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Logistics behemoths Maersk and DB Schenker are moving to grab larger slices of the B2C market at a time when costs are soaring and margins are under pressure.
Maersk has the US e-commerce market in its sights; yesterday it announced its new E-Commerce Logistics business unit would be leading its “foray into the $600bn US e-commerce market”.
It pointed out that it has a network of nine e-fulfilment centres that can reach 75% of the US population within 24 hours, and 95% within 48 hours.
“By making e-commerce supply chains easier and more robust, we can deliver factory-to-sofa service,” said Casey Adams, head of Maersk E-Commerce Logistics in North America.
The announcement followed the rebranding of Visible Supply Chain Management, the Utah-based e-commerce fulfilment firm acquired last summer, as Maersk E-Commerce Logistics on 18 March. The logistics giant last year also bought two e-commerce firms in Europe – B2C Europe and HUUB – and LF Logistics in Asia to strengthen its presence in this segment.
Meanwhile, DB Schenker is going after e-commerce traffic in Europe by extending its groupage system freight network to include standardised B2C shipping across the continent.
Its new service, DB Schenkersystem home, aims at companies that ship to private customers, particularly home appliances and technical and interior design products.
“By expanding delivery from 22 million companies to 195 million private households, we are now taking the next step in leveraging the full potential of our European groupage network,” said Helmut Schweighofer, CEO of DB Schenker Europe.
These forays come as e-commerce growth is looking less rosy than a year ago. Recent results of major operators have been bruising: JD Logistics saw revenue soar 44.7% last year and 23% in the fourth quarter to Rmb275.9bn ($43.3bn), but operating income in the final quarter slumped to a Rmb392.0m ($61.5m) deficit, which led to a net loss of Rmb5.2bn ($816.3m).
Amazon reported $206m in operating losses in the US and a $1.63bn operating deficit in the international arena for its core e-commerce business in the fourth quarter, while its online stores segment registered a decline of 1%. According to its own estimates, before the peak season the company was expecting to spend about $4bn more in Q4 than budgeted, to compensate for higher shipping costs, supply chain challenges and labour shortages.
Amazon’s global shipping costs increased 10% last year, to $23.6bn.
Runaway costs are one headache, but e-commerce operators are also grappling with a loss of momentum. Statistics released by the UK government indicate that online retail sales in the UK dropped 4.5% in January from December, and were down 20.8% on January 2021. This is hardly surprising, as in-store sales crept up again. Moreover, the scrapping of Covid-related restrictions has been widely expected to swing the balance from purchases to a growing spend on services, entertainment and travel.
ParcelHero described the drop in online sales as a reflection of “a natural rebalancing, as people return to high streets”. It argued that online sales still represent 25.3% of all total retail sales, way up from 19.8% back in February 2020.
Its management expects to see online sales continue to lose ground throughout the year, but expressed confidence they would remain at about 25% of the retail market.
In any case, the frothy times of frantic growth, with merchants scrambling for fulfilment capacity at any cost, appear to be giving way to a rising focus on cost. Cathy Morrow-Roberson, founder and head analyst of Logistics Trends & Insights, sees stores assuming a greater role in the fulfilment equation as merchants try to rein-in their costs. Increasingly, free delivery will translate into pick-up from stores, while faster delivery options will command a premium fee, she believes.
This scenario favours merchants that have established omni-channel fulfilment capabilities, as they can leverage their array of options. Pure online merchants will probably partner with physical stores or integrator outlets like UPS Stores to establish pick-up options, she said.
“I think the whole definition of free shipping is going to change,” she added.