Borders are Fading with Cross-border eCommerce’s Explosive Growth Demanding Logistics Participants to Re-strategize and Adopt New Business Models
The explosive growth of cross-border eCommerce is supported by the increasingly young and urban population with easy access to technology such as mobile phones and tablets. Cross-border eCommerce trade between Europe and Asia is significant, with China being the most popular country for online shoppers in the West, driven by low prices and a wide variety of product offerings such as consumer electronics and electronic gadgets.
Most of the cross-border shoppers expect orders to be delivered faster, leaving logistics companies in a tough situation, due to the limited transportation options. For instance, with the given infrastructure between China and Europe, goods can be transported either via sea, which is time-intensive (35-45 days), or via air, which is cost-intensive (8x sea costs). Hence, to stay competitive in the market, eCommerce companies try their best to deliver products to customers at the earliest by compromising on their profit margins, and the major component that affects their bottom-line is logistics. Around 75% of the logistics costs are spent on the last leg of the supply chain, i.e., transporting products from the retailer location to the end customer. Despite these challenges, more participants seem to focus on cross-border eCommerce and improve the efficiency of logistics in this field.
Opportunities:
- North America: Most of the Canadian eCommerce retailers do not ship to the United States or outsource their logistics activities to third-party service providers. Canadian eCommerce retailers are considering outsourced fulfillment options to expand to cross-border and other international markets.
- South America: The USA remains the most preferred destination for cross-border eCommerce. However, the share is being cannibalized by China, supported by a growing preference toward Chinese goods. Payment modes, adherence to regulations, and logistics, especially last-mile delivery, remain a major challenge in this region.
- Europe: Mobile penetration in Europe is high, and more than 54% of the retailers expect mobile to be the potential source of order placement by cross-border eCommerce consumers. Due to logistical challenges, customers get their products delivered slower, and are unable to track them, as the goods are handled by various logistics participants before they reach the customer.
- The Middle East and Africa: The cross-border eCommerce market in the region is comparatively small, but emerging, supported by high disposable incomes and digital penetration. High trade barriers, red tape, changing regulations, and volatile currency exchange rates adversely affect small cross-border eRetailers operating in the region. With high internet penetration and excellent infrastructure in the Middle East, cross-border eCommerce is set to grow at an exponential rate during the forecast period.
- Asia-Pacific: Shopping preferences in this region are mixed, with some shoppers focusing on low costs and others focusing on fast deliveries. Cross-border retailers find it difficult as well as cost-intensive to set up distribution centers in major city centers and deliver products within a short duration. As the transportation infrastructure within the region is under development, last-mile delivery in rural areas remains a major challenge for logistics service providers; those with expertise in express deliveries will partner with cross-border retailers and set up distribution centers for quick deliveries.
Growth in cross-border eCommerce is opening up several new opportunities for logistics service providers. As the market is rapidly evolving, in the next 5 years, a continuous adjustment in service offerings is imperative for participants to meet the changing preferences of eCommerce companies and end consumers. Growing customer demands such as next day delivery, same-day delivery, time slot deliveries, better tracking, and better management through specialized eFulfillment centers are forcing e-Retailers to outsource their logistics functions. The emergence of eCommerce-specific logistics solutions is expected to increase the demand for warehouses, logistic centers, and cold storage. Companies need to break the traditional concept of using a single mode of transport and consider multi-modal transportation for enhanced value.
