DHL is expanding its e-commerce reach
BI Intelligence
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German-based parcel delivery company DHL will invest $137 million through 2020 to build eight fulfillment centers and upgrade two existing warehouses in the US to boost its North American e-commerce capabilities, reported The Wall Street Journal (WSJ).
The investment will be aimed at supporting the growing global cross-border e-commerce market, which DHL expects will reach $1 trillion by 2020. Online vendors in the US are able to stock their merchandise in DHL’s fulfillment centers for quicker international deliveries. DHL currently operates 20 fulfillment centers in North America, with 18 located in the US.
DHL had previously attempted to compete with UPS and FedEx in the US delivery market,but due to heavy losses it's now shifted focus to international shipments. This is an opportune time for DHL to expand its US e-commerce infrastructure, as “it is expected that 1 billion people will shop online and across borders by 2020, with the US being the most popular origin for 25% of consumers worldwide,” noted Charles Brewer, CEO of DHL eCommerce.
This necessitates more fulfillment centers for US merchants. DHL has also made other investments in the US with its $1.3 million DHL Express service center and a $35 million DHL Global Forwarding distribution center, both located in Chicago.
The growing e-commerce cross-border market has led US parcel delivery firms to invest in their global logistics capabilities in order to better serve customers around the world. DHL is not the only parcel delivery company to invest in cross-border solutions in the US. FedEx recently rolled out its new FedEx CrossBorder shipping service to help North American merchants serve online shoppers in 220 foreign countries.
Additionally, the United States Postal Service (USPS) is testing its own cross-border shipping initiative called Global eCommerce Marketplace (GeM) Merchant. The number of e-commerce cross-border transactions is growing steadily, and delivery parcel firms must continue to invest in cross-border shipping solutions in order to reach more customers worldwide.
The parcel delivery industry — a segment of the shipping sector that deals with the transportation of packages to consumers — is booming thanks to e-commerce growth, and players outside the industry want a piece of the pie.
Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on the future of shipping that looks at efforts by Amazon, Alibaba, and Walmart to handle more of their own shipping and concludes that big retailers are well positioned to disrupt the parcel industry.
Here are some of the key points from the report:
- Transportation and logistics could be the next billion dollar opportunity for e-commerce companies. The global shipping market, including ocean, air, and truck freight, is a $2.1 trillion market, according to World Bank, Boeing, and Golden Valley Co.
- There is much at stake for legacy shipping companies, which have seen a boom in parcel delivery as e-commerce spending has risen. Twenty different partners currently share the duties of shipping Amazon's 600 million packages a year, with FedEx, USPS, and UPS moving the most.
- Amazon, Alibaba, and Walmart have so far focused on building out their last-mile delivery and logistics services but are increasingly going after the middle- and first-mile of the shipping chain.
- Amazon has already made major moves across each stage of the shipping journey. It launched same-day delivery service, which it handles through its own fleet of carriers, cutting out any third-party shippers. The company also recently began establishing shipping routes between China and North America.
- Walmart's interest in expanding its transportation and logistics operations is almost purely related to cost-savings. It's begun leasing shipping containers to transport manufactured goods from China and is making greater use of lockers and in-store pickup options to cut down on delivery costs.
- Alibaba has begun leasing containers on ships, similar to Amazon's Dragon Boat initiative. This means that Alibaba Logistics can now facilitate first-mile shipping for third-party merchants on its marketplace.
In full, the report:
- Sizes the market for the shipping industry.
- Explains how the industry operates in broad terms.
- Suggests why major e-commerce retailers should disrupt the space.
- Outlines the shipping initiatives of Amazon, Walmart, and Alibaba.
- Concludes how these moves might impact traditional carriers.
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