a result, the retail economy is robust. Moreover, e-commerce has spillover effects on other industries such as manufacturing, payment services, and logistics industries.
Among these related industries, logistics companies are found to have benefited the most and experienced several significant changes in business operations. The rise of e-commerce led to the rise of e-logistics. E-commerce thus disrupted the logistics industry without intending to. There are many factors to this direct relationship which will be explored in this article.
Scaling of operations
Firstly, e-commerce industries have opened up opportunities for local businesses to widen their customer base globally. Now, a local Korean cosmetic can ship face masks anywhere in the world without high capital costs through online marketplaces. To get one product to another country requires a smooth and efficient coordination among different couriers, local and international. The higher the number of online retail transactions, the more air, land, and sea transfers of products. This means increased higher revenue for the logistics partners of the online retailers. The volume of transactions even helped transport services companies to consider maintaining different fleets of delivery vehicles to cater to the diverse market demand, from wide-scale to small-scale deliveries. Nowadays, even home-based fashion accessory makers have local customers to ship goods to.
Entry of new players
Established logistics providers ultimately benefited from the recent economic boom in the e-commerce industry. Yet because online shopping has easily become a mode of living for the modern-day consumers, new logistics players are entering the market. The high demand and rapid growth call for a corresponding increase in supply. Local, small-scale logistics firms help fill in the gaps in the soft network infrastructure system in any given country. That is, most big international couriers partner with these new or small players in the host country to economically transport orders from point A to B. The entry of new players, therefore, contributes to the industry development.
Diversification of revenue streams
People commonly associate logistics with deliveries. But the industry is a lot more complex than driving through streets and finding the right addresses. Logistics even covers warehouse management, proper product handling, customer service, and storage. Some logistics companies grow horizontally than vertically. That is, instead of expanding their geographic scope, they diversify their revenue sources. It is not uncommon then to see a warehousing and container cartage provider rolled into one. For example, a logistics company would offer a range of services, including warehousing, distribution, and technological solutions. The company, seeing the increased need for a technological logistics platform for small businesses, would also diversify into the technology sector. Still, others choose to subcontract other delivery firms or micro businesses to widen their coverage.
Because of the growth in the e-commerce industry, competition became tough for logistics providers because of new players and aggressive pricing schemes. Finding a niche is an alternative to diversification. Local players differentiate themselves in terms of geographical niche or venture into international markets like Linfox entering the Asian market. They know the terrain better than the others. Others prefer to compete in price points, customer service, or reliability. With the ongoing green movement, big players like Linfox and Brambles Limited adopt a sustainable business model. They invest in technologies that reduce their carbon footprint or waste volume and be branded as a socially responsible enterprise by consumers. Brand equity in the field of logistics also has its economic benefit.
Interestingly, because logistics providers primarily operate on a business-to-business (B2B) model, they can differentiate in terms of client industry. Effective Logistics, for instance, specializes itself in refrigerated transport services and contract warehousing. Some ventured into the food delivery sector which requires a different set of vehicles and system to implement.
E-commerce will revolutionize one consumer sector after the other. Today, grocers have also gone online. Busy mothers who care about buying the most economical grocery items can very well do so in one click within the comfort of their home. Even gourmet meals are now being transported right to the consumers’ doorstep. This massive explosion in online shopping, prioritizing customer convenience, will continuously shape and reshape the logistics industry.