Executive Briefings

E-commerce Logistics Models Criticized as Unsustainable

The present business models being employed by e-retailers and their shipping partners are becoming increasingly unsustainable, according to a report from Transport Intelligence, a research and analysis firm focusing on the global logistics industry.

Global e-Commerce Logistics Report 2015 found that whilst logistics is viewed as a strategic advantage by online retailers and many are investing in delivery and fulfillment networks, the financial impact of these investments is weighing heavily on their profit margins.

The resulting squeeze on carriers, not least due to “free shipping” options, has already led to additional pressure on the industry, leading directly and indirectly to consolidation and business failures.

According to Cathy Roberson, the report’s author, this will mean that although parts of the logistics and express industry will benefit from increased revenues, it will be a huge challenge to translate this growth into profits.

These challenges were evident in the past two holiday seasons when several carriers were overwhelmed by volumes and in some cases stopped accepting new shipments. “The pressures on carriers will only increase as some retailers take on many logistics functions, including, as in the case of Amazon, last-mile delivery,” Roberson said.

She pointed towards alternative delivery networks as being the way forward for the industry. “What the end customer wants is choice allied with cost-efficiency.” “New solutions such as ‘click and collect’ and lockers are becoming popular as they can be more convenient than waiting at home and have the added benefit of being free-of-charge. At the same time, these alternatives suit many carriers who struggle to make any money on home delivery, not least because of the costs incurred in re-delivery.”

Source: Transport Intelligence

Global e-Commerce Logistics Report 2015 found that whilst logistics is viewed as a strategic advantage by online retailers and many are investing in delivery and fulfillment networks, the financial impact of these investments is weighing heavily on their profit margins.

The resulting squeeze on carriers, not least due to “free shipping” options, has already led to additional pressure on the industry, leading directly and indirectly to consolidation and business failures.

According to Cathy Roberson, the report’s author, this will mean that although parts of the logistics and express industry will benefit from increased revenues, it will be a huge challenge to translate this growth into profits.

These challenges were evident in the past two holiday seasons when several carriers were overwhelmed by volumes and in some cases stopped accepting new shipments. “The pressures on carriers will only increase as some retailers take on many logistics functions, including, as in the case of Amazon, last-mile delivery,” Roberson said.

She pointed towards alternative delivery networks as being the way forward for the industry. “What the end customer wants is choice allied with cost-efficiency.” “New solutions such as ‘click and collect’ and lockers are becoming popular as they can be more convenient than waiting at home and have the added benefit of being free-of-charge. At the same time, these alternatives suit many carriers who struggle to make any money on home delivery, not least because of the costs incurred in re-delivery.”

Source: Transport Intelligence