Industry gears up to respond to ecommerce peak season demand

For the ecommerce industry, 2020 seems like an extended Christmas. Thanks to Covid-19 and the advocacy of social distancing, the holiday season this year may not resemble what it did in the past. As more retailers announce the closing of physical stores for Thanksgiving, which may extend into Christmas, the online shopping season will be much larger than normal. As retail turns e-tail, the logistics industry stands to benefit even as limited shipping capacity and longer delivery windows remain critical hurdles.

When ecommerce giant Amazon introduced Prime Day back in 2015, no one expected that it would become a shopping holiday that would break all records of ecommerce spending. In fact, over the years, brands and retailers have jumped onto the bandwagon and subsequent demand generated around Amazon’s mid-July mega sale. Meanwhile, Alibaba’s Single’s Day, a 24-hour commercial juggernaut, celebrated every year on 11.11 has been another major online shopping extravaganza that has been breaking even Amazon’s Prime Day records and easily surpassing Black Friday and Cyber Monday combined over the last few years.

With Amazon’s mid-July Prime Day pushed to October this year, followed by Single’s Day and then Black Friday and Cyber Monday falling on November 27 and November 30, this holiday season is likely to be a blockbuster when it comes to sales. What’s more, the possibility of more temporary store closures around the holiday season (Target and Walmart have already announced closure of their physical stores for Thanksgiving), and lesser footfalls in open retail stores, 2020, which has already seen an overwhelming shift to ecommerce, may easily dwarf 2019’s record high share of ecommerce during the holiday season in the US, as the sector rose 18.8 per cent from 2018. According to IMRG, the UK’s industry body for online retailers, the demand for online shopping increased by 40 per cent to 50 per cent during lockdown and will rise by another 30 per cent during the festive season.

In Asia Pacific, in the first half of 2020, online retail sales in mainland China reached RMB 5.15 trillion, with a year-on-year increase of 7.3 per cent. Over the first six months of 2020, 30 per cent of consumers in Southeast Asia increased their online purchases. Among consumers who have been buying more since April 2020, 80 per cent plan to continue online purchases even in the future. According to the latest Forrester forecast, online retail sales in 11 Asia Pacific countries are expected to grow from $1.5 trillion in 2019 to $2.5 trillion in 2024.

Undoubtedly, this will increase demand for air freight and cross border ecommerce but it will also pose a major challenge for logistics players worldwide that are already buckling under extreme pressure. “The peak this year is likely to be particularly challenging, because of a “perfect storm” confluence of factors: the massive reduction in belly capacity in passenger aircraft and air cargo capacity overall, and the huge increase in online buying — both a direct outgrowth of the Covid crisis. The supply chain also has been affected by social distancing initiatives to protect employees, which has an impact on labour productivity,” predicts Mark Diamond, vice president of aviation consulting firm Strategic Aviation Solution International (SASI). Add to the mix, the potential for a further uptick in Covid-related air cargo demand, for PPE and possibly even the launch of a vaccine, the situation is likely to be a major challenge.

With the capacity shortage in air logistics, I would think that it will become quite difficult to maintain delivery commitments, and delays should be expected
Mark Diamond, vice president,
Strategic Aviation Solution International (SASI)

That said, airlines and other stakeholders involved in the ecommerce supply chain are bracing up in the build-up to the holiday season. This is also a period when consumers eagerly await the latest tech with many big brand names launching new products. Over the last few years, several carriers have launched cross-border ecommerce delivery platforms to cash in on the huge opportunity that this sector offers. IAG has Zenda, Lufthansa has heyworld, Emirates has Emirates Delivers, Delta has Dash Door-to-Door – airlines have launched its own ecommerce delivery systems to compete with integrators such as UPS, DHL and FedEx.

“We’ve been working closely with our ecommerce customers to understand their needs, and for many years, our customers have come to rely on IAG Cargo during their busiest periods, to safely and efficiently deliver their cargo demands across the world. We’ve been increasingly opening new routes to provide that much needed capacity,” said John Cheetham, chief commercial officer, IAG Cargo.

We’ve been working closely with our ecommerce customers to understand their needs, and for many years, our customers have come to rely on IAG Cargo during their busiest periods, to safely and efficiently deliver their cargo demands across the world. We’ve been increasingly opening new routes to provide that much needed capacity
John Cheetham, chief commercial officer, IAG Cargo

Online businesses shipping internationally often have to choose between fast shipping providers that are often expensive, and affordable ones that take weeks to deliver. IAG’s ecommerce delivery platform Zenda’s real-time Delivered Duty Paid functionality, people buying from their favourite online brands, but based in different countries, can immediately see how much tax and duty they will have to pay up front. Merchants that utilise Zenda have access to their purpose-built web interface, the behind-the-scenes tool taking care of the complexities of international shipping such as duties and tax calculation, customs declarations, DDP delivery, and fully transparent shipment tracking.

