Ti’s latest report, Global e-commerce logistics 2021, shows rapid growth in the e-commerce logistics market as online retail demand soars and consumer requirements for same or next day last mile delivery options rise sharply. Meanwhile, Covid-19 continues to change the retail landscape.
1.Global e-commerce logistics market grew by 27.3% in 2020
2.Global e-commerce logistics market to grow at a CAGR of 8.6% from 2020-2025
3.Online sales volumes grew rapidly in 2020 but logistics costs also increased
4.Logistics providers growing in importance in helping e-retailers meet consumer demands
5.Last mile provision and capacity a key constraint to e-commerce growth
The global e-commerce logistics market grew by 27.3% in 2020 and will hit €557bn by 2025. While the e-commerce logistics market is experiencing rapid growth during the pandemic the growth rate is expected to moderate to a still strong CAGR of 8.6% out to 2025. The moderation in growth is largely because of frontloading of e-commerce adoption with the pandemic accelerating online retail adoption through 2020. For example, online sales in the UK rising by 46% in 2020 according to the ONS.
Meanwhile, logistics costs increase 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, raising e-commerce logistics volumes and overall expenditure on last mile services. Ti’s latest report shows 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.
Ti’s latest report also outlines how last mile provision has been a key constraint on growth since the outbreak of Covid-19, with some retailers having to suspend orders or remove options for next day delivery as the capacity of last mile providers is stretched.
The report also highlights the key trends in e-commerce logistics, exploring how logistics providers are helping retailers to cater to the latest demands of consumers, facilitating the fulfilment of orders from social commerce, managing returns effectively and setting in place the logistics to allow omnichannel retailers to reimagine their bricks and mortar stores for the post pandemic world.
Ti’s Head of Commercial Development, Michael Clover, said: “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”.