The pandemic pushed online shopping to an all-time high and with the growth in e-commerce comes increased demand on its logistics. Ecommerce logistics grew 27% during 2020 and shows no signs of slowing down. Shopping behaviors seem to have changed permanently and instead of reverting the growth is expected to be around 8-9% annually from now until 2025.
The cost of growth in e-commerce logistics
The quick growth comes at a price and the expenses related to e-commerce logistics are growing exponentially. The market leader Amazon is a prime example of this. Their expenses related to e-commerce logistics grew from 17,8% of total costs to 31%. Keep in mind that this increased share of the expenses comes at the same time as the company has diversified its business away from e-commerce, making it even more mind-blowing.
The same thing is happening across the entire business and at the same time, the customers keep raising their demands and expectations. Customers are expecting quicker and quicker deliveries and this too raises costs. At the same time, the consumers expect free deliveries, 60% of online stores offer free shipping and that number is expected to grow. Now obviously this makes it hard to push the costs onto the customer.
Customer satisfaction is key
With heavy competition in online retail, it’s easy to lose a customer. Studies show that in general a customer will tolerate one bad experience but the second time it happens, they are gone. The expectations are trending towards next-day or even same-day deliveries, so the smallest mistake with the logistics could lead to a lost customer.
E-commerce logistics centers are struggling
Many shippers and logistic centers are operating with the same resources and tools as they did before the recent boom. This makes it increasingly hard to keep up as volumes grow at the same time as they need to be delivered faster. The employees are struggling and many are even finding it hard to take a bathroom break.
Wearable technology – a part of the solution
With e-commerce logistics becoming a bigger part of the total expenses it makes it increasingly important to find new ways to keep the costs down. As previously mentioned, the logistics have not been able to keep up and are in dire need of new investments.