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Global e-commerce logistics market posted strong 27.3% growth in 2020 and is forecast to grow at a CAGR of 8.6% from 2020-2025
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Retailers’ online sales volumes grew rapidly last year but their logistics costs also increased
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Logistics providers growing in importance in helping e-retailers meet consumer demands
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Last mile is one of the major constraints of e-retailing, now one of the most important sectors in logistics and likely to undergo major restructuring
The global e-commerce logistics market grew by 27.3% in 2020, the exceptional growth spurred by COVID-19’s tremendous impact on the retail landscape, according to a new Transport Intelligence (Ti) report.
Ti’s Global e-commerce Logistics 2021 highlights the rapid growth of the e-commerce logistics market as online retail demand soars and consumer requirements for same or next-day last mile delivery options rise sharply.
While the e-commerce logistics market is experiencing rapid growth during the pandemic, growth is expected to moderate to a still strong compound annual growth rate or CAGR of 8.6%, hitting EUR557 billion (US$666 billion) by 2025.
The moderation is largely because of frontloading of e-commerce adoption with the pandemic accelerating online retail adoption through 2020.
Covid-19 continues to change the retail landscape. Logistics costs are increasing for retail as sales move to more logistics-intensive online channels and consumer demand for expensive same or next-day last mile services rises sharply. This is raising e-commerce logistics volumes and overall expenditure on last mile services.
Ti’s latest report showed that for many retailers, their logistics costs as a percentage of sales are steadily rising over time; for instance, Amazon’s have increased from 17.8% in 2011 to 31.0% in 2020. This increase in costs was partly driven by investment in networks to build long-term reach and efficiency and partly as a result of the intensifying logistics requirements of online retail to meet consumer expectations.
Rising costs have made the management of inventory even more important for online retailers and underlined the need for efficiency. But costs appear to have been rising more on the last mile side.
Ti’s latest estimates show that for pureplay online retailers expense on last mile services represents 53% of logistics costs, with fulfilment accounting for the other 47% in 2020.
The report also outlines how last mile provision has been a key constraint on growth since the outbreak of Covid-19. Some retailers have had to suspend orders or remove options for next day delivery as the capacity of last-mile providers has become stretched.
The report also identifies the key trends in e-commerce logistics, exploring how logistics service providers (LSPs) are helping retailers to cater to the latest demands of consumers. LSPs are helping facilitate the fulfillment of orders from social commerce, manage returns effectively, and set in place the logistics to allow omni channel retailers to reimagine their bricks and mortar stores for the post-pandemic world.
“e-commerce has been one of the key growth sectors for logistics over the course of the pandemic with the rise in demand creating opportunities for LSPs and last mile providers to grow rapidly, as long as they can help retailers react to the changes in consumer demands and manage wildly changing trading conditions,” said Ti’s head of commercial development, Michael Clover.
Photo by Dylan Gillis on Unsplash
