Friday, February 17, 2012

UPS responds to the rise in ecommerce by acquiring Kiala

From Ti's Global Newsletter:

The growth of ecommerce is resulting in a renewed interest in the internet. UPS recently acquired privately owned Belgian company Kiala and also entered into a partnership with Kabbage to provide funding for online merchants. Expect more transportation and logistics providers to enter this market.

Déjà vu.  The 1990s introduced the world to the likes of Amazon, AOL and EBay. Companies scrambled to build a presence on the internet and then when the dot com bubble burst in the early 2000s, a sense of reality set in for the business world. Now, thanks to the increasing use of smart phones and social media, the internet market is taking off again. As such, the rise in ecommerce has many companies renewing their interest in this market, including those within the logistics and transportation industry.  After reporting an impressive holiday peak season thanks to strong ecommerce sales, UPS unveiled part of its strategy to penetrate the ecommerce market by acquiring privately owned Belgian company, Kiala.  Launched in 2001, Kiala operates in Belgium, France, Luxembourg, the Netherlands and Spain.  According to Norman Black, UPS spokesperson, "We're devising and looking for new answers in this space," Black said of e-commerce. "We need to be a leader in supporting this type of economic growth."

Through proprietary software, Kiala has integrated with more than 450 etailers through a network of over 6,500 collection point retail shops.  This allows etailers to offer their shoppers the option of having goods delivered to a convenient retail location.  Kiala is able to handle 150,000 packages per day and more than 50m per year.

Although terms of the deal were not made public, according to the co-founder and President of Kiala, Denis Payre said the company’s 2011 revenue was €49m.

Another ecommerce move UPS made was that of partnering with Kabbage, a provider of working capital for online merchants operating on eBay, Amazon, Yahoo Stores, Etsy and Shopify. UPS Capital has provided Kabbage with a new debt facility specifically intended to fund small ecommerce business through Kabbage’s proprietary system. In addition, small businesses will be able to direct UPS to share their shipping history with Kabbage via the website, giving the company more info about merchant’s operations, which Kabbage uses to determine how much capital and at what rates it will provide the seller.

Ecommerce has been a bright spot in an otherwise uneven and sluggish economic recovery. The two largest ecommerce markets, Europe and US witnessed double-digit growth in 2011 with European internet sales growing 18% to €200.5bn, based on figures from the Center for Retail Research. Based on data from Comscore, the US market grew 12% to $256bn. Double-digit growth for both Europe and the US is expected to continue in 2012.  

For transportation and logistics providers, this growth is creating changes in warehousing and distribution, delivery methods, and modes of transportation.  These trends will likely benefit small parcel companies such as UPS, FedEx and DHL due to frequent small packages that ecommerce generates.