eCommerce Logistics Industry Booms During Pandemic

By Thomas Price Sunday, October 25, 2020

Much has changed in the business world in 2020. With the struggles to maintain sales and the race to create an online retail presence due to the ongoing COVID-19 pandemic, many other industries connected with these two factors have also been affected. One of the largest areas of impact for these changes in 2020 has been logistics. More specifically, ecommerce logistics. With more people staying home and more physical storefronts being shut down, the demand for products being delivered to the shopper directly has skyrocketed, causing a major explosion of growth within the industry. That growth has led to some major evaluations of what logistics and specifically, ecommerce logistics will look like in the coming years.

How the Industry Currently Looks

Digital sales have skyrocketed in recent months, and with it, the logistics to get all of the ordered packages delivered have as well. In the most recent quarter, the United States saw an incredible $211.5 billion in ecommerce sales alone. To put that number in perspective, this marks a 31.8% rise in online sales from the previous quarter in 2020. In comparison to the same quarter in 2019, the rise is even more impressive, with ecommerce sales increasing by 44.5% from the previous year. When comprehending the scope of this in comparison to all retail sales, ecommerce retail currently represents 16.1% of all retail sales in the United States. Expanding to North America, online ordering is up an astounding 80% since January of 2020.

At a global level, ecommerce sales are predicted to reach $4.2 trillion by the end of the year. 3rd party logistics in the United States as a whole is already worth $225.1 billion. In 2020, the entire industry grew by 2.4%, which annualized growth from the previous five years being at around 5.2%.

When looking at ecommerce sales in terms of their scope in logistics, the sector is responsible for 9.9% of all logistics costs in the United States. Major logistics players include UPS, FedEx, and of course, Amazon. Amazon is by far the biggest name in 3rd party logistics, boasting a massive 60% total market share in United States ecommerce logistics. Amazon spent $17 billion on delivery infrastructure alone last year. In 2019, ecommerce logistics generated $43.4 billion in annual revenues. Revenues are expected to increase in 2020 by a hearty 28%.

Expected Growth Based on Current Trends

From 2015 to 2019, ecommerce sales in the United States grew at a compound annual growth rate of 14.6%. Based on this trend, analysts believe that growth within the industry is likely to continue at a similar rate moving forward into the future. However, with that being the case, eccommerce logistics costs will continue to increase in size as well. Because of ecommerce sales exploding at such a rapid rate, the compound annual growth rate for United States ecommerce logistics through 2020 is at an even higher 19.9%.

3rd party logistics as a whole is already worth a tremendous amount of money, especially as the ecommerce logistics continues to grow as a cornerstone of the industry. In 2019, the global 3rd party logistics market was worth $1 trillion. That number is only expected to continue to grow in the coming years with estimates for the market in 2024 coming in at around $1.3 trillion. The expansion of the market goes even further with 3rd party logistics being estimated to be worth around $1.8 trillion in 2026. With this growth both in the ecommerce sector and in 3rd party logistics as a whole, many companies have been hiring more workers to handle the increase in traffic as well as prepare for the future. Multiple logistics and ecommerce firms have made a push for more workers with companies like Radial and GEODIS in Americas hiring 2,600 new workers in order to meet demand. Trends like this have become more commonplace in 2020 with Amazon hiring a whopping 100,000 new workers to help meet current demands as well. The majority of these new employees would be working somewhere in the supply chain of their own logistics department, specifically the 100 new warehouse and operations sites that have opened in the last few months of the year.

Final Conclusions

3rd party logistics is going to expand even more than it already has. Trillions of dollars in global sales fuel this expansion. The growth can be largely attributed to the massive rise in ecommerce sales over the last few years, and especially in 2020, where due to closures of physical stores and consumers staying home since the pandemic, this rise has been exacerbated to an entirely new level. As a result of these factors and the estimated continuation of current trends moving forward, logistics should become even larger than it already is.

About the Author

Headshot of Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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