E-commerce platforms remain averse to dedicated air capacity amid steadfast growth

With a large share of global e-commerce revenues generated by or via the big global e-tailers and marketplaces, the strategies of major platforms have a disproportionate impact on shaping e-commerce logistics requirements. Our research shows that fourteen platforms account for more than 50% of global e-commerce. Most of these companies have become large buyers of logistics services and airfreight capacity.

Figure 1 provides an overview of the Gross Merchandise Value (GMV) of the platforms included in our analysis. GMV is a measure of scale and consists of the sum of revenue conducted with own retail and revenues achieved by third-party retailers. For platforms that host third-party sellers, the revenue generated by the platform itself — also called net revenues — is usually a fraction of GMV. This number increases depending on the commissions charged by the platform as well as value-added services provided to sellers, such as fulfillment. All major and minor platforms with the exception of eBay have shown double-digit growth in overall sales volumes in 2021. Figure 1: Key Global E-Commerce Platform GMV in 2021

With a total annual active consumer base of more than 1 billion worldwide, Alibaba reported a GMV of $1.2 trillion in 2020, and we expect this number to surpass $1.5 trillion in 2021. The 2021 GMV figure has been estimated since Alibaba’s fiscal year ended March 31, 2022. Alibaba’s GMV includes China retail marketplaces and local consumer services GMV.

In 2021, Amazon sold $600 billion worth of goods — more than double its 2018 sales of $277 billion — with its global GMV up 22% year over year. Most of the growth is attributed to its third-party marketplace, which has been growing faster than Amazon’s first-party sales. Since 2018, Amazon has doubled its fulfillment network and now has more than 1.6 million employees. If this annual growth continues, Amazon will likely reach $1 trillion GMV by 2026.

eBay is the only platform that reported flat GMV growth in 2021, with this number falling 10% during the last quarter of the year. eBay recently updated the definition of GMV to include all paid transactions on its platform, including shipping fees and taxes. In the past, eBay was reporting this figure regardless of whether the purchaser and vendor completed the transaction. This change is a move to align with other e-commerce platforms and will provide higher visibility on payment management on a global scale. Competition from Etsy and other e-commerce shops, its continuous drop in sales, and the number of active buyers have been reflected in the company’s stock, which has also dropped 12% over the last twelve months.

Founded in 2015, Pinduoduo is now the largest online marketplace for agricultural products in China. Its user base has exploded in recent years, and last year it briefly surpassed Alibaba. Pinduoduo has also been focusing its efforts on growing its client base through large sales events, with profitability being a distant second. The company has the potential to become an even more powerful force when it begins to focus on recouping this investment. Nevertheless, the last twelve months have been somehow disappointing as consumer spending in China is waning amid a broad economic slowdown and rigid COVID-19 restrictions. Since early 2021, Chinese regulators have been waging a campaign to rein in the country's enormous and rapidly growing online economy while the share values of listed Chinese tech companies have plummeted. What does this growth mean for airfreight demand? Amazon continues to be the only major platform committed to dedicated air capacity and has seen a rapid expansion of its network in the U.S. and Europe . Mercado Libre is the other platform that continues to invest in the growth of its own logistics, as shown by the recently launched Meli Air fleet of four aircraft — two in Mexico and two in Brazil — flying in its colors. These operations began in 2020 and connect the hub of Queretaro in Mexico with Cancun, Culiacan, La Paz and Merida, and the hub of Sao Paulo in Brazil with Goiania and Recife in the northeastern part of Brazil. Mexico-based Aeronaves TSM will soon start 737 ACMI operations with Mercado Libre . JD is also planning the launch of its own cargo airline with a small number of 737-800 freighters by the end of 2023.

All the others stay committed to ad-hoc capacity. Alibaba’s logistics arm, Cainiao, announced a commercial agreement with Atlas Air to secure a new 747-8F aircraft under a long-term contract to boost capacity between China, the United States and Latin America — specifically Brazil and Chile — with the goal of supporting cross-border e-commerce activity. A large share of cross-border e-commerce also moves on dedicated charter arrangements. In some cases, platforms like Alibaba (Cainiao) appear to be chartering the capacity but in other cases, e-commerce consolidators such as the Hongyuan Group are the ones doing so. Cainiao has also been expanding its cargo network, adding capacity from Malaysia to the United Kingdom using a Malaysia Airlines A350-900 in order to speed up the delivery of parcels. Nevertheless, getting into dedicated airlift capacity is not a trend that has gone viral in the e-commerce business.

E-commerce platforms remain averse to dedicated air capacity amid steadfast growth

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