E-COMMERCE LOGISTICS SOLUTION FOR INCREASED GROWTH
What is E-commerce?
This is a term used to describe all commercial transactions conducted electronically on the internet. This means all transaction of goods and services consummated online will be characterized as Ecommerce. The history began with the sale of a single CD in August 1994 by a man to his friend through his website NetMarket. The CD had a song by the group Sting.
There are different models of E-commerce and it all depends on who is the producer of the product and who she is selling it to. So it could be an exchange between a business and another (B2B); between a final user and the original owner (C2C), from a business to the final user (B2C) or finally from a consumer to a business (C2B).
The market has since evolved and created a huge following of retailers, online market platforms, and big corporations who are benefiting from the increased scaling of their market presence. It is estimated that this market will top $27trillion in the next 3 years or less.
This exchange of goods and services essentially must also entail the physical movement of the products to the final mile. This is where logistics come into play. As the Ecommerce business is scaling it parallels the growth in logistics. The relationship is symbiotic and mutually beneficial.
B.Bonin Bough boldly asserted “We are all Ecommerce companies now” in his essay in May 2012 for Harvard Business Review. He also said that everyday items are now being sold online and sales are expected to double in 2014 and exponentially thereafter.
In Nigeria products such as plantain chips, roasted goat meat and Ojuelegba Sharwarma are traded daily online. And they all need to move these products from one part of the state, region or country to another. Regardless of how you deliver the product, if a company sells products online it is an e-commerce company. The company is principally engaging with customers across multiple digital platforms and delivery mechanisms taking the battle away from war for shelf space.
Delivery Mechanisms:
Logistics is how you manage the process of moving resources and products from the warehouse on transit until it gets to the final destination. You notice I have not given a definitive definition for the purpose of this essay so you can feel free to define it based on your existing process or what works for you. The aim therefore is to get you to think through the process of storage, and the actual movement to its final destination. Logistics is therefore the Management of resources or products when in storage and transit. In e-commerce ventures logistics are the processes of shipping order to customers or transporting inventory to a merchant.
Logistics speaks to the planning, execution and control of the movement of goods from end to end and the ultimate goal is to move goods from one point to the other in the supply chain in a fast, efficient and most cost effective manner.
The Market Analytics
According to the latest data from supply chain consultancy Armstrong and Associates in 2016 the global third party logistics (3PL) market reached $802billion and is on track to exceed $1.1Trillion in 2022. Understandably, China and North America are the dominant and biggest drivers. It is expected that the growth trend will continue based on estimates for fiscal year 2019. North America is seeing increased productivity from the America first initiative of the current Administration and improved manufacturing indices. Europe is exiting recession and as such the global revenue from Logistics will continue to trend upwards.
E-commerce has great impact on the global 3PL market and most analysts are of the opinion that it can only trend higher rather than see a slump. The Global e-commerce related revenues for 2016 and estimates for the fiscal year 2019 and going into 2020 is growing at a compound annual rate of 15.7% versus overall 3PL market growth of 6.0% for the same period. This is a good trend to strengthen your belief to increase your hustle.
The drivers for this growth are a more complex mix of economic activities and increased global trade but we will take a few and discuss in this series:
- Increased connectivity
Technology is propelling the growth of e-commerce with increased connectivity of consumers and the “Internet of Things”. Tracking of goods in transit using Software has been made increasingly simple and there is even a bigger push for Drone delivery by Amazon and Driverless cars by Uber. The internet disruption is further aided by throwing the markets open so prices can be compared real time, product can be sourced locally and internationally. Amazon and Alibaba are reaping big time with this openness.
Whilst most logistics firms are strengthening their processes, improving reach through mergers and developing new products and services
- Distribution Centers
With the unprecedented growth and demand for e-commerce and multi-chained fulfillment services stock-keeping units are key to managing Distribution Centers (DC). Most DCs in Nigeria are still struggling with Material Handling Equipment (MHE) in an increasing complex supply chain management needed for a fast paced e-commerce business. DCs with the traditional design of handling below-peak throughput naturally are finding life difficult with the growth of e-commerce and frequent promotions with numerous peak periods. The challenge is huge especially with the regular traditional wholesale orders trudging on alongside.
- Infrastructural Challenges
The prevailing issue of poor road, rail and air transportation infrastructure is still a major drawback and carry with it cost overrun for most logistics firm. The issue of reverse orders thrown into this mix makes the process all the more complex and costly. This is the predominant issue with Nigeria and thus anchors most Ecommerce sites on Pay on delivery.
- Government regulations
The issue of poor standardization of operations especially in the area of safety and insurance of products on transit is still a jury out with no real solution in sight.
There is a strong case for logistics solutions with the growth of e-commerce and the prospect for increased revenue is a given at least for the next 10 years. However I must add here that most operators must keep an eye on the new technologies that are coming along the way that could disrupt the industry in a big way.
A good way to do that is to attend some of the big conferences by great e-commerce companies in 2019. I recommend you attend the Imagine 2019 conference by Magento. “ Connecting the Global Magento Ecosystem. May 13-15 2019
