E-commerce: only the biggest disruption since … ever. Just look at what the headlines are saying:
“In China, 2 million companies are in the e-commerce delivery game. Chinese e-commerce giant Alibaba has officially become the world’s largest retail platform, with its total trading volume online (in the fiscal year ending March 2016) surpassing Wal-Mart’s annual sales.” – China Daily, April 6, 2016
“Amazon acquires 20 percent of Atlas Air Worldwide holdings, partner for global air cargo delivery. Twenty new aircraft for Amazon!” – Wall Street Journal, May 5, 2016
“New U.S. importing rules make foreign goods a better deal for online shippers – no duty tax for $800 or less.” – Wall Street Journal, May 4, 2016
Last mile experts addressed 600+ attendees at I.CON: Trends and Forecasts this week in Jersey City, New Jersey. Panelists Curtis Spencer, president, IMS Worldwide Inc.; Ben Conwell, senior managing director/practice leader e-commerce and electronic fulfillment, Cushman & Wakefield; and Kelly Picard, CEO, Hackbarth Delivery Service Inc., shared their insights.
- By 2020, the U.S. will sell $486 billion of goods to the world in cross-border e-commerce.
- By 2020, the U.S. will buy $10 billion of goods from overseas in cross border e-commerce.
- This will require 160 new e-commerce logistics centers of 800,000 square feet or larger to be built in the top urban markets, plus another 110 new or new or repurposed facilities in key markets.
A key e-commerce issue is getting the product to the consumer where and when they want it. “Last mile,” the term used to describe the movement of goods from a fulfillment center to their final destination, is not a new concept. Remember the milk man? The original last mile delivery is making a comeback.
A major challenge in that last mile is cost; there must be a higher willingness to pay for a higher level of service if Amazon.com Inc.’s same- or next-day delivery is to be profitable. The biggest cost drivers for delivery are mileage and time. Winners in the e-commerce race will be those who can control costs while achieving high customer satisfaction.
Also for consideration in site selection for last mile providers is location, location, location. Proximity to dense populations, good access to highways, security, ability to scale and building configuration are the key elements. Route optimization is valuable – the fewest miles to serve the most customers. There is no such thing as free delivery!
So what if you’re not Amazon? Limited larger retailers are able and willing to handle delivery in certain markets, but most have to hire it out. Fulfillment mostly done by 3PLs or other contract carriers offer same day, next day, two-day … or slower. So who’s trying to solve the gap between retailers and your doorstep? ShopRunner, Instacart, Postmates, Muchery, DoorDash, Shyp, Curbside, Drizly, Deliv, UberRUSH and more – plus the good ole USPS.
Kathryn Hamilton, CAE, is Vice President for Marketing and Communications at NAIOP Corporate.