Driven by e-commerce, 2017’s peak arrived earlier, lasted longer

SF Express’ airline subsidiary, SF Airlines operates the largest domestic express freighter fleet in China.

The growth of e-commerce around peak shopping season is no longer a new story, but 2017’s peak season did raise some eyebrows for getting off to an unusually early start, with sales from 1 November to 22 November up 17.9%, year-over-year in the United States, according to Internet Retailer’s report on the peak shopping season.

Last year the global e-commerce goliaths Alibaba, Amazon, and JD all began offering deals earlier in the year, which prompted other online/offline retailers to follow suit. In the United States, around 30% of online retail during the month of November was from Amazon, but other retailers – most notably Target – also managed to capture healthy shares of the online shopping market.

In China, a duopoly continues to dominate the e-commerce market. Last year on the “11.11” shopping holiday, Alibaba reported the number of orders across its platforms rose 23%, to 812 million, boosting gross mechandise volume (GMV) 39% higher than the same day in 2016, to $US 25.3 billion. The number-two retailer in terms of GMV, (and number-one in terms of revenue) Beijing-based also fared well, with GMV across its platform up by more than 50%, to US$19.1 billion for the eleven-day period beginning on 1 November.

Not only is e-commerce growing in China, the kinds of goods bought is changing, and boosting demand for both express and general air cargo shipments. In addition to the many high-end goods which were transported via domestic airfreight, JD .com reported that in 2017, 11.11 sales included more than 20,000 tonnes of fresh products, including 2 million hairy crabs, and 500,000 black tiger shrimp – many of which were imported via airfreight. And shortly after 11.11, SF Express Airlines, which operates China’s largest freighter fleet, acquired two 747-400Fs, which it plans to deploy on cross-border e-commerce missions.

Following 11.11, peak e-commerce demand shifts from China to Europe and North America. In the United States, online sales accounted for about 20.2% of overall retail sales between Thanksgiving and Cyber Monday, up from 18.4% in 2016. American consumers spent a record US$5 billion through online channels during Black Friday, amounting to a 16.9% increase over the prior year, according to statistics released by Adobe Digital insights. On Cyber Monday, Adobe estimated online sales reached US$6.59 billion, an increase of 16.8% over 2016. For the first time, nearly one-third of these transactions, some $2 billion worth, were completed through mobile devices.

But just what does this surge in sales mean for fulfillment and last-mile delivery? During the holiday shopping season, volumes moving through fulfillment centers are about six times higher than at any other time of year, but consumer expectations for speedy fulfillment remain high, regardless. For many retailers and last-mile logistics providers, this meant hiring in advance to staff fulfillment and customer service centers, investing in technology for things like order and shipping status tracking and, in some cases, boosting the number of fulfillment centers.

The freighter fleets of nearly every carrier were fully deployed from 11.11 through Christmas. Lufthansa Cargo even brought an MD-11F back into service, and operated six charter flights for Deutsche Post between Frankfurt and New York to ensure on time delivery of e-commerce parcels. Alexis von Hoensbroech, chief product and sales officer at Lufthansa Cargo said the carrier had never before “organized so much additional space on such short notice.”

On the shipper side, fulfillment services struggled to keep up with the shopping surge in the days after Thanksgiving. UPS fell behind in deliveries across its United States network, with ShipMatrix estimating that about 94.4% of the carrier’s ground deliveries were on time between 26 November and 2 December. FedEx Ground maintained a slightly better record, at 96%, while the U.S. Postal Service’s Parcel Select service, for last-mile delivery, maintained a 99% on-time record.

With a solid finish to 2017, there is reason for continued optimism moving in 2018. In the coming weeks, we should begin to get an idea of what the new year may bring.

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