I was recently asked if e-commerce is driving logistics or if logistics is driving e-commerce. At first glance the answer seems clear. As e-commerce has been steadily growing und pushing the limits of logistics providers, you might say that it’s clearly e-commerce. However, this is not completely true — at least not any longer.
Yes, e-commerce continues to grow and still leads to high pressure in the market. Accenture and Ali Research expect as much as 27.4% of annual growth over the next four years. And for many years, e-commerce shops have been able to boost their business simply through marketing activities, such as SEO or SEA. It was relatively easy just to create an online shop and surf on the wave of continuous growth. People running an e-commerce platform only needed to focus on their sales and not really consider logistics. Logistics companies, in turn, have been able to benefit from e-commerce growth while relatively easily using their traditional delivery processes.
This way of thinking is not sustainable, though.
Depending rather than driving
As it currently stands, e-commerce shops continue to focus on increasing sales, and logistics companies still focus on their traditional delivery methods. It seems that both industries are not thinking about the near future where these old structures will exceed their limits and pose very challenging issues. Logistics service providers will not be able to fulfill consumers’ needs and expectations and e-commerce platforms will no longer be able to offer a convenient full-service quality.
E-commerce platforms are not driving the industry.
As mentioned above, e-commerce platforms were driving sales through SEO and SEA initiatives. For many years, they were primarily bringing the convenience of home shopping to everyone. It was more convenient to shop whenever and wherever, rather than go to a local store during office hours or at the weekend. This was the driving force behind the growth.
These days, though, it is no longer sufficient to provide access to any kind of product at any time of the day. Online shopping has become a commodity, and the exposure to products is now very high. There is not just one platform selling a product. There are now several platforms selling the same thing, and with the increase in options, online consumers’ expectations are increasing. They now expect flexible deliveries and a high quality of service in addition to direct delivery and a convenient returns process. If the service of a particular e-commerce platform is not compelling enough, they will likely switch to a new provider. Therefore, simply focusing on marketing activities that will bring you one-off visitors but a lack of quality in service will not create returning customers.
This is where e-commerce begins to depend heavily on logistics service networks, which are still planned as they were many years ago: Daily tours with fixed delivery times. This might be possible several times a day, but only when the consumer follows the rules of the logistics service provider.
I therefore believe that while e-commerce platforms might appear to drive logistics companies at first glance, they are, in fact, increasingly dependent upon the quality of the service provider they are choosing.
Logistics service providers are not driving the industry.
At first glance, logistics companies seem to not depend directly on e-commerce platforms. In general, all e-commerce platforms contribute to the massive growth of logistics services. Therefore, the impact of one platform switching service provider is very low. Because of this low impact, many still do not see the need to rethink their processes.
This stagnancy, though, will soon prove detrimental as more forward-thinking e-commerce companies become increasingly aware of the adverse effects of these antiquated logistics providers. As a response, e-commerce platforms will take control over the delivery processes, themselves, in order to provide the flexible and speedy delivery options that will keep their current customers happy and entice more customers to their platform. This will be devastating to the logistics providers who remain stagnant in the old methods.
Therefore, I believe that consumers are the driving force today.Successful e-commerce shops are therefore already taking steps to invest in their own logistics infrastructure or to invest in technology, such as many companies using Evertracker’s Artificial intelligence and IoT platform, enabling them to gain control over processes, therefore providing more seamless customer experiences.
As for the traditional logistics providers, they must start investing in e-commerce platforms in order to gain full control over the entire value chain. The companies that have full control over all processes will not end up as simple box-pushers driven by certain e-commerce platforms, and e-commerce platforms that control the delivery processes more precisely will be able to drive the logistics industry towards their shared goal.
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