With 94 million consumers already shopping across borders, international commerce is thriving. E-retail giants have now started developing their own delivery logistics solutions as a powerful means of differentiation. With Google introducing Shopping Express, Ebay acquiring same-day delivery provider Shutl, and Amazon testing its own delivery services, the game of thrones has just begun.
As national borders continue to diminish thanks to the growth of Internet, cross-border e-commerce is becoming increasingly important. An interesting formula for companies to increase their business volume, e-retail helps them to attract customers from other countries. Improving infrastructure and the democratization of technology is connecting cross-border retailers and consumers like never before, widening the opportunities available to both.
In the United States alone, according to FedEx Ground President and CEO Henry Maier, the e-commerce market is expected to top $300 billion in sales. A research report by eMarketer showed that the global B2C e-commerce sector is expected to hit $2.3 trillion by 2017.
The air cargo industry gets around $2 billion of that pie every year, based on figures from around 250 IATA-member airlines in more than 100 countries. The new trend toward convenience coupled with the explosion in online stores – 1,354 percent between 2012 and 2014 shows exactly what potential the logistics sector has to grow.
On one side, integrators and ocean and land freight options are standing in as stiff competitors for cargo and combination carriers. As consumers demand more goods more quickly, it can be difficult to adapt – especially for an industry that has seen largely flat growth until recently, and few innovations.
E-commerce has fundamentally altered the way transportation companies operate. It has diminished the typical peak season by forcing retailers to have deep stocks on hand throughout the year and spurred demand for smaller distribution centers closer to metro areas.
The China holiday of Singles’ Day best exemplifies the magnitude of this shift with Alibaba’s logistics affiliate Cainiao receiving 467 million delivery orders on the day this year. That’s more than 15 times the daily average and a 68 percent increase from last year.
China’s e-commerce giant Alibaba created a new record in online sales netting $14.33 billion on the annual Singles Day, the world’s biggest online shopping day, with shoppers splurging on a variety of products despite the world’s second biggest economy experiencing its worst slowdown since 2009. Alibaba, which accounts for eight per cent of China’s total retail volume, said its total sales on the event far exceeded the 57.1 billion yuan ($10 billion) transactions it generated last year.
In a press statement, Jack Ma, executive chairman of Alibaba, said the Singles Day represents only a small part of the huge potential for domestic demand in China. Hundreds of thousands of businesses benefit from Singles Day not only Internet companies, but also other companies that produce quality products, he said. E-commerce has become a success in China as it overtook the US as the world’s largest online retail market with $442 billion compared to US’ nearly $300 billion last year.
The Asia-Pacific region emerged as the largest e-commerce market in the world in 2015. Its B2C e-commerce turnover reached $770billion, higher than Europe and North America. The region’s e-commerce market is also growing at 44 per cent against 14 per cent for Europe and 12 per cent for North America respectively.
The growing number of online retail stores is propelling the growth of the global air cargo market. Online retail stores, especially online fashion stores, are a major source of revenue for the market. And airlines are now adopting the acquisition route to enter the global air cargo market to increase their revenue.
In a recent development, Qatar Airways Cargo announced the launch of a new product, QR Express, trying to ride on the e-commerce market. In an official statement, Qatar Airways Cargo explained that QR Express “provides clients with the opportunity to book through a simplified system with high boarding priority and rapid handling, guaranteeing the speedy delivery of their cargo.”
Speaking at the launch, Qatar Airways’ CEO Akbar Al Baker explained that the QR Express was focused on delivering to the needs of the e-commerce market. According to media reports, he also reportedly said the company “wanted to get into the courier business” – with a third party providing final-mile delivery under the Qatar Airways brand, and QR Express offering a simplified booking process, high-priority boarding and quick handing.
In a recent development, online retail giant Amazon is looking to expand its logistics reach to cut costs for its retail business and potentially provide third-party logistics services to other industries.
It is already negotiating a deal to lease 20 jets to start an air-delivery service in the United States. The retailer bought truck trailers to add shipping capacity and started a program last year that uses a fleet of on-demand drivers to deliver packages.
