Thursday, January 3, 2013

Flexibility key to the growing ecommerce logistics market

As the 2012 holiday season comes to a close, lessons learned are being compiled and plans are probably already underway for the 2013 holiday season. Although final financial figures have yet to be recorded, it appears that once again ecommerce continues to gain on traditional retail sales. According to Chase Paymentech, year-over-year US ecommerce sales growth from October 29 to Dec. 25 increased 15.2% despite an overall holiday season that some retail analysts are predicting to be the worse since 2008. For the UK, Experian Hitwise reported an estimated 17% increase in visits to online retail sites on Boxing Day alone. It’s expected France and Germany also witnessed ecommerce double-digit growth during the holiday season. Combined, France, Germany and UK comprised 70% of European ecommerce sales in 2011.

For logistics providers, this evolving retail shift means changes in not only delivery and fulfillment but the entire supply chain. For example, last year, UK-based Yodel was caught off guard as an estimated 750,000 parcels were not delivered in time for the Christmas holiday. This resulted in investments in forecast demand processes, additional warehouses and storage at its busiest locations and it increased deliveries to seven days a week in December. Despite a 30% decline in the number of deliveries this recent holiday season, the need for flexible logistics solutions is important and Yodel will likely benefit from its investments.

Another example of flexibility is that of US regional small parcel provider, OnTrac, which serves six US western states. The company provides Sunday pickup for Monday deliveries and does same-day deliveries for Quidsi, a subsidiary of Inc. that operates a number of web-only merchants including and Partly as a response to demand for quicker shipments, along with the overall growth in online retail, OnTrac has over the past year added 1m sq. ft. of warehouse space to accommodate that growth—a 70% increase from its previous space.

Speed and flexibility is evident in the changing distribution centers. Robotics and automation is speeding fulfillment as orders and delivery options increase – to the end consumer, to the retail store, to an independent location or to another agreed on location. has taken note and acquired Kiva, manufacturer of robots, earlier in 2011 and has introduced this in some of its facilities.

Finally, shopping patterns, particularly those in the US, indicate most buying is done at the beginning of the holiday season and days/hours just before the actual Christmas holiday. If this holiday season is any indication of things to come, consumers will likely demand shorter delivery times – dare I say – same day delivery. While still a relatively new concept for many US consumers, it is one that many like but few have taken advantage of. The question is, will consumers be willing to pay for same day delivery? More importantly will the larger delivery companies be flexible enough to deliver such a service?