“Zenda’s offering is noticeably less expensive than express shipping, and significantly faster than typical postal options, with a standard delivery time frame of 4-8 days from the US to Europe,” endorses Cheetham.

In its effort to serve ecommerce customers, Lufthansa’s heyworld is preparing by implementing a completely new scanning and sorting facility at its main hub Frankfurt Airport. Heyworld offers a door-to-door solution for cross-border ecommerce shipments. It orchestrates and take care about every single transport and documentation module from the warehouse/the origin of the shipment until the delivery at the consumer’s doorstep, including all customs clearance processes and, of course, returns.

“For example, one of our customers is an Indian ecommerce retailer, selling their products to consumers in the US. We pick up the parcels daily at their warehouse in India, truck them to DEL, do the export customs clearance, fly to the United States, do the import customs clearance and inject the parcels to our last mile provider’s network. We offer our service to other logistics companies, as well as to shippers (in our case ecommerce retailers, as mentioned in the example) directly. Transportation is possible out of Asia, Europe and North America with 5 to 7 days delivery time from door-to-door and a price level that is much more affordable than express shipments,” explains Timo Schamber, managing director, heyworld.

We offer our service to other logistics companies, as well as to shippers (in our case ecommerce retailers) directly. Transportation is possible out of Asia, Europe and North America with 5 to 7 days delivery time from door-to-door and a price level that is much more affordable than express shipments
Timo Schamber, managing director, heyworld

Interestingly, logistics player GEODIS has recently introduced a new, guaranteed four-to-six-day B2C delivery service from the United States to 27 European countries, which enables ecommerce sellers to ship parcels internationally at a transparent price and respond to the explosive growth in the cross-border ecommerce market. It responds to the key demands of cross-border shipping like - tax and duty calculation before checkout, validation of product commodity, validation of delivery address, flexible delivery options, multiple return options and finally tracking through every steps of the parcel journey. “eShoppers are used to high speed delivery but this becomes a little more complex when a parcel needs to cross borders and cover a much longer distance compared to a domestic parcel. To deliver consistently high delivery experience, it is critical to invest in right capabilities and also provide tracking insight at every stage of the parcel journey. GEODIS with its global presence and expertise is very aware of these requirements of cross-border ecommerce shopping and has built these capabilities and more in the new offering GEODIS MyParcel,” explains Manoj Pankaj, vice president, cross-border ecommerce, GEODIS.

GEODIS provides multiple return options to a brand including replenishment and liquidation at destination country as well as to bring the parcel back to the origin country to the shipper Source: GEODIS/Bruno Clergue

Forwarders are also flexing their muscles to deal with the upcoming holiday season. A number of forwarders, including Flexport, DHL Supply Chain, Schenker and others have already locked in capacity early, with block space agreements and dedicated freighter charters. “With peak shopping season approaching and peak shipping volumes already at capacity, we’re getting ready for what we call the “Shipathon” – a peak season shipping endurance race. We are working with customers to ensure they are prepared for the holiday season, and that our teams are prepared to accommodate additional customer inquiries and to expedite requests,” shares Kawal Preet, president, Asia Pacific, Middle East and Africa (AMEA), FedEx Express.

With peak shopping season approaching and peak shipping volumes already at capacity, we’re getting ready for what we call the “Shipathon” – a peak season shipping endurance race. We are working with customers to ensure they are prepared for the holiday season, and that our teams are prepared to accommodate additional customer inquiries and to expedite requests
Kawal Preet, president, Asia Pacific, Middle East and Africa (AMEA),
FedEx Express

Anticipating huge volumes during the holiday season, FedEx Express is also adding capacity in key areas across the Pacific, Europe and Intra-Asia lanes by adding flights and/or upgrading planes to larger equipment types on these lanes. “We have expanded our ecommerce capabilities even further - including the acceleration of FedEx Ground’s seven-day a week residential delivery, investments in automated facilities, and growth in our FedEx Freight Direct service and our retail convenience network,” she adds.

Meanwhile, DHL Express has been consistently investing in the growth of its network and for increasing its operational capacities. Last year, DHL Express invested around EUR 1 billion in its infrastructure (hubs/gateways, fleet, sorting technology, aircraft) for further improve its quality and multiply its capacities. “Since 2019 until today, we were able to add eight of the 14 in 2018 ordered wide body planes Boeing 777F to our aircraft fleet,” says Leendert van Delft, vice president of sales programs and digital marketing for DHL Express. “With the Covid-19 effect on the ecommerce sector, and the accelerated growth we are seeing already in our network, we foresee that this year’s ecommerce peak events are going to be remarkable. We also assume that the ‘shopping season’ will start earlier as several of our ecommerce customers (e.g. Amazon) already push for a sooner kickoff of their sales promotions. Many other merchants and big Black Friday players also announced that they will start their sales earlier compared to past years (In October instead of November),” he adds.

