Logistics service providers (LSPs) can look forward to the rapid growth of the e-commerce market, but they will hardly benefit as they grapple with high logistics costs that stubbornly refuse to come down, according to a new report by Transport Intelligence (Ti).
Ti’s “Global e-commerce Logistics 2020” noted that the e-commerce logistics market continues to expand rapidly, expected to top EUR500 (US$544 billion) by 2024.
“The global market expanded by 16% in 2019 as online sales continued to grow in more mature e-commerce markets from the US to South Korea,” said the report.
“Even more rapid market development was seen in countries where online retail is only now taking hold—annual growth rates in excess of 30% were recorded in several markets. Looking ahead, the market is expected to top €500bn by 2024.”
However, data from more than 20 retailers across geographies and retail sectors shows that logistics costs as a percentage of sales have essentially remained flat at 15% for much of the last decade.
“This is despite large investments in infrastructure, technology and automation from LSPs as they seek to boost efficiency and capture more value,” said Ti, a logistics research and analysis service provider.
Significant variations in logistics costs can be found, however, with retail sector and location as key determinants of overall logistics costs.
“e-commerce presents quite a puzzle for logistics service providers. On the one hand its growth is phenomenal and the potential for value creation is incredibly attractive. On the other, there’s a battle to keep costs down as retailers heap pressure onto their supply chain partners to limit costs while improving service levels at the same time,” said Nick Bailey, head of research at Ti.
“It would have been hoped that the huge investments in infrastructure, automation and other technology seen over the decade last would be reducing costs, but that’s not happened market-wide and costs, especially in fulfilment, have risen dramatically,” he said.