The year of the pandemic will be remembered for countless global events. However, one outcome that certainly no one expected was an 18.4% increase in online shopping, the greatest acceleration to date. With current and expected growth trends in online shopping, coupled with endless technological developments and new payment methods, eCommerce wants anyone to be able to buy anything from anywhere in the world. So far, it has been achieved at its most extent. Consumers all over the world have adapted their lifestyles and shopping habits as a result, converting online shopping from an option to THE option.
In 2020, the world’s top-three performers among Amazon Prime countries were Canada, the United States, and Great Britain with Year-on-Year growth rates of 41.4%, 37.1%, and 31.6% respectively. When looking at China’s online retail growth in the past five years, Alibaba drove this by cultivating a culture of online shopping as a lifestyle instead of a necessity. This culture change gave growth figures larger than both Western Continents combined.
Increased activity may sound good for shippers, but not everything is rosy. Overloaded supply and demand have caused serious supply chain disruptions. For example, the US is the number one eCommerce buyer. However, it has few ports adapted to be a gateway for inbound trade with Asia, the number one eCommerce supplier. Those gateway ports, such as Long Beach and Oakland, have vessels congested and waiting in line to unload their cargo for up to two weeks. This is unprecedented and especially challenging for retailers who were disrupted in productivity and last mile transportation.
Many companies have reported these setbacks. Nautilus Inc. (which makes fitness machines like Bowflex) said on a call this week that logistics issues delayed the launch of its new connected treadmills. Shoemaker Wolverine World Wide Inc. said $20 million in sales would shift from the first to the second quarter because of the backlogs. Steve Madden Ltd. said supply chain disruptions cut the footwear company’s first-quarter sales expectation by $30 million.
But for the shipping industry, the situation was quite different. At the beginning of 2020, many sailings were withdrawn from shipping lanes based on pessimistic forecasts of the market. However, after the pandemic situation in China was effectively controlled, freight volume recovered rapidly, and the main trans-pacific freights rose by more than 200% year-on-year. More importantly, this happened without giving certainty to secured space or transit times. When seeing this situation and the urge to deliver goods, shippers also opted for airfreight solutions which usually are up to ten times more expensive than sea freight.
With limited flights operating, prices were over the moon and shippers paid these costs to get their goods delivered, even at a loss of profit. At the end of the day, keeping customers’ fidelity was priceless.
So what can we expect from 2021?
We don’t know for sure what will happen, but as vaccination is taking place rapidly in the US, it is quite possible that we will see some consumers ready to return to offline shopping in the fall and winter. Yet, this might not undo the eCommerce advancements for everyday purchases. These transient transactions require little thought, let alone a trip to the store. But on the other hand, offline shopping for browsing and leisure purchases could gain ground later in the year. This return is subject to not only government regulations but also consumers’ comfort levels. Some find convenience in ordering their furniture or new mobile phone from the comfort of their home, but others still value the tangible experience. So given the uncertainty, what needs to adapt in the shipping industry?
Eco Friendly Shipping
Studies have shown that the shipping industry could contribute approximately 17% of all global CO2 emissions by 2050. Shipping has historically been a significant driver of carbon emissions, and with increased shipping as a result of the eCommerce boom, these effects will be compounded. The environmental effects have become a big concern to carriers and shippers.
Greener operations trended pre-pandemic, and now that the impact of excess emissions has been seen more clearly, we expect to see more sustainability strategies in supply chain such as power usage, electrification, and eco-friendly fuels. In addition to these, software sits paramount in the path towards efficiency.
If you want to know more about emissions technology and implementation, read on in our Blogward post: Greenhouse Gas Emissions and the Shipping Industry: Introducing our free CO2 calculator.
Allocations and freight rates
For the entire shipping industry, the most intuitive impact of the epidemic on the market is the continuous surge in freight rates. Due to COVID-19 and general uncertainty, liners have been hesitant to build up more shipping vessels in order to normalize the flow. Given this, we can tell that freight rates will stay volatile if demand doesn’t slow down, medical supplies stay prioritized, and consumption needs continue to change.
While we cannot ensure if/when freight rates will stabilize, we can be sure that a digital wave in the shipping industry will ease uncertainty in space management and schedules. Should shippers be subject to blank sailings or other consequences, they need to know alternatives for getting their cargo to destination. For this, having visibility into their capacity and seeing options for schedules would help.
To check schedules for any route, try our freebie that aggregates schedules from a multitude of carriers.
The commercial world is a place full of surprises. We have learned to adapt faster than ever and to never give up! Companies have shown great courage in changing their mindsets, trying new technologies, and advancing these culturally with their own staff. The world has seen the benefits of this through aftershock of the eCommerce boom. Logistics will always sit centrally in global trade. We must continue to implement strategies that bring stability to turbulent times.
Sources used in this article:
Source 1 - Smart Insights: https://www.smartinsights.com/digital-marketing-strategy/online-retail-sales-growth/
Source 2 - Shippy Pro: https://www.get.shippypro.com/wp-content/uploads/2021/02/2021_ecommerce_outlook.pdf?utm_campaign=fourth-report&utm_medium=confirmation-email-landing-nativa-en&utm_source=autopilot
Source 3 - Business of Fashion: https://www.businessoffashion.com/news/retail/us-retailers-see-millions-in-sales-delays-amid-shipping-logjam
Logward is a Hamburg & Bangalore based logistics technology company.
We build software, move containers, and change mindsets.
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