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Innovation Wins

I am an avid 49ers fan, the 5-time Superbowl winning 49ers, to be exact. Now I believe their success has been a result of the marriage of offensive innovation and strong defensive commitment – In other words, changing with the times when needed that is how I am seeing the logistics and supply chain business today. I am heading to Home Delivery World in 2 weeks, and I am hoping to see insightful presentations, meet with peers, and visit some of the booths.

First and foremost are companies embracing new approaches, technologies, and partnerships? I have noticed that many of the new companies that entered the logistics market are keen on challenging the status quo. As someone at one of the companies that are creating a new way to deliver small packages across the country, I want to see how interested companies are truly challenging the established logistics players. In my experience, many want an alternative to UPS and FedEx, but it is difficult for many to try new approaches – it is a very risk-averse industry.

Another factor I hope to gain insights into my company and find very important is the customer journey. I find it amazing that even with all the technology in the front office cart abandonment rate of about 70%. Now one of the top 3 reasons for customers leaving their carts are the fees that are charged as part of the checkout process and shipping is one of them. So, how are marketing, sales, and logistics working together to ensure a simple seamless customer experience?

The speed of shipments truly fascinates me because of the “Amazon effect.” All companies are trying to combat Amazon – many of the start-up companies that are driven by innovation are helping to combat that effect. We all know customer want their products as fast as possible and want to match 2-day delivery. Does 2-day delivery the standard we need to meet to make customers happy? And now that Amazon is testing 1-day delivery is the pressure going to be ramped up for all to move even faster? I want to know what my peers think at Home Delivery World.

Innovation is important whether the San Francisco 49ers or a jeans apparel company. Events are important it does provide us a venue to discuss items openly, learn from our peers and see what is going to be possible. And as I am excited to see Chris Grey present “Alternative Delivery Networks” to disrupt and benefit the bottom line in the home delivery world – Chris is the George Kittle of SmartKargo!

Disruptive Innovation is a Necessity

I am heading to “Home Delivery World” in about a month and am excited to go to a show that is manically focused on logistics and supply chain. I have years of working with e-commerce, pharma, & manufacturing organizations, that require small parcel delivery and I can never think of a more exciting time in the space. Now when I go to an event I am there to learn and gain insight to connect with my partners and customers!

Now I am very intrigued by the decision to resurrect brick & mortar presence though most large retailers have seen massive spikes in e-commerce purchases. Considering Shopify is laying off workers because they believed that the e-commerce growth would continue, are companies seeing a long-term pullback in e-commerce? Or just a short-term abatement? I am looking to my logistics experts at the show to share their ideas.

Inflation is the issue so many companies are now learning to deal with daily- choosing to raise prices or eat margin will always be a difficult decision. So, I further wonder, are large retailers handling the constant increase in shipping costs without passing the charge off to customers? Many platforms can rate shop, which eases the pain of cost increases. Nonetheless, all carriers are raising costs within weeks, if not days of each other meaning there is no escaping it for the shippers. I never forget that the price of something will always reflect the sum of its cost inputs.

“Necessity is the mother of invention.” This is an old proverb we take for granted but it applies today more than ever. We have inflation, pull forward in e-commerce demand, supply chain issues, workforce concerns, delivery limitations, tremendous growth in surcharges and so many more worries. Innovation is not only needed but paramount for the logistics area. What are new companies doing in technology, last mile, and alternative delivery networks? Moreover, are retailers going to be more innovative? As an example, American Eagle created Air Terra