The Rise of E-Commerce
By Richard McDuffie
There is permeating pressure across the logistics industry today when dealing with the current consumer model, as companies are trying to make choice, speed and availability paramount.
If you look at the Amazon model and what they’ve accomplished in over 10 years and financially in the past three years, it’s impressive—they continue to spend money in research and development and infrastructure in so many areas. If you analyze their financials—particularly the fully-loaded costs of home delivery—you will see they are not making as much there as compared to cloud services.
Our company, Dunavant Logistics, competes on a bulk basis—we’re not a last-mile type of company. We’re delivering to distribution centers, like Amazon and other shippers, but we are not the last-mile deliverer.
However, from a logistics and 3PL perspective, there is still opportunity with companies that are distribution center and hub center focused—they have to deliver product into other plants or distribution centers, whether it’s raw material or finished product.
Those competing with Amazon, and Amazon itself, from a business to consumer perspective still have many issues to be weighed in on from a government perspective (state and federal), such as state tax issues and the financial viability and support of the U.S. Post Office. I’m interested to see how Amazon’s model transpires over the next several years.
Every company has a specific philosophy or strategy around their product type and speed to market. We hear often about speed, choice, transparency, consumers wanting visibility—and that all depends at a high level on whether it is a B2B or B2C model, or even C2C in some cases.
I believe we will continue to see more and more retail distribution centers that may be smaller but closer in proximity to the consumers to meet speed-to-market demand. There is no shortage of opportunities to take advantage of inventory optimization and placement.
On the other hand, returns require a completely different supply chain model to optimize, as returns continue to increase as customers want choice and spend but also the freedom to touch and see it as you would in a retail store. You see it now, when ordering online, there’s a whole reverse logistics process and it’s getting larger as consumers now think, ‘I can I order 10 things and send five back, for free.’
I study consumer demand as a larger part of understanding macro economic trends, and I do believe there will always be consumers who want to hold it, touch it, feel it before they buy. The dollars spent associated with the reverse logistics process is significant and growing, and the process will continue to grow as more and more products are ordered online.
The bottom line is that moving products is an evergreen business; however the modes, demands and expectations are constantly changing. Flexibility is key.
Richard McDuffie is COO of Dunavant Logistics.