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3/16/2017 - ECOMMERCE EXPRESS CARGO: Raised Expectations

Unfortunately for brick and mortar retailers, the consumer environment is bleak and getting darker. Just in the past few months, major chains such as Sears, JC Penny and others have been forced to shut hundreds of stores. The reason is no secret; purchasing power is shifting at an accelerated rate from stores to etailers. And, consumer research has found that increasingly shoppers who do visit these stores are “just looking” and will ultimately consummate their purchase online.

This presents an incredible opportunity for express air cargo companies focused on global ecommerce delivery. And by every major research report, air cargo ecommerce shipments are going to continue to grow exponentially for at least the next five years.

At a recent conference in Hong Kong, Steven Li, Director of Logistics for Alibaba, noted that, “one third of the US $3 trillion global ecommerce market is cross border trade which is growing faster than domestic sales.” Mr. Li offered a critical caveat as well. He said that while this explosive growth will drive demand for express air cargo, our industry must embrace the need to change and change quickly. He stated that what drives ecommerce comes down to logistics, which are “fast, transparent, easy, and dependable”.

This makes perfect sense from a consumer perspective. Today any person with a smart phone can make a purchase from just about any geographic location throughout the world. The ease of ordering their item has led – according to a Harvard Business School study – to a consumer expectation of “near instant gratification” within their purchasing experience.

On the passenger side, this online mentality was taken seriously from the start. Every airline jumped on the web more than a decade ago, enabling customers to buy tickets, book hotels, rent cars, choose insurance, etc. – all online and completely transparent. Now, every airline passenger division has an e-commerce department.

Predictions for growth in ecommerce are bullish. According to eMarketer, a market research company that focuses on digital marketing, media and commerce, online shopping will show a compound annual growth rate of 27.4% over the coming five years. By some projections, the global B2C volume will reach $2.26 trillion a year by 2020, fueled by annual growth rates of 15-20%.

But we as an industry must be vigilant in ensuring that our logistics model matches both consumer expectations as well as the platforms of the etailers that are increasingly emboldened towards structuring their own transportation networks.

For years, etailers” have repeatedly voiced their concerns about transparency and reliability. They have opened up global shopping to anyone with a computer or smartphone. By changing the distribution channels, they unlocked whole new markets, providing the world with new levels of availability and comfort. Understandably, they cannot – and will not – have their growth frustrated by below-par logistics.

Amazon's moves to build up dedicated freighter capacity, securing deals for Twenty 767 freighters apiece with Atlas and Air Transport Services Group, have sent strong ripples through the industry and prompted carriers to examine their options. Lufthansa Cargo recently disclosed that it had held talks with Amazon and Alibaba.

So as an industry we have a tremendous growth opportunity with the ecommerce boom, but in order to successfully ride this wave towards maximizing revenues, the express cargo industry must be vigilant that its logistics platforms meet the new template of both the etailers and their customers.

The cargo industry in general, continues to focus on the more economical tactic of bundling and consolidating shipments in order to lower unit costs. This leads to more geographical concentration on fewer consolidation gateways. However, this model is getting away from door-to-door delivery, not closer.

Alibaba’s Mr. Li has it right. Global ecommerce shipments will continue to exponentially grow and be the probability sweet spot for express cargo companies for many years to come and our logistics systems must continue to evolve to meet the consumer expectation of “fast, transparent, easy and dependable” service.

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