IMAGE: Kirsty Pargeter — 123RF

Logistics: the moment of truth has arrived

Enrique Dans
Sep 17, 2017 · 3 min read

The logistics sector is increasingly being driven the giants of electronic commerce as they develop new platforms and channels, allowing them to deal with the shortcomings and problems that have hampered traditional logistics operators.

Souq.com, recently purchased by Amazon, has in turn bought an aggregation and logistics management platform, Wing.ae, to consolidate its same day or next day deliveries in the Middle East, along the lines of Amazon Prime. The enormous success of electronic commerce in the Arab countries is largely due to climatic and cultural factors, but it is not always ideal, with a panorama of traditional suppliers not specially focused on the provision of services to the level that companies need. The arrival in the region, through Souq, of a monster like Amazon, which carries out 43% of all online sales and sends no less than 1.6 million packages a day worldwide, puts huge pressure on traditional logistics operators: no one wants to lose the giant’s business, but without a doubt, this makes it very hard to make a profit.

Another company, Best, backed by Alibaba, is to go public in the United States, hoping to raise 932 million dollars. The company, based in Hangzhou and headed by Johnny Chou, former president of Google in China, joins four other large Chinese operators that have recently floated, three in the Chinese market and another in the North American market, to capture resources to face the demands of immediacy and quality of service imposed by electronic commerce.

The tensions that the development and adoption of ecommerce imposes on traditional logistic operators are being seen in practically all markets: in Spain there have been reports of companies complaining about Amazon’s demands (link in Spanish), and that it may well buy out some players or even create its own logistics service. For electronic commerce companies, logistics is undoubtedly the biggest source of complaints and problems with customers: as volume increases, operators increase the number of shipments per route, forcing their delivery agents to skip shipments, claiming nobody was at home. Meanwhile, Amazon has already experimented with the creation of logistics services in some countries for its Amazon Fresh, intending to ratchet the service up in the United States after the acquisition of Whole Foods, incorporating new warehouses, new channels and possibilities, such as drones.

Air distribution is one of the major logistics innovations, and Amazon intends to position itself as the leader: its service with autonomous drones in the environs of London has been tested with clients and real products since December 2016, and the company has patented far more futuristic methodologies that include hive-like buildings for drones in cities, and even zeppelin-like airborne warehouses. Futuristic or not, everything indicates that the logistics of proximity is going from being a service based on networks of dealers, motorcycles and vans, to a business in which technology plays an increasingly important role, with more and more drones and autonomous vehicles, a situation that could wrong-foot many traditional competitors.

For companies like Amazon or Alibaba, creating their own logistics versus working with external suppliers is a decision that needs to be weighed up carefully: it’s not a simple business, requires large investments and an important level of expertise.

But the problems of depending on the services of a third party is a major incentive, and Amazon would likely repeat what it has done in the United States: first create the service for itself , and then open it to third parties in platform mode. This forces traditional competitors into a dilemma: try to match customer demands for one-hour or same day deliveries in line with the likes of Amazon, or watch as new players, aided by ecommerce giants, take over their business. For the logistics sector, the moment of truth has come.


(En español, aquí)

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade