CFA 2016: Is the airfreight industry ignoring a trillion-dollar market? [VIDEO]

HONG KONG – Airfreight clearly has a major role in servicing e-commerce fueled cross-border traffic in the future, but the conclusion of panelists on “The E-commerce Explosion and Air Freight” session at Cargo Facts Asia 2016 was that individual players risk being squeezed out of this market unless they are prepared to make major changes.

Steven Li, director of strategic partnerships, at Alibaba-backed e-commerce logistics giant Cainiao, called upon the industry to take a greater interest in the 3 trillion-dollar e-commerce market. He pointed out that a third of e-commerce transactions were now cross-border, and that this cross-border segment was seeing staggering compound annual growth – far outpacing even robust domestic e-commerce growth.

However, Li was blunt in adding that at present, the airfreight industry is not sufficiently prepared to meet the demands of the cross-border market. “With E-commerce, buyers and sellers need a quick response, flexible services and more visibility of the total process from pickup to delivery.” He challenged airlines to further integrate their IT systems with other logistics providers and with e-commerce marketplaces, and also called for new solutions to the headache caused by having to send dangerous goods (lithium batteries, powders and liquids, for example) by sea when the market was demanding the speed of airfreight.

The other panelists all agreed, and all stressed the need for broader collaboration, IT enhancements, and redefined value propositions which better fit shipper and customer needs in the extremely complicated world of cross-border e-commerce. And regarding customer needs, Rich Corrado, Chief operating office of ATSG (which will be operating Amazon’s air network in the US), pointed out that “with e-commerce, transportation becomes part of the buying process.”

This simple realization lies at the crossroads of many of themes brought up at this year’s Cargo Facts Asia Symposium—from the types of aircraft and carriers, and the associated logistics models which will service future airfreight demand, to the opportunities for collaboration across the supply chain and service enhancements which could make airfreight more relevant in servicing this very transportation-centric style of commerce moving forward.   

Stan Wraight, founder and Senior Executive Director of Strategic Aviation Services, was optimistic about the opportunity provided by the emergence of hundreds of thousands of small and medium sized sellers vying for access on the global market, but stressed that many traditionally minded airlines are letting this business slip away because of their unwillingness to change.

Raj Subramiam, FedEx’s EVP Global Marketing & Communications, noted that, from the consumer’s perspective, cross-border commerce was anything but “friction free,” as often times the customer was left with large gaps in shipping and cost information. It was to reduce this friction, and tap into the international e-commerce business, that led his company to develop its Fedex’s CrossBorder platform, which fills in these information voids by integrating the price, taxes, duty, currency exchange, and shipping information into a “single buying process, so the buyer knows exactly what they are paying.”

Competing platforms are certainly on the rise, Li vividly described the challenge Chinese consumers once faced when trying to purchase goods from U.S. e-tailers, and the solutions Cainiao has provided by integrating big data from its payment, merchant, and logistics arms into a single portal called “e-pass,” as shown in the video.

Looking forward, the panelists were bullish on future e-commerce growth in the United States, China and other developing markets such as India, Russia and Southeast Asia, especially as the industry develops new solutions to current bottlenecks.

Li described Russia, China’s largest cross-border e-commerce trading partner as a potential site for an “e-commerce explosion.” Cainiao alone oversees more than 500,000 packages moving into Russia every day. He added, however, that no matter how fast Cainiao gets a package to the Russian border, it can take more than 60 days for the Russian customer to receiver that package, as the country is plagued with enormous logistics service gaps.

But, as Stan Wraight was quick to point out, the airfreight industry should view this as a golden opportunity.