US e-retail trends push logistics beyond traditional hub

Compared to low overall retail growth of just 1 to 2 per cent, e-commerce is on fire. This retail channel is a $370 billion market expanding at a 15 per cent compound annual growth rate (CAGR) according to Forrester. Also referred to as B2C or direct-to-consumer commerce, e-commerce accounts for 8 per cent of overall retail sales today and is expected to make up 14 to 16 per cent ($1 trillion) of the US retail landscape by 2022, says the ‘US E-commerce Trends and the Impact on Logistics’ report by ATKearney.

E-commerce presents a fundamental shift in how consumers shop. Instead of firms pushing cases and pallets to physical stores, e-commerce has consumers pulling customised baskets to their desired location, whether home, a nearby store, or other convenient location such as lockers. This push-to-pull model has created a structural change in underlying supply chains and the movement of goods in terms of product flow, location of assets, delivery mode, and enabling technologies and analytics.

As retailers and brands seek to enhance the direct-to-consumer value proposition and compete for e-commerce share, they are constantly working to offer a larger assortment and reduce delivery lead time. Consequently, retailers and brands are forward-deploying a wider mix of stock-keeping units (SKUs) to fulfilment centres, where piece-picking of individual SKUs for orders takes place, adds the report.

According to United Parcel Service (UPS), 50 per cent of its domestic parcel deliveries are the last-mile portion for e-commerce orders. They travel from an eaches picking fulfilment centre or a local store to the end consumer demand point. E-commerce orders took eight days from order placement to delivery in 2014; today, the click-to-door lead time is five days. As consumer demand for faster lead time drives companies to forward-deploy more inventory, we expect the average last-mile distance to continue to shrink. In addition, more retailers and brands offering free returns as a table-stake value proposition is driving last-mile volume growth in reverse logistics.

E-commerce businesses will spend up to $25 to $30 billion on distribution-centre picking and packing activities alone in 2016. The balance ($30 to $35 billion) will be spent on last-mile transportation and delivery across three carrier segments: national parcel carriers (including UPS, FedEx, and the US Post Office), regional short-haul shippers (such as Ontrac, LaserShip, and XPO Logistics), and crowdsourced platforms (including Deliv and Uber), says the report.

The report also notes that retailers are trying to further reduce lead time. In fact, same-day delivery has grown rapidly in recent years, spearheaded by demand-and supply-side drivers. According to B.I. Intelligence, same-day volumes could reach $3 to $4 billion by 2018.

Rapid advances in digital technologies and automation will continue to influence e-commerce logistics. The 2016 Stanford University One Hundred Year Study on Artificial Intelligence concludes that artificial intelligence will disrupt logistics and transportation as we know them. (KD)

Fibre2Fashion News Desk – India