• DATVF.ATLPHL
    1.714
    -0.061
    -3.4%
  • DATVF.CHIATL
    1.944
    0.039
    2%
  • DATVF.DALLAX
    0.898
    -0.033
    -3.5%
  • DATVF.LAXDAL
    1.537
    0.003
    0.2%
  • DATVF.SEALAX
    0.901
    0.066
    7.9%
  • DATVF.PHLCHI
    0.962
    -0.018
    -1.8%
  • DATVF.LAXSEA
    2.139
    0.018
    0.8%
  • DATVF.VEU
    1.540
    -0.013
    -0.8%
  • DATVF.VNU
    1.426
    0.005
    0.4%
  • DATVF.VSU
    1.218
    -0.014
    -1.1%
  • DATVF.VWU
    1.520
    0.042
    2.8%
  • ITVI.USA
    10,531.040
    -57.980
    -0.5%
  • OTRI.USA
    6.020
    0.110
    1.9%
  • OTVI.USA
    10,502.790
    -61.450
    -0.6%
  • TLT.USA
    2.440
    -0.020
    -0.8%
  • WAIT.USA
    150.000
    -1.000
    -0.7%
  • DATVF.ATLPHL
    1.714
    -0.061
    -3.4%
  • DATVF.CHIATL
    1.944
    0.039
    2%
  • DATVF.DALLAX
    0.898
    -0.033
    -3.5%
  • DATVF.LAXDAL
    1.537
    0.003
    0.2%
  • DATVF.SEALAX
    0.901
    0.066
    7.9%
  • DATVF.PHLCHI
    0.962
    -0.018
    -1.8%
  • DATVF.LAXSEA
    2.139
    0.018
    0.8%
  • DATVF.VEU
    1.540
    -0.013
    -0.8%
  • DATVF.VNU
    1.426
    0.005
    0.4%
  • DATVF.VSU
    1.218
    -0.014
    -1.1%
  • DATVF.VWU
    1.520
    0.042
    2.8%
  • ITVI.USA
    10,531.040
    -57.980
    -0.5%
  • OTRI.USA
    6.020
    0.110
    1.9%
  • OTVI.USA
    10,502.790
    -61.450
    -0.6%
  • TLT.USA
    2.440
    -0.020
    -0.8%
  • WAIT.USA
    150.000
    -1.000
    -0.7%
Air CargoBusinessContainerEconomicsInnovationLast MileLess than TruckloadMaritimeMarket InsightModesNewsOcean shippingParcelRailroadSupply ChainsTruckingTruckload

E-commerce battles for logistical domination continue to grow

Amazon may be taking the lead in the e-commerce evolution, but is by no means alone. Amazon’s 2019 Prime Day, a two-day event for members with site-wide deals, deep price discounts and free expedited shipping was held last week. Large traditional retailers such as Walmart, Target and BestBuy are getting in on the action with fast shipping and exclusive incentives for members. Further, these retailers and online-only competitors like eBay offered deals that overlapped with the Prime Day event in order to compete in the digital arena. Nonetheless, these traditional retailers will be playing catch up to gain any ground on Amazon and its 100 million-plus Prime members.

Consumer spending moves the U.S. economy and accounts for nearly 70 percent of the gross domestic product (GDP). Within the consumer spending number, there is spending on goods and services. Spending on services makes up around 65 percent of all consumer purchases, with the goods portion accounting for the remaining 35 percent. Services contain sectors such as healthcare, education and other professional segments – in other words, sectors that don’t move freight.

On the other hand, there are goods; items like vehicles, home furnishings, clothing and electronics – for the most part, retail items. These are the freight goods that are making their way across the country, primarily via truck or rail, every hour of the day. Retail spending serves as one of the key drivers of trucking demand in the economy, as most of the goods moving from warehouses to retail locations are transported via truckload or less-than-truckload (LTL) shipments.

But enough of the layers, what is the current state of the retail segment? 

FreightWaves SONAR: SONAR Ticker – RESL.DEPT, RESLONLN

Traditional brick and mortar stores (RESL.DEPT) generally struggled to keep up with the pace of growth in e-commerce over the last few years. There was an unprecedented drop in growth for December 2018, but expansion has remained steady, outpacing department store growth. E-commerce growth is measured on a quarterly basis by the U.S. Census Bureau, but a sense for what is going on within the segment can be determined on a monthly basis by using electronic shopping and mail-order growth. Electronic shopping and mail-order (RESL.ONLN) are the classifications for businesses that are primarily e-commerce, so it covers what Amazon does but not capture online activity from traditional retailers. Nonetheless, electronic shopping and mail-order growth serve as a proxy for e-commerce and have grown progressively, about 10 to 14 percent over the last four years.

FreightWaves SONAR: SONAR Ticker – RESLG.ONLN

It’s not just traditional brick and mortar stores that have been outpaced by e-commerce, but most of the rest of the economy as well. There has not been a quarter of decline for e-commerce since the end of the recession. E-commerce growth has remained impressive through tax law changes, government shutdowns, trade tensions, currency fluctuations and a general slowdown in the manufacturing sector, often growing five to six times the speed of the rest of the economy. 