With the Covid-19 effect on the ecommerce sector, and the accelerated growth we are seeing already in our network, we foresee that this year’s ecommerce peak events are going to be remarkable
Leendert van Delft, vice president of sales programs and digital marketing, DHL Express

Australian Post Global ecommerce Solutions (APG ecommerce), one of the leading suppliers of cross-border ecommerce delivery solutions to a portfolio of global ecommerce merchants, is strengthening its operations and customer servicing teams to bolster up for the upcoming holiday season. It is also working closely with its partners in order to cope with the airfreight capacity. “We foresee three possible points or stages that could be affected during Peak 2020: the first would be fulfilment in origin, mainly in China; on a second stage, the airfreight and space capacities. We’re already seeing some lack of space in September and we’re expecting to be higher increase in volumes after the Chinese Golden Week. Finally, the last mile carriers. We are seeing capacities cap on some markets to secure the service levels,” observes Ramon Abalo, general manager Asia-Pacific, Australia Post Global ecommerce Solutions.

We are strengthening our operations and customer servicing teams to bolster up for the upcoming holiday season
Ramon Abalo, general manager Asia-Pacific,
Australia Post Global ecommerce Solutions

Logistics majors are also on a hiring spree to meet the seasonal demand as well as the huge increase in ecommerce volumes. UPS is hiring more than 100,000 seasonal employees; DHL Supply Chain is hiring an additional 7,000 through the end of the year and Amazon, which has been growing in leaps and bounds during the crisis, has hired 175,000 since March. FedEx has also been proactively hiring additional personnel for seven-day operations in the US.

Leveraging technology for better visibility

Ecommerce companies, on their part, are leveraging tech support to improve visibility into inventory quantities across fulfillment centers that will allow the business to order more inventories proactively and prevent a stockout especially in the holiday season. Recently, Descartes, a leading technology solutions provider for logistics-intensive businesses in ecommerce, implemented its ecommerce WMS solution for Germany’s SNOCKS, a lifestyle brand offering premium sneaker socks, clothes and accessories. Descartes’ ecommerce WMS accelerates order fulfillment workflows for SNOCKS.

“We enable warehouse operations to deliver a world-class fulfillment process. We do this by empowering warehouse teams with mobile technology so that they can ensure inventory levels are accurate, so companies do not sell out-of-stock items (also reducing safety stock). Mobile technology also eliminates picking/fulfillment errors, which drives the type of exceptional customer service that can translate into repeat sales and positive online customer reviews,” explains Troy Graham, VP Business Development at Descartes.

“With the solution, we can process inquiries quickly and forward them to the warehouse in real-time. New shipments can be triggered immediately. Thanks to the fast response options, we also ensure short delivery times,” said Jonas Walter, warehouse manager, SNOCKS. SNOCKS deals on a regular basis with major peaks in order volumes, often after weekends and not only during the holidays or during special occasion days/periods such as Cyber Week. “I can now scale flexibly and quickly switch to a two-shift operation on Monday and Tuesday so that we don’t lag behind in processing orders. Descartes’ ecommerce WMS helps us to keep our customer promise of ‘short delivery times and top customer service’,” said Walter. “Without it, we would need twice as much time to ship our 1,500 orders per day.”

Dealing with modal shift

With the capacity shortage in the air, there has been a shift of volumes to ocean freight. Some shipping lines have been offering expedited ocean services with priority loading, unloading and delivery, across the Pacific in particular.

FedEx Express increased its flight operations between its APAC Hub in Guangzhou, North Pacific Hub in Osaka, and South Pacific Hub in Singapore in Asia Pacific

According to IATA, international belly cargo capacity was down 67 percent in August 2020 versus August 2019. While this capacity loss has been offset to a certain extent by more intensive utilization of pure freighters and the addition of “passenger-freighters”, this hasn’t been enough to completely offset the belly capacity loss. Overall cargo capacity in ACTKs (available cargo tonne kilometers), including both passenger aircraft and freighters, still was down 29.4 percent in August 2020 compared to the same period in the previous year, the industry body stated in a recent release.

So long story short, there is already a capacity crunch, and we are just in the beginning of the seasonal rush. Prior to the pandemic, e-retailers’ delivery commitments had been getting more and more aggressive, with next-day delivery and even same-day delivery becoming the norm. “With the capacity shortage in air logistics, I would think that it will become quite difficult to maintain these commitments, and delays should be expected,” warns SASI’s Diamond.