E-retailers struggling with cost of delivery and logistics investment
New Ti report finds online retailers see the strategic advantage of investing in e-commerce logistics, but have their profits weighed down by the costs of those investments.The current business models e-retailers and their shipping partners are using to handle e-commerce are becoming financially unsustainable, according to a new benchmark report from the London-based consultancy Transport Intelligence.
The Global e-Commerce Logistics Report 2015 found that retailers view e-commerce as a strategic advantage, with many investing in delivery and fulfillment networks. But Ti said the financial impact of these investments is weighing heavily on their profit margins.
“The resulting squeeze on carriers, not least due to ‘free shipping’ options, has already led to additional pressure on the industry, leading directly and indirectly to consolidation and business failures,” said Cathy Roberson, senior analyst at Ti and author of the report. “This will mean that although parts of the logistics and express industry will benefit from increased revenues, it will be a huge challenge to translate this growth into profits.”
Roberson said these challenges were evident in the past two holiday seasons when several carriers were overwhelmed by volumes and in some cases stopped accepting new shipments.
“The pressures on carriers will only increase as some retailers take on many logistics functions, including, as in the case of Amazon, last mile delivery,” she said.
Roberson pointed towards alternative delivery networks as being the way forward for the industry.
“What the end-customer wants is choice allied with cost-efficiency,” she said. “New solutions such as ‘click and collect’ and lockers are becoming popular as they can be more convenient than waiting at home and have the added benefit of being free-of-charge. At the same time, these alternatives suit many carriers who struggle to make any money on home delivery, not least because of the costs incurred in re-delivery.”