The modern-day consumer lives in a world of instant gratification: they want to be able to choose from a large range of products and they want to be able to get them fast. This is why e-commerce – the trading of products or services, usually via the internet – has become so successful.
As a result, businesses across the globe are jumping on the e-commerce bandwagon. The business model allows companies to be established anywhere there is a good internet connection and a computer-savvy population willing to buy off the internet. What is key in making the business model work is fulfilment.
Signed, sealed, delivered
Take USA eShop, which is based in Columbia, South Carolina. Its model is based on the premise that European shoppers wanting to buy low-cost items from US websites are often put off by high shipping costs. “USA eShop works with the manufacturers to introduce and sell their products across Europe through our own e-commerce sites, such as Wishbox, Amazon's EU sites, and select wholesale accounts,” says John Wilkinson, COO of USA eShop.
USA eShop provides the means to consolidate small volumes of products from multiple US manufacturers and ship them to a fulfilment centre in London. “From there, the products are shipped to consumers at much reduced rates,” says Mr Wilkinson.
The location of distribution and fulfilment centres is a critical consideration for any new e-commerce business, especially as existing online retailers such as Amazon and TaoBoa are constantly cutting their delivery times.
In 2009, Chinese consumer-to-consumer online retailer TaoBoa introduced same-day delivery, meaning that if shoppers place orders by 11am, they can expect delivery by 3pm. The service operates via local motorcycle courier networks. Meanwhile, US-based global online retailer Amazon has unveiled plans for Prime Air, a delivery system that will see the company use small, unmanned aerial vehicles to get packages to customers in 30 minutes or less.
Such trends exacerbate the need for fulfilment centres to be located close to consumer markets. One company to have recognised this need is Australian property firm Goodman Group, which recently opened a 110,000-square-metre facility, the Goodman Chongqing Airport Logistics Park, in China's Chongqing Province. The park comprises eight warehouses and was developed in response to the huge surge in online retailing in the country.
Asian e-commerce sales grew to $615bn in 2014, meaning that it is now twice as big as the US market, according to reports by research firm Internet Retailer. In its 2014 e-commerce index, Unctad listed just one Asian country, South Korea, in its top 10 e-commerce performers, in terms of countries' readiness for business-to-consumer e-commerce, but it recognised the growth taking place in the Asian market. “Among developing and emerging economies, the frontrunners are in east Asia: South Korea, Hong Kong and Singapore,” said Mukhisa Kituyl, Unctad's secretary-general, in the report.
Many companies are eager to tap into this growing market. For instance, in 2014 US-based retailer Wal-Mart announced plans to expand its fulfilment capacity in Japan by investing in e-commerce initiatives for Seiyu GK, a grocery chain and web merchant that it acquired in 2008. The company is also ramping up its operations in the US, with plans to open two 110,000-square-metre fulfilment centres in Bethlehem, Pennsylvania and Atlanta, Georgia in mid-2015. This is being done because, despite the tremendous growth taking place in Asia, the US remains an important market for the e-commerce industry, not only in terms of consumer numbers and revenue generation, but also in terms of innovation.
Seattle-based Amazon already has some 70 fulfilment centres across the US, but has plans to open several more by the end of 2017. This expansion is to accommodate its increasingly popular same-day delivery service, as well as in preparation for the possible launch of its Prime Air network. So what is next for the US's largest online retailer? It recently filed a patent for what it calls 'anticipatory shipping', which packages and ships products before customers have committed to buying them. The future, it seems, is not as unpredictable as many had previously thought.