According to media reports, Amazon has approached several cargo-aircraft lessors to line up the planes and is speaking with Air Transport Services Group (ATSG), Atlas Air and Kalitta Air.
Amazon wants to build out its own US cargo operations to avoid delays from carriers such as UPS and FedEx, which have, at times, struggled to keep up with the rapid growth of e-commerce. This past holiday season, FedEx failed to deliver some Christmas packages on time, blaming inclement weather and a surge in last-minute holiday shopping. Two years earlier, it was UPS that struggled with the crush of holiday shipping.
Meanwhile, Hong Kong Air Cargo Industry Services (Hacis) – the added-value logistics arm of Hong Kong’s largest air cargo handler, Hactl – opened a new depot directly targeting e-commerce business. It is Hacis’ seventh Inland Cargo Depot in mainland China.
Located in Guangdong Free Trade Zone, Hacis Nansha Depot is set up to support the region’s e-commerce logistics. To ensure optimum efficiency for all e-commerce shipments, systems integration has taken place between Cargo Management Systems and Customs Clearance System, enabling real-time information exchange with all relevant parties.
According to Hacis Managing Director, Vivien Lau, Chinese consumers are increasingly seeking overseas commodities such as healthcare products and foodstuffs, and ordering these online.
“As the e-commerce market matures and becomes more price-driven, fulfilment is moving closer to the market to achieve economies of scale and cost reductions in logistics. Hong Kong has the global air services needed by this growing business, and Hacis’ opportunity is to provide reliable and highly-cost-efficient onward connections to the new generation of e-commerce fulfilment centres in China,” Lau said.
In yet another development, Singapore Post (SingPost) has integrated its e-commerce division, SingPost e-commerce, with leading US-based e-commerce providers TradeGlobal Holdings, which SingPost recently acquired, and Jagged Peak, to launch SP Commerce.
The new business unit aims to build a global e-commerce logistics solution and to provide access to China and the rest of Asia Pacific markets. SP Commerce, an omni-channel enablement for global brands and retailers, will facilitate commerce between geographies, providing the necessary infrastructure for customers to gain easy access to e-commerce markets around the world. SingPost currently provides end-to-end eCommerce logistics solutions to more than 100 mono-brands such as Adidas, Calvin Klein, Cole Haan and Muji.
“The launch of SP Commerce marks a significant milestone in SingPost’s transformation from a domestic postal service provider to a global eCommerce logistics enabler. We are well positioned to provide the gateway for brands and retailers,” Marcelo Wesseler, chief executive officer, SingPost e-commerce said in a press note.
“Other than bringing businesses abroad, we are also focused on facilitating commerce in the domestic US market as we believe that a strong business foundation in the home market makes a solid springboard for global expansion,” he added.
In a latest move, Dubai-based logistics company Aramex announced the acquisition of New Zealand-based courier service provider Fastway for around Dhs 293.6million. “Enhancing and expanding our operations in the region also allows us to further contribute to the development of Asia-Pacific’s e-commerce sector and facilitate cross-border trade,” Aramex Asia CEO Othman Aljeda said.
“This deal gives us significant opportunities to expand our e-commerce proposition and take advantage of the increasing demand for online shopping delivery solutions and small parcel delivery services in the Asia-Pacific,” he added.
“New Zealand and Australia are two of the most rapidly growing e-commerce markets in the region and by acquiring Fastway Couriers we can now serve more businesses and consumers shopping online,” he added.
Meanwhile, Deutsche Post DHL announced plans to invest in a minority stake in Relais Colis, a French e-commerce logistics company, in order to enhance access to one of Europe’s largest e-commerce markets. According to the announcement, Deutsche Post DHL will acquire a 27.5 percent stake which is expected to support the further development of Relais Colis existing French e-commerce logistics network of pickup points and its customized delivery solutions for end customers.
This is expected to allow DHL’s divisions, primarily DHL Parcel, to open up additional channels and expand its offering of logistics services for e-commerce customers to the French market. Relais Colis is also expected to benefit from additional volumes from the Deutsche Post DHL Group’s networks as well as experience in the German parcel market.