GUEST COLUMNIST BY Ebenezer Onyeagwu
E-commerce has emerged as a thriving industry following the acceleration of digital transformation as new digital platforms, and evolving consumer preferences have combined to make the internet the biggest marketplace. E-commerce now accounts for a significant component of the business of many of the world’s biggest tech companies, while firms like Amazon and Alibaba are now some of the most popular brands globally. According to a report by Shopify, the Canadian e-commerce company, the share of sales from online purchases is expected to reach 20.8 per cent in 2023 and 23 per cent in 2023, from 17.8 per cent two years ago.
While the success of e-commerce companies is a well-discussed phenomenon, not much is in the mainstream about the role that e-commerce logistics plays in the success story of e-commerce businesses. The average customer who purchases from an online store is likely to be very conversant with the digital platform on which the order is made. The buyer may also be familiar with the customer support platform for handling complaints and queries with their order. But the vast logistics operation involved in delivering the orders happens behind the scenes. Without it, no e-commerce giant will exist.
An analysis of e-commerce businesses and the e-commerce logistics industry highlights the unique interdependence between digital platforms and traditional services as digital transformation continues to shape the creation of new business models. According to a report by Transport Intelligence, the global e-commerce logistics market grew by almost 20 per cent in 2021 and is forecast to reach almost $650 billion in value by 2025. E-commerce logistics operations comprise activities like warehousing, packing, shipping, and delivery, among others. They require significant investment from retailers, who often spend roughly 11 per cent of their turnover on logistics. Shopify notes that e-commerce companies are seeing fast and efficient logistics as a competitive advantage adding that some retailers even report huge risks to their business if their logistics process does not meet customer expectations.
Thus, getting a hang of e-commerce logistics is likely to be one of the most defining indicators for the success of e-commerce in the future as competition in the space intensifies, and customers continue to choose convenience and speed in their shopping experience. Already, many businesses are turning to technology to ensure that they stay ahead of the competition. Emerging technologies like machine learning, artificial intelligence, robotics, augmented reality, and the internet of things (IoT) are poised to transform the automation of e-commerce logistics processes. Earlier this year, Amazon launched a $1 billion venture investment programme, Amazon Industrial Innovation Fund, that will back companies working on technology to increase e-commerce delivery speeds and improve the experience of workers in warehousing and logistics. While it may take some time for innovations to be integrated into everyday business operations, many retail giants consider that investing in e-commerce logistics technologies is the way to give themselves a fighting chance in the future.
Collaboration between e-commerce firms and third-party logistics providers is another trend that will shape the success of e-commerce logistics operations of merchants in the future. The arrangement will allow big online retailers to store, label, and pack their products in specialised third-party distribution hubs strategically situated to ensure the regionalisation of inventory. This will save retailers the hassle of maintaining extensive and expensive logistics operations through fulfilment centres, allowing them to stay nimble and focus on other core e-commerce operations.
•Ebenezer Onyeagwu is the Group Managing Director/CEO of Zenith Bank Plc and Chairman of the Body of Banks’ CEOs in Nigeria.
This opinion was first published in the Zenith Economic Quarterly Vol. 18 No. 4 October 2022, in his column “CEO Insight”.