Head of the pack

It’s no secret that Amazon is leading the charge when it comes to e-commerce. Amazon seems always to remain a step ahead of its traditional brick and mortar contemporaries – events like the two-day Prime Day event are a good example. Amazon debuted its new free one-day delivery service to Prime members with over 10 million items during the event. Amazon is constantly shortening its delivery window, one of the few remaining advantages that traditional department stores still have. Things aren’t stopping with the one-day delivery service, with three million items now available for free same-day delivery for Prime members.

A couple of purposes are being served with the Prime Day deals, first of which is you have to be a member to participate. Prime Day was a way for the e-commerce giant to expand its ever-growing membership. Second, Amazon is beginning to offer more and more of its own brand name items, with things like its Amazon Essentials, Echo devices, office items, clothing and health supplements. Amazon is not just a third-party online retailer, but a full-on retailer that offers its own items that can compete and out-price popular brands.

Amazon is pulling off this new free one-day delivery service while growing less dependent on partnerships with delivery giants. FedEx recently decided not to renew its U.S. air contract with Amazon. However, Amazon broke ground in May on a new $1.5 billion air hub in Northern Kentucky. The center will have enough capacity to house around 100 planes.

Additionally, Amazon is moving closer and closer to being a fully self-sustainable organization that isn’t reliant on any other companies to optimize its supply chain processes. It has a growing fleet of trucks and vans, and operates its own ocean freight services. There is also a rise in its independent contractor program called Amazon Flex. This program has local drivers pick up packages from warehouses and handle the most expensive aspect – final-mile delivery.

As of now, Amazon handles the shipment for 26 percent of its online orders, a number that is sure to rise in the coming years. However, with Amazon building out its own logistics fleet, it will be interesting to see what partnerships may form with major retailers and carriers or if any other company will be able to build out its own internal fleet to handle transportation.

Emerging trends

E-commerce seems to be the natural progression for businesses to remain competitive and be part of a sector that is outpacing other sectors of the overall economy. E-commerce serves as a shield that is invulnerable to protectionism and international trade conflicts (thus far). Parcel services such as FedEx, UPS and the U.S. Postal Service may have a more diminished role when it comes to partnering with Amazon, but surely opportunities will continue to arise as traditional department stores ramp up their online presence.

There are spillover effects from the advancement of e-commerce for truckload and LTL carriers. However, the big surges in volumes are primarily felt by the parcel companies for last-mile delivery. The majority of items purchased via e-commerce aren’t things big enough for truckload or LTL carriers, but they may seek to get more involved in last-mile delivery, especially for larger items like furniture or appliances.

Prime Day is just the most recent and most significant event to showcase the growing prowess of e-commerce. Cyber Monday is another occasion when retailers battle it out through online deals. Cyber Monday occurs on the first Monday following Thanksgiving and the notoriously chaotic Black Friday. The frenzied Black Friday event that drew large hordes of people to traditional brick and mortar stores may have acted as one of the catalysts to things going digital. There is a convenience to going the e-commerce route. You can get better deals with a few taps on your computer, tablet or cell phone instead of subjecting yourself to waiting in long lines, dealing with inclement weather and scrambling for the last off-brand pressure cooker in the back of the store as soon as the store’s doors open at 5:00 a.m.

The landscape is altering, and new trends are emerging from the e-commerce boom. One of the few statistics that Amazon shared from Prime Day 2019 shows that more than 100,000 lunchboxes and 100,000 laptops were sold during the two-day event. Consumers may be shifting things like the typical “back-to-school” purchases forward to take advantage of deals now instead of during the traditional August time frame.

One thing is certain – e-commerce is going to be essential for most traditional brick and mortar stores to stay afloat in the coming years and Amazon is setting the pace. There were 175 million items sold worldwide during Prime Day this year, more than the sales for its 2018 Black Friday and Cyber Monday events combined. Companies will not only be competing on price as in years past, but also online user interface, membership loyalty and speed of delivery. The rise in digital sales for retailers likely means that they will need to build more warehouses and distribution centers to get closer to their final consumer, which may be good news for some LTL and parcel companies.

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Anthony Smith

Before FreightWaves, Anthony received his Bachelor’s and Master’s degree in Economics from New Mexico State University. Anthony started his career off in tech as a Commercialization Associate where he identified and evaluated emerging technologies and innovations. Anthony transitioned to a Corporate Economist & Consultant where he advised CXO leaders and Fortune 500 companies on economic analysis, industry trends and internal strategy. Anthony’s clients varied from construction, trucking, industrial, software, manufacturing and retail industries. Anthony most recently worked in-house as a Corporate Economist for a building products company. He led analysis around M&A, pricing sensitivity, competitive intelligence and annual sales forecast for the executive team.

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