Third Party Logistics

Value of Third Party Logistics Providers Rises Alongside Ecommerce

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Third party logistics has always had a symbiotic relationship with ecommerce: As more consumers order items online, the industry surges to keep up with demand. Conversely, in times when global commerce and international trade stumbles, so too does the logistics market.

With this kind of direct correlation between markets, third party logistics providers may be heartened by positive news emerging from prominent retail trade groups. As we go into the 2016 holiday season, the Wall Street Journal reports recent projections made by The National Retail Federation and the International Council of Shopping Centers showing higher holiday spending than previous years.

“We continue to see positive consumer spending intentions ahead of the holiday season,” Tom McGee, the ICSC’s chief executive, told the Wall Street Journal. In particular, ecommerce is projected to see a significant boost: The NRF says that spending could increase anywhere from 7 percent to 10 percent, totalling over $117 billion.

Year-Round Increased Ecommerce Spending

Even more positive for logistics providers, this surge in online spending isn’t isolated to the holidays. While seasonal spending surges are unavoidable, lumpy sales can make it difficult for third party logistics providers to make useful operational projections, limiting the ability to plan for spending and hiring.

Luckily, this boost in spending has been observed throughout the summer and Q1 of 2016, as noted by research by comScore Inc. ComScore noted that ecommerce on desktops grew 19 percent in April year over year, followed by a 15.5 percent year over year increase in May.

“Consumers seem to be back, increasing their buying of products and not just services, such as vacations, restaurants, etc.,” Gian Fulgoni, chairman emeritus at comScore, told Internet Retailer. “”The convenience of online buying is exploding … Through April, it looks like consumer spending is strengthening across the board. Consumers are opening their wallets again to products.”

Shipping and Logistics Expansion, Driven by Third Parties

In response to the booming ecommerce market, the major online retailers are pumping more money into building up supply chain infrastructure. Retailers like Amazon have expanded their efforts by employing up to 20 different third party logistics providers to fulfill its nearly 600 million yearly orders. This impact isn’t simply domestic or land-based: Business Insider reports that Asian retail giant Alibaba has begun leasing containers on ships, effectively mitigating some of the losses related to the slowdown of container shipping.

Much of the boon for third party providers is in the reduction of last mile shipping costs. Even as retailers make subtle moves to build up in-house shipping solutions, this final stretch before a package arrives at the home of a consumer has consistently been proven to be cheaper to outsource to legacy providers with existing infrastructure in place.

Combined with an increased interest by retailers to build out their last-mile delivery and logistics services, the global shipping market — including ocean, air and truck freight — has hit $2.1 trillion in 2016. Driven by ever growing demand in ecommerce, third party providers can breathe easily and prepare themselves for better days ahead.

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