How Is the Explosion in E-Commerce Creating a Logistical Nightmare?
Updated: Dec 16, 2021
In 2020 alone, the global e-commerce logistics market expanded by more than 27 percent. This astronomical surge was largely attributable to the COVID-19 pandemic and its disruptive influence on the retail and logistics landscape.
Industry experts anticipate growth in the e-commerce sector will be more modest in coming months than what was seen throughout 2020. Nevertheless, supply chains are being stretched to the breaking point.
What Is E-Commerce?
The term “e-commerce” encompasses all goods and services sold via the internet, as well as the transfer of data and money required to complete those sales. E-commerce falls into several distinct types:
Business to Consumer (B2C): Online retailers selling to consumers.
Business to Business (B2B): Manufacturers and wholesalers focusing on selling software, raw materials, or products to business customers.
Consumer to Consumer (C2C): The sale of products or services between consumers via platforms like Gumtree, Etsy, and Fivver.
Direct to Customer (D2C): This relatively new model enables brands to bypass wholesalers, distributors, and retailers, selling directly to their end customer. This saves brands significant sums in the process, which they can then pass on to consumers. Social media platforms like Facebook, SnapChat, and Instagram are all popular venues for D2C sales.
Consumer to Business (C2B): This form of e-commerce involves an individual selling their product or service to a business, for example, influencers offering brand exposure, or freelancers selling stock photography, consulting, or writing services, etc.
What Was the Impact of COVID-19 on E-commerce?
With social distancing policies, lockdowns, and stay-at-home orders in place in many countries worldwide throughout much of 2020, COVID-19 accelerated expansion in the e-commerce sector, with huge numbers of shoppers taking their spending power online, accessing products from the safety and convenience of their own homes. Many companies transitioned from physical stores to e-commerce sites impressively quickly, taking their products online to stay profitable through this economically turbulent time.
Despite travel bans curtailing much international travel, the cross-country transportation of products continued, with new firms springing up, tapping into underserved demographics, helping them access products they want to buy, be that everyday necessities or luxury items. Experts predict that these changes in consumer habits will prove to be long lasting, particularly bearing in mind the emergence of new variants of COVID-19 and potential new waves of the pandemic.
What Are the Benefits of E-commerce for Shoppers?
E-commerce confers numerous benefits over traditional retail shopping, including:
Convenience. Rather than having to travel to a brick-and-mortar store, consumers can shop from the comfort of their own home, browsing thousands of products, purchasing seamlessly via the internet at any hour of the day or night. Many e-commerce stores offer next-day delivery, as well as easy returns.
More Choice. In an increasingly globalized marketplace, e-commerce shoppers are no longer restricted by geographical location, meaning they can widen the net in their search.
Personalization. Tracking cookies often receive a negative press, with many viewing them as an invasion of privacy. Nevertheless, when implemented correctly they can actually be quite helpful, enabling e-commerce marketplaces to enrich user profiles, personalize product offerings, and make suggestions for other products a consumer may find useful.
Cost Efficiency. Without the necessity of a brick-and-mortar store, businesses can reduce their overheads significantly. Today, digital sellers can launch an online store with minimal cost, enabling them to undercut their retail rivals.
What Is the Impact on the Logistics Industry?
With shopper behavior changing fundamentally in such a short span of time, logistics companies all over the world are facing significant pressures trying to keep pace with demand. The sharp uptick in online sales, particularly within the grocery sector, has not only triggered a surge in demand for drivers and vehicles, but also a need for increased warehousing space.
Not all carriers were impacted equally by the pandemic, with demand spiking for some and plummeting for others. For example, trucking volumes increased by 30 percent in early 2020 due to panic buying, before falling sharply. Railroad volumes fell by 20 percent, and ocean shipping fell by 25 percent, while last-mile deliveries peaked at more than 10 times their normal levels.
As the world adjusts to this new normal and green shoots of recovery appear in the US economy, a huge spending splurge by consumers has placed considerable pressure on already precarious global supply chains. The commercial pipeline that delivers $1 trillion in clothing, furniture, toys, and electronics from Asia to the US is currently clogged, the logjam driving up shipping costs. The cost of transporting a container from China to the West Coast doubled between July and October 2021.
With the pandemic exposing investment shortfalls in American transportation infrastructure, experts warn that it could be some time before bottlenecks at US ports are cleared. Los Angeles alone is set to process 10.8 million containers this year. Despite the International Longshore Warehouse Union accelerating training of new workers, congestion at one point in supply chains translates creates disruption in others, a problem that is not expected to disappear anytime soon.