In a post earlier this year by Adam Robinson of Cerasis, he discussed how modern consumer demands are pushing companies to implement omnichannel solutions. Part of the article focused on how eCommerce and Ommnichannel are driving competition within the shipping industry.
I wanted to dive a bit deeper into this concept.
Efficiency and technology have always gone hand in hand. As the old saying goes “necessity is the mother of invention,” and today’s consumers have made it necessary for businesses to implement technologies to meet those needs, which include faster shipping times and greater transparency over the delivery process.
Increased competition in the shipping industry will result in a fight for lower costs – not necessary a “race to the bottom,” but differentiation, beyond technology, will also be created by price. However, though this may seem to benefit the big players like Amazon the most, given the technological landscape the smaller players will be rewarded as well.
There are 5 Ways that eCommerce will drive increased competition:
- Increased Demand
As consumers move increasingly towards eCommerce, the demand for shipping will increase as well. While omnichannel fulfillment options such as in-store pickup will grow as a trend, home shipping will be the mainstay of online shopping.
As such, the greater demand for shipping will increase competition among the shipping providers. Whether they are third party logistics companies, or the retailers themselves, the increased consumption of goods from online retail has already begun to change the shipping industry as we know it. And, for some, a little too fast.
For example, there have been cases such as Christmas 2013, when shipping companies could not deliver on the promised delivery date during peak season. This was a wake up call for the industry, letting them know that they cannot rest on their laurels.
- Push for Efficiency
We live in a time of incredible changes, changes that are happening at a speed that makes your head spin. The race to streamline operations and create more operational efficiency for shipping companies is one of the greatest driver of competition that we see today. As new entrants appear and the volume of online orders increases worldwide, businesses will need to focus internally on their operations in order to meet the new challenges of the eCommerce era.
- More Reliance on 3PLs
Along with the increased demand comes a greater reliance on third party logistics providers. With that increased reliance comes a greater competition over the new business. As a result, incumbent 3PLs are starting to establish competitive advantage with technology – especially around engaging customers during the last mile, as well as greater operational efficiency.
- Potential for Retailers to Take Over the Last Mile
On the flip side, we are seeing some of the larger retailers, Amazon in particular, making moves that indicate they might be looking to phase out 3PLs altogether and take on the last mile shipping of goods purchased online themselves.
Earlier in 2016, there was a lot of buzz about Amazon purchasing the french shipping company Colis Prive’ – the motives of this purchase were made clear when a document was leaked that indicated that Amazon wanted to turn itself into a full fledged shipping company.
- Opening of New Markets
With the increased consumption in emerging markets like China and India, huge new markets have been opened up for eCommerce. Ali Baba showed that China could be a fertile market for eCommerce in a way that companies like Amazon may not have considered before.
India, of all markets, seems to be the most wide open – and the sharks are circling. The biggest incumbent in that market has “traditionally” been Flipkart, but Amazon is starting to establish a foothold.