The eCommerce Frontier: How to Take the Lead in eCommerce

Summary

The discussion, led by McKinsey partners, explores the rapid growth of e-commerce and its impact on logistics. They address the increased complexity in supply chains due to new online categories, the heightened consumer expectations for speed and service, and the economic challenges for logistics providers. Strategies for efficient last-mile delivery, sustainable practices, and innovative solutions in fulfillment and returns are highlighted, emphasizing the need for a balance between cost and quality.

Takeaways

• 📈 E-commerce growth has accelerated due to the COVID-19 pandemic, with volumes expected to double by 2025 compared to pre-pandemic levels.
• 🛒 There has been a significant shift in online purchasing towards categories with previously low online penetration, such as groceries and furniture.
• 📦 The supply chain for e-commerce is becoming more complex due to unique requirements of new product categories, like cold chain for groceries or white glove delivery for furniture.
• 🚚 Consumer expectations for delivery speed continue to rise, with a focus on same-day and instant delivery options.
• 📊 B2B e-commerce is growing rapidly, with a strong preference for seamless online experiences among B2B buyers.
• 🔗 The logistics ecosystem is described as a 'string of pearls,' emphasizing the importance of a tightly integrated operation from digital to physical flows.
• 💡 Logistics providers are under pressure to balance cost and quality, as consumers are less willing to pay for the increasing complexity of shipments.
• 📊 Retailers are focusing on diversification to manage cost pressures, especially in last-mile delivery and fulfillment.
• 🌐 The global contract logistics market is projected to grow significantly, driven by the demand for e-commerce fulfillment.
• 🔄 Returns are a major cost driver in e-commerce, with an increasing return rate and consumer expectations for fast and easy returns processes.
• ♻️ Sustainability in the final mile of delivery is becoming a key focus, with consumers and businesses seeking more environmentally friendly delivery options.

Q & A

What is the role of Prob Gill in the session?

Prob Gill is an associate partner based out of Vancouver and serves as the moderator for the session.

What is Tom Bartman's area of expertise at McKinsey?

Tom Bartman is an associate partner based in Miami and specializes in transportation and logistics, particularly in supply chain support for e-commerce.

What has been the impact of COVID-19 on e-commerce growth?

COVID-19 accelerated the already high growth rate for e-commerce, with consumer spending shifting strongly towards goods versus services, establishing a new baseline for growth.

How are categories like grocery and furniture affecting supply chain complexity?

Categories such as grocery and furniture, which have seen exceptionally fast growth, are introducing more complexity due to requirements like cold chain, bulkiness, and high return rates.

What consumer expectations are placing pressure on logistics providers?

Consumers are increasingly focused on same-day or instant delivery, demanding faster and more efficient logistics services.

How is B2B e-commerce different from B2C in terms of consumer expectations?

B2B e-commerce is influenced by consumers bringing their home-based expectations to the workplace, demanding speed, reliability, and a seamless online experience.

What is the 'string of pearls' concept mentioned in the script?

The 'string of pearls' concept refers to the tightly knit电商物流生态系统, which needs to operate efficiently and reliably, connecting consumers, sellers, and various digital and physical entities.

Why is cost management crucial in e-commerce logistics?

Cost management is crucial because logistics costs for e-commerce shipments are significantly higher compared to brick and mortar, and these costs continue to grow with increasing volumes.

What are the key areas of focus for retailers in managing logistics costs?

Retailers are focusing on last mile delivery and fulfillment to manage costs, looking at diversification of last mile partners and exploring automated solutions for fulfillment.

How is the growth in e-commerce affecting the contract logistics market?

The online warehousing market is expected to grow at a much faster pace than the offline market, with e-commerce and omni-channel related warehousing becoming increasingly important.

What capabilities are most valued when retailers look for a fulfillment provider?

Retailers value proven capabilities, network density, cost efficiency, the ability to manage seasonality, onboarding speed, and experience, and relationships with carriers.