The global e-commerce logistics market grew 27.3% in 2020, according to the latest data from Transport Intelligence, reflecting a surge in e-commerce demand, exacerbated by the coronavirus pandemic. With a market share of 41.6% globally, Asia Pacific represents the world’s largest market, with China leading the way.
2020 growth
The Asia Pacific e-commerce logistics market grew 22% in 2020. Valued at around €153b, it is the largest regional market, accounting for 41.6% of the global total. In 2020, China’s logistics market grew 20.1% in 2020 to around €112.8b. According to eMarketer, online retail sales accounted for 44.8% of total retail sales in 2020, with growth bolstered by the coronavirus pandemic.
Japan experienced growth of 18.6% in 2020, making it Asia Pacific’s second-largest e-commerce logistics market. Despite already being a relatively mature market, given internet penetration rates close to 100%, e-commerce has reaped the benefits of the pandemic. Online retailers have benefitted from urban density, tech-savvy consumers, and high-tech network infrastructure. Competition remains intense within the market with Amazon Japan, Yahoo Japan and Rakuten accounting for more than 50% of the country’s yearly e-commerce revenue.
South Korea represented the third largest market for e-commerce logistics in the region. Despite experiencing 26.7% growth in 2020, the market is set to only expand by 7.2% over the next 5 years (2020-2025). With already high levels of internet penetration and smartphone adoption, this means less headroom to improve in areas that typically promote e-commerce growth.
Other markets that showed significant growth include India, expanding 36.1%, as consumer habits moved online brought about by the coronavirus and lockdown measures. Rising smartphone penetration, the launch of 4G networks and increasing consumer wealth have also boosted the market in 2020.
Australia expanded by 35.3% in 2020 on the back of a shift in consumer behaviour towards online shopping. According to Australia Post, almost 9 million households made an online purchase last year, up 10% from 2019. The pandemic also prompted a shift in the product categories purchased online. To support future growth, the company invested in its air network, including the addition of a dedicated Gold Coast freighter.
Taiwan, meanwhile, was the slowest growing market in the region, experiencing 16.1% expansion in 2020. Despite initiatives by the government to boost e-commerce growth through subsidies, language barriers and high shipping costs have stunted the country’s cross-border e-commerce potential, according to Ti.
Retail logistics
The impact of the Covid-19 pandemic on various retail product categories has been anything but universal with retail sectors experiencing varying demand. For instance, demand during the first wave of lockdowns was so great, many logistics providers and retailers struggled to cope.
Transport Intelligence suggests that changes in the retail sector imply parallel changes in the sector’s logistics industry. The traditional model of ‘trucks & sheds’ looks old fashioned, characteristic of traditional retailing. Right now Amazon’s logistics operations are setting the benchmark for e-retailing in the future, with its large, capitalised networks of fulfilment hubs and cross-docks with high levels of automation, and even higher levels of focus on data. Companies following this lead have reversed the trend towards outsourcing logistics and making logistics a core-competency. Ti notes that the traditional contract logistics industry looks to have a far more limited future in many parts of the retailing sector.
Whilst consumer demand is unlikely to change its patterns, the ability of e-retailers to respond to demand as a result of superior information management at the tactical level implies more precise inventory management. Ti says order-to-delivery cycles can be compressed and inventory positioned and priced more effectively. The implications for logistics sectors, such as airfreight and sea freight, are likely to be significant.
Consumer electronics
Booming demand for televisions, smartphones, and wearable devices drove the consumer electronic market in 2020, reversing the slump seen in previous years. The sudden revival was primarily due to stay-at-home orders, which left many scrambling for office and home equipment to supplement new remote work or online school setups.
However, electronics supply chains were amongst the earliest to be impacted by the coronavirus as factories shut down for a prolonged period over the Chinese New Year. At the same time as supply chain issues, the logistics industry was critically disrupted. Bottlenecks, created by cessation of passenger flights, blanking of sailings and disruption of domestic transport within China, has forced many high-tech shippers to use air charters. For instance, Sony had to commission Delta’s 747s to ship PlayStation 5 consoles to the US to meet launch demand.
Airlines such as IAG, Lufthansa, Delta and United Airlines, which relied on travel prior to the pandemic, had to use passenger aircraft for charter flights, whilst other airlines with freighter services increased their frequency and range of destinations.
‘Chinaflight’
Ti suggests that the electronics sector’s supply chain geography is changing. For more than 20 years, the sector has been dependent on China for the assembly of products. Most chip fabrication plants in China, however, are owned by Taiwanese, Korean or Japanese, whilst state-owned plants produced more commodified products. But, as Ti notes, all this is changing with some ‘not entirely successful’ attempts by China to make its own chip designs. “SOEs have expanded into other component areas, supplying both major global corporations, notably Apple, and Chinese brands, resulting in a more China focussed supply chain and consequently logistics provision,” Ti added.
In parallel there is a so-called strong ‘Chinaflight’ pioneered by Japanese and South Korean electronics brands who, over the last five years, have adopted a policy of moving assembly operations out of China. For instance, Sony and Samsung have shifted production from their home markets of Japan and South Korea to new locations like Thailand and Vietnam.
In terms of the global logistics market, Ti suggests this could result in growth in Southeast Asian ports, shipping lanes and airfreight operations; growth in logistics property and infrastructure; and significant diminution of the opportunities for non-Chinese logistic players in the main land.
Asia Pacific forecast
With its fearless forecast, Transport Intelligence expects moderate growth of 8.6% for Asia Pacific’s e-commerce logistics market over the next five years. This rate could go as low as 4.9% or as high as 12%, depending on whether logistics costs as a percentage of sales were to increase or decrease over this time frame, Ti noted.
China’s e-commerce logistics market is expected to grow at 12% CAGR over the next 5 years, extending its position as the world’s largest e-commerce logistics market, ahead of the US. It is expected to grow above Asia Pacific and the global growth rate, accounting for 76.1% of the Asia Pacific market and 35.7% of the global market by 2025.
Other developing markets also remain full of promise and will continue to fuel e-commerce growth over the next five years with many boasting double figure growth rates. Vietnam and Malaysia are set to grow at CAGRs of 19.9% and 14.4%, respectively, or higher. However, e-commerce is still a ‘relatively new’ phenomenon in these markets, and increased internet access, more secure online payments, improved customer interfaces and improved logistics processes will be needed to make this happen.
