Almost 200 years after the first freight wagons transported goods by rail, the country is in the midst of a new revolution in transportation and commerce fueled by the pandemic – online shopping delivery.
Millions of people relied on e-commerce to get everything from toilet paper to groceries, puzzles and sweatpants during the pandemic. Online retail sales increased 32% from last year, a number that was not expected until 2022, according to digital research firm eMarketer.
“If the pandemic continued or a vaccine was distributed immediately, it wouldn’t really change anything, because this was a train already in motion,” said Rich Thompson, who leads the commercial real estate company’s global supply chain and logistics team JLL. “It’s just accelerating now.”
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The increase in online shopping has led Amazon to add delivery trucks and limit inventory. Target has increased the number of employees dedicated to packaging products purchased online and doing mandatory overtime in some warehouses. Walmart has deployed popup distribution centers to help deliver online orders during the Christmas shopping season.
It all adds up to a historic expansion of distribution networks that rivals the 19th century railroad boom, Thompson said.
“Package deliveries are similar to the creation of the American rail system,” he said. “These alternative logistics providers are trying to create a private delivery network across the country – because that is what we need.”
After decades of consolidation and labor abuses, railway companies split into competing entities in the early 20th century, when the federal government enacted antitrust legislation and created the Federal Trade Commission to enforce laws that promoted competition across the industry .
Today’s online shopping delivery networks are not railway lines. But the country’s largest e-commerce companies are snapping up smaller, left and right delivery companies. FedEx finalized the acquisition of Shoprunner this month to expand its online distribution network. Target announced this year that it would acquire Deliv, a same-day delivery startup. Last month, Walmart announced the acquisition of Joyrun, a last-mile point-to-point delivery service.
President-elect Joe Biden and vice-president-elect Kamala Harris – both voiced about the potential dangers of a monopoly among major technology companies – address the White House in January, raising questions about how the next government will dispute the industry giants like Amazon.
“In all the other revolutions we’ve had technologically, it took anywhere from six years to a generation for a government to come in and level the playing field again,” Biden told The New York Times in January. “Suddenly, do you remember the Luddites destroying machines in the Midlands? That was their response when the culture was changing. The same thing with television. The same thing with radio. The same thing, but this is gigantic. And it’s a government responsibility to ensure that there is no abuse. “
Amazon, Walmart and Target, whose share prices have soared in the past nine months, have benefited greatly because people stayed at home during the pandemic. But brick and mortar retailing was taken by surprise. To compete with the heavyweights, smaller retail companies turned to “spot market” companies that offer short-term delivery services at much higher prices, said Zac Rogers, assistant professor of operations and chain management Colorado State University supply chain.
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“Many of the minors are saying that we have to eat the cost, because it is difficult to pass the costs on to customers because many people are struggling,” he said. “You have these big guys and you need to keep up with the service level and competitive prices of these giants who have giant devices – and that is a challenge.”
As sales and stock prices soared for Target, Walmart and Amazon, small physical businesses were overwhelmed by the pandemic. Small business sales were down 28% at the end of the summer, down 9 points from May, said Christopher Carlozzi, state director of the Massachusetts National Federation of Independent Businesses.
Rogers said: “Large retailers that have their own fleets and their own delivery capacity at the locations, they have done well. It is the more specialized people who depend on other logistics companies that are really going through a difficult time because the supply has exceeded the demand for nine months. “