In 2015, FedEx described how transportation systems had been the catalyst igniting a wave of new companies – micro-multinationals. “Today, all you need is a mobile device, a shipping platform and a big idea,” the company explained. Those three things were enough to enable anyone who wanted to launch a global business online to do so.
Nearly five years later, we are seeing continued innovation and technology advancements in the logistics sector, with a particularly big impact on global e-commerce. Logistics automation has allowed any individual or business to sell online, without supply chain expertise or needing to employ an operations team. We’ve seen this trend continue with no plans of slowing down, but as things continue to advance, it’s no longer just about being able to move product around the world. In order to be successful in online retail today, you need to be able to satisfy quickly evolving consumer expectations.
Buyers today expect to receive the items they purchase online quickly, safely, and efficiently, driven largely by Amazon Prime’s two-day shipping model. As other major retailers quickly added two-day shipping options to compete with the retail giant, consumers have become conditioned to expect nearly instant gratification. Amazon’s strategy has paid off: their market share of the total U.S. e-commerce retail market is getting closer to 50 percent each year. They quickly realized a short delivery timeline was so integral to their rise to dominance that they built their own logistics operation to ensure their delivery promises were met. Amazon now has ownership over their supply chain, and their growing operation has allowed them to raise the standard yet again by offering free one-day shipping for Prime members.
Given that logistics automation played one of the most important roles in Amazon’s success, other retailers have been rushing to compete, and are looking to employ logistics companies that can help them do so. We’ve seen a huge rise in the number of logistics technology companies and the logistics industry is attracting massive investment from venture capitalists. In 2018 alone, logistics startups garnered $6 billion in VC funding, nearly double the amount invested in the sector the year before. Even tech giants like Uber are trying to gain a piece of the seemingly unlimited logistics pie, as they continue to put more resources and capital towards their Uber Freight business.
Because of the rise in companies specializing in logistics automation, even small businesses have a plethora of platform options to get their goods into the hands of people around the globe. Logistics companies are now beginning to specialize in moving certain types of items or operating specifically in certain geographies if the opportunity is big enough. So powerful are these logistics platforms that today, a company may not even need to employ an operations team to have a successful e-commerce business that satisfies consumer expectations.
One important and often overlooked distinction when it comes to logistics automation is that the vast majority of the online retail giants and logistics companies owning the market today cater to parcel goods: items that are relatively low-value and/or small or not fragile. And yet, the current trend in e-commerce is buying and selling goods that have opposite characteristics: items that are high-value, fragile, oversized or heavy, or require additional collection or delivery services such as custom packing or installation. Consumers are becoming more comfortable buying these types of items online and sellers are jumping to capitalize on this trend.
However, a crucial element of selling these goods cannot be overlooked: the supply chain for specialized goods today is fragmented. While parcel shippers can handle all aspects of fulfillment from collection to delivery, furniture, fine art, or oversized items may require multiple carriers to carry out the first, middle, and last mile legs. The diversity of service providers involved compounds even further when you are shipping internationally, not to mention that import and export clearance can be particularly complex for high-value goods. As such, the ability to ship these items via a one-day delivery method is nearly impossible, but customers often don’t have line of sight into what goes into receiving their purchases, so the expectation of quickly, safely and efficiently doesn’t change with these specialized goods.
This presents, quite possibly, the biggest opportunity in the logistics arena right now: logistics automation that can service specialized items and their unique requirements. It’s a problem that next-day air hasn’t solved just yet, but hopefully in a few years’ time, consumers will be able to have an 18th century Chinese urn delivered to their home as easily as new light bulbs.
This article first appeared in the Nov/Dec 2019 issue of Courier Magazine.