Freight News, Logistics

E-commerce Faces Challenges, Opportunities Beyond Coronavirus. By John Jeter

[ April 17, 2020 // Gary G Burrows ]

Mother Nature and e-commerce share at least these in common: Each moves fast and both disregard borders. While governments and health authorities work to contain the novel COVID-19 pandemic, logistics executives are creating at least some degree of certainty despite the coronavirus.
“Our customers are looking for a more predictable supply chain so they know when product is expected,” says Mohammed Esa, Senior Vice President, Global Business Development & Chief Commercial Officer, Europe, Agility Logistics. “They’re having to do a lot of contingency planning now.”
During a telephone interview from his office in Basel, Switzerland, Esa echoes what stakeholders are saying in the United States: There’s an urgency to solve logistics problems that are mounting due to the fast-spreading virus, especially in e-commerce. They also looking ahead to other major issues when normalcy returns.

“[Our customers] are having to do a lot of contingency planning now.” — Mohammed Esa, Agility Logistics.

Agility is working with one of its major clients – a North American retailer – to create an air-charter program. Simultaneously, Agility is working to help the customer determine how and when to move a full planeload of cargo from China, the source of the coronavirus.
“And it wouldn’t be one flight,” he says. “It would be multiple flights over multiple months.”
Matt Castle says that C.H. Robinson, where he is vice president of Global Forwarding, Products & Services, remains in near-continual contact with clients. Discussions include what he calls “continuity plans,” as well as production planning and general forecasting.

“As factories and production in China return to full efficiency, we expect demand to surpass capacity on the trans-Pacific.” — Matt Castle says that C.H. Robinson.

“As factories and production in China return to full efficiency, we expect demand to surpass capacity on the trans-Pacific,” he says. “We continue to see empty container supply dwindle in regions where China trade has been a catalyst, primarily North America and Europe.”

Then what?

Sir Himakuntala, President & CEO of Intellect Technologies, predicts that the next phase of the impact will come when the government issues the “all clear.”
“Everyone will want to ship at the same time, creating a massive backlog,” Himakuntala says. “Vessels will be overbooked, carriers will take advantage of the situation and try to make up for lost revenue by increasing the cost per container to ship.”

“Everyone will want to ship at the same time, creating a massive backlog.” — Sir Himakuntala, Intellect Technologies.

Charles Moore, Vice President of Parcel Solutions at Transportation Insights, underscores the need for contingency planning. He emphasizes that companies must continue monitoring carrier spend levels to “ensure that they continue receiving volume incentives.” “If those are in jeopardy, carrier conversations are taking place to mitigate the impact either with the incumbent provider or perhaps a new provider,” he says.

“If those are in jeopardy, carrier conversations are taking place to mitigate the impact either with the incumbent provider or perhaps a new provider,” – Charles Moore, Transportation Insights.

Meantime, Himakuntala warns that pricing for air and maritime inbound freight could skyrocket.

An article published in February in the Wall Street Journal warns that a stout case of congestion could infect air-cargo terminals and warehouses where delivery and pick-up services “cannot currently be arranged.” This is likely to cause increased storage costs, which in turn would result in customers absorbing higher costs.

“We will see prices in the stores increase to accommodate the increase in transportation costs,” Himakuntala says.

At the moment, however, outside of production, transportation and other virus-related issues—or even a global recession—e-commerce may have some immunity from the outbreak.

“Our team has spoken with a couple of our customers that have actually seen a spike in online ordering,” says Transportation Insight’s Robyn Meyer, Partner, Enterprise Solutions. She believes the reason is people are staying in to reduce risk of infection.

Pandemic or no pandemic, e-commerce isn’t about to go anywhere expcept up, especially as the coronavirus’s spread eventually goes down.

“Our team has spoken with a couple of our customers that have actually seen a spike in online ordering.” — Robyn Meyer, Transportation Insights.

By 2012, e-commerce sales are expected to reach $4.8 trillion, reports a Shopify Plus report “The Global Ecommerce Guide.” Data from Digital Commerce 360 places online sales at $3.46 trillion in 2019 and $2.93 trillion in 2018.

As logistics companies navigate the unprecedented challenges of the deadly pandemic, e-commerce, while continuing its relentless, double-digit year-over-year expansion, still faces several challenges. Merchandise return rates, speed-of-delivery and last mile, cross-border e-commerce and even emerging alternatives in pick-up and delivery—these are among several potentially shape-shifting trends executives are watching.

Regarding click-it-and-get-it, Thad Bedard sees retailers having to move away from even two-day delivery.

“The economics don’t work, The costs are too high for the provider,” says Bedard, Vice President of Strategy, Marketing and Business Development, APL Logistics. “A trend I see, and I might be completely wrong, is a move away from 48-hour delivery windows in e-commerce. It’s not sustainable, and we have had many companies go under who put too much into the last mile.”

Some companies are providing consumers a discount if they choose slower delivery times, he says. Other logistics executives remark on how they’re also figuring out other ways to direct online shoppers. One such way is through schemes such as at-store pickups and “BOPIS”—Buy Online, Pickup In Store. But there’s always a need, Moore says, to keep a mindful eye for serial reverse-shoppers – those who cointinuously buy and return items. Returns, he says, is a mounting problem. Today the rate of returns are said to be around 30%.

“[Returns present a huge potential cost for e-commerce companies and retailers,” Moore says.

Executives contend that clearer return policies could create more repeat customers. Moore suggests that such a practice tells customers that your company is focused on the long-term relationship and not just a onetime purchase.”

Sebastian Tschackert, President Americas at Tigers, a global company that specializes in bespoke supply-chain solutions, e-fulfillment and multimodal transportation, agrees. Letting online shoppers change their minds may wind up being a reasonable business decision, he says. “Whilst the cost of returns looks high when looking at it standalone, one has to remember that brands have a major financial benefit from selling directly to their consumers and cutting out the wholesaler/retailer,” he says. “Despite the high return rates, the profitability will still outweigh the other channels, in general.”

“Despite the high return rates, the profitability will still outweigh the other channels.” — Sebastian Tschackert, Tigers.

Moore goes on to mention an apparel retailer that encourages online shoppers to purchase more than just one dress—try them all on and return the unwanted ones to the store or ship them back.

“They obtain the sale,” he says of the retailer, “and the returns create an additional opportunity to upsell additional items.”

As for cross-border e-commerce, Tschackert calls it “one of the largest volume contributors to airfreight on all the main routes.”

Up until the coronavirus outbreak that, for now, is having a devestating impact on air cargo, cross-border e-commerce had a “considerable impact on the airline industry and has carriers and authorities still wondering how to adapt to this,” he says.

Tschackert also notes that air-freight volumes typically peak toward the end of the week, while online shopping creates a Monday e-commerce spike.

In short, as Himakuntala says, “E-commerce is the driver of all modes of transportation. All transportation modes are trying to keep up with e-commerce. The buyers want visibility from end-to-end, and everyone in between needs visibility to make decisions.”