With a new year come newer, faster opportunities for growth. The shipping industry is no exception, with major breakthroughs in technology allowing for the possibility of expedited delivery, higher efficiency, greater accuracy and – most importantly for supply chain logistics – lower costs than ever before.
Here are some of my predictions for what to expect in ecommerce logistics in 2017.
Limited Amazon Prime Air Rollout in a Smaller City
We all saw the video Amazon released of their first-ever Prime Air delivery in Cambridge, England. Obviously, it was more for publicity than anything — an incredibly effective stunt. A recent retail study found that 79% of U.S. consumers would be “very or somewhat likely” to request drone delivery and 73% said they’d pay a $10 surcharge for the added convenience.
Based on that level of expectation, Amazon is probably working feverishly for a rollout. When they launch by the end of this year, it probably won’t be the biggest city. In a similar vein, Google’s fiber optic debuted in Kansas City, Uber launched its driverless service in Pittsburgh, and 7-11 launched its first drone delivery in Reno, NV.
The vast scale and inevitable complexity of drone delivery in a dense urban setting means that it makes sense to do pilots in smaller cities. On-the-ground support will be needed to deal with issues like drones stuck in trees, pet attacks, setting up landing pads and other problems. Navigating Albany instead of New York City would be a sensible toe in the water for Amazon.
Current Federal Aviation Administration regulations prohibit unmanned aerial vehicles from flying beyond pilot line of sight, which is why Amazon chose the UK and its more relaxed drone rules.
Uber-like Freight Brokerage = Ground Delivery Efficiency
Just a few years ago, the accepted reality in logistics was that a trucker delivering goods between Los Angeles and Denver might stop once or twice to load and offload cargo. The empty space and potential shippers along the way who could benefit from forwarding their goods were part of the cost of doing business.
The recent UPS acquisition of truck brokerage firm Freightex and logistics company Coyote are calculated to radically reduce the lost capital of trucks at less than capacity, and to take advantage of loading/offloading opportunities en route. FedEx has made similar acquisitions to streamline its fleet.
In 2017, companies like Coyote have proprietary software that eliminates those old inefficiencies within the fleet. These acquisitions mean the logistics industry can expect to see substantial gains in ground transport. Fuller payloads, better-timed pickups and drop-offs and faster overall delivery should lead to better margins for a costly undertaking.
Skyrocketing Subscriptions Decrease Supply Chain Friction
2016 saw an increase in the number of American shoppers joining subscription services. Studies by Shorr Packaging show that services like Ipsy and Dollar Shave Club have led the charge, with subscriber rates increasing by an unbelievable 1,000+ percent in some cases.
There are many reasons for this wild popularity: getting a surprise package of your favorite consumer items, spending less time shopping, saving on luxury goods like makeup or clothing. While subscription boxes won’t replace traditional a-la-carte ecommerce shopping, their growing popularity will have a positive impact on supply chains.
Since logistics relies heavily on predictability and timing, there’s nothing more favorable to shipping and warehousing companies than knowing months in advance how many orders need to be stored and shipped. The alternative – random bumps in consumer demand, especially in the throes of peak season – causes chaos. Subscription boxes can reduce these violent peaks and troughs, providing more predictability and fewer out-of-stocks and backlogs along with demand-spike headaches.
Omnichannel Fulfillment Will Get More Omnipresent
As the lines between ecommerce and retail blur, omnichannel fulfillment will continue expanding. Businesses have realized “that customers prefer to have the choice of buying online or in store,” writes Mickael Froger for MCM, and this will play out in a variety of ways.
Wildly popular ecommerce brands will make the move to retail – witness the Amazon Go convenience store in Seattle – and create a rich interchange of data and retail marketing. As B2C businesses learn more about customers’ purchase habits, this will streamline everything from marketing budgets to warehouse labor force participation. As with subscription boxes, more accurate sales predictions mean greater fulfillment efficiency. That’s a huge boon to companies that will benefit from smarter logistics, and consumers, who will benefit from lower price pass-alongs.
Major retailers will continue ramping up ecommerce. Kohl’s saw an uptick in retail sales because of a newly-introduced click-and-collect option for online customers, who then bought additional goods during their store pickup. In 2017 retail giants will buttress otherwise faltering store networks by incentivizing online customers to use click-and-collect.
AI Continues to Impact Every Aspect of Ecommerce
The biggest impact on shipping and fulfillment in 2017 will definitely be artificial intelligence. Chatbots are a great example of how AI technology is becoming more widespread and more helpful.
A smarter chatbot might monitor your online buying habits and make a purchase on your behalf when it sees that a product you’ve bought before and reviewed positively goes on sale. For ecommerce companies, chatbots can be employed to assist customers with basic queries such as tracking a shipment. Depending on the query, they might even be able to provide unstructured yet quantifiable data for retargeting campaigns or other marketing purposes.
AI is already in use by many companies to deliver optimized customer experiences. There’s no reason why it won’t be employed to facilitate behind-the-scenes operations of major ecommerce companies.
Jake Rheude is Director of Business Development for Red Stag Fulfillment
This article was originally posted earlier this year and is frequently updated