Amazon’s huge increase in capital value in the past week is an indicator of scale of growth in e-retailing. That said, the detail in the financial numbers suggests an equivocal situation, with profit numbers on the e-retailing side still very low, ‘International’ operations still loss-making, and profits in North America for the quarter having halved.
The number that so many have been mesmerised by is the sales growth. In North America that was 35%, although that was flattered by the acquisition of Whole Foods, whilst in ‘International’ it was 29%. Amazon is now approaching selling US$100bn worth of goods through its North American e-retail business although this does include media products as well. In contrast, Walmart sold approximately US$300bn in its North American businesses and that included items such as fuel sales.
The logical conclusion is that e-retailing is growing very rapidly.
That has implications for business involved in e-retail logistics. Companies such as FedEx, UPS and DPDHL are already driven by e-commerce activity and looking at the Amazon numbers it appears that the trend will not lessen in the near future. Indeed, if things carry on like this then US express providers will become dominated by e-retail activities.
This is reflected in the level and type of investment that the likes of FedEx are engaged in. For example, it has begun to open a series of very large distribution centres across the United States. The most recent has been in Baltimore this week, whilst last month it opened a facility in Texas which will be expanded to 1.3m sq ft.
These facilities are within it’s ‘FedEx Ground’ network, with the company increasingly developing its in-house ‘last mile’ capabilities utilising the capabilities of these large regional hubs. Whilst this is not wholly new, it is a significant change in a company that has been so focussed on air freight. Of course, it may be that ground and last-mile operations are not as profitable as air freight and having a large customer such as Amazon may also be a major change in its business model.
Source: Transport Intelligence, October 31, 2017
Author: Thomas Cullen
