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Game Over! How Retail Just Won the Last Mile

Oct 27, 2017 1:12:47 PM / by Fauad Shariff

Mark the date: October 2017 will be remembered as the month in which retailers won the final mile of logistics. Who would have thought? Among the "winning" retailers are of course e-commerce giants like Amazon and AliBaba. But bricks-and-mortar juggernauts like Walmart and IKEA are getting in on the act as well.

The result is a radically transformed logistics landscape where the line between a click on a website and a knock at the door is increasingly blurred.

"Retailers are coming to the realization that the combination of the supply chain AND the value chain is the most important basis of competition over the next decade or two. It is happening in other markets too,” observed Brian L. Aoaeh, Partner, KEC Ventures in New York. He continued:

“Companies with tightly integrated, largely proprietary physical and digital supply chains that have been engineered to increase their ability to create value for their customers or users are snatching business away from their industry peers. These companies understand that supply chain can provide a distinct edge when it comes to increasing customer satisfaction, maintaining brand loyalty, and increasing profit margins. I am excited about startups building platforms to enable this shift in how companies in established industries interact with their supply chain."

Here are the transactions you need to know about from this transformative month, along with our take as to what each one means for your business and logistics as a whole:

AliBaba

China’s e-commerce titan kicked off the month of October by announcing an $807 million investment to acquire a majority interest in logistics company Cainiao, and also announced that they will be investing $15 billion over the next five years to build out their global logistics network.  

Our take: While AliBaba has a large task ahead in overcoming logistics infrastructure challenges within China, the bigger deal here is their desire to build out a proprietary global logistics network. This moves AliBaba beyond simple package delivery or order fulfillment into the realm of logistics services such as freight forwarding, distribution center management, and end-to-end supply chain.  

Amazon

As if there weren’t enough business models being disrupted by the e-commerce giant, in early October we learned that Amazon was planning to test deployment of its “Seller Flex” service on the U.S. West Coast. Already offered in India, “Seller Flex” doesn’t actually make Amazon a delivery service, but it does enable them to decide how packages will be delivered on behalf of sellers on its platform.  

But they didn’t stop there. On October 10th, we also learned that Amazon is working with smart license plate manufacturer Phrame on a solution that would enable delivery to the very trunk of its customers vehicles, and by extension, potentially using trunk space as a way to source parcel delivery capacity.

Plus: Amazon just announced Amazon Key -- a new program that will allow consumers to install special locks in the homes that will allow the company to deliver packages inside the house. Talk about trust! At a time when most people are reluctant to let strangers into their homes, they are about to literally hand over the key to Amazon.

Our take: It’s over. With its own private airline at PrimeAir, local delivery services, and exclusive rights to U.S. Postal Service delivery on Sundays, Amazon has won the “last mile” of logistics in the United States.  

IKEA

Remember when we said “How Logistics Became the New Prime Real Estate”?  In October 2017 IKEA -- hardly known for aggressive e-commerce moves -- took this to a whole new level when it announced the acquisition of gig economy site TaskRabbit. This deal allows IKEA to access an “on-demand” network of workers to deliver and assemble furniture for their customers which makes for a truly value added online retail experience. Since most IKEA "stores" are primarily warehousing space, they are uniquely suited to make the conversion from retail store to distribution center, a problem that retailers like Home Depot and WalMart have struggled with.  

Our take: This is big on many levels. Kit assembly and light manufacturing are value-added services that have been profitable for logistics companies for decades. And with TaskRabbit, IKEA has acquired an assembly platform that can be used for its goods today, but can ultimately also be applied to the needs of any manufacturer or retailer. Just as Amazon has succeeded at being a fulfillment platform for other sellers, IKEA could be uniquely positioned to become a platform for brick & mortar retailers.  

Walmart

Despite all the changes of recent years, the retail conversation begins and ends in Bentonville. In October Walmart announced it had acquired Brooklyn, NY based Parcel, a last-mile delivery startup focused on the New York City market. The irony here is incredible as those who follow retail, or New York City politics, would know.  Walmart was rebuffed every time it tried to open a New York City retail location, and with Parcel they’re finally “in."

Our Take: As we had discussed in this recent post this a “logistics is the new e-commerce” moment.  As is the case with Amazon, Walmart is embracing technology, innovation and startups to help it win in areas that fall outside their core business but are necessary to integrate with for the future.  

This trend is nicely summarized by Deborah Weinswig, Managing Director at Fung Global Retail & Technology

"We see the future of last-mile logistics as diverse, with online shoppers enjoying an array of options, from same-day in-store collection to low-cost, traditional home delivery to more premium rapid-delivery options. This diversity will also span ownership of the last mile: while we may see more retailer-owned fulfillment networks, such as those owned by Amazon, we are also likely to see rapid-delivery services lean on third-party “gig economy” service providers such as courier firms."

What does this mean for Freight Forwarders?

Now that the retailers have won the “last mile” of logistics, it’s time for them to start focusing on the “first mile": the bulk lots and full containers of merchandise that feed their domestic delivery networks with products from the Far East, Europe, and other sourcing markets.  CoLoadX customers like freight forwarders and NVOCC’s need to update their business practices and technology stacks, internally AND externally, in order to match the speed of logistics that e-commerce companies and retailers so desperately crave.  International shipping and cross-border logistics are fraught with complexity, but then it was once impossible to get goods on a same day basis without actually going to a store.  And look what just happened to that process in the last 30 days!  


Download your free copy of the "Top 20 Global Freight Ports" infographic today.

 

Topics: Commentary, Freight Forwarders, Logistics News, AliBaba, Amazon, WalMart, Retail, Ikea

Written by Fauad Shariff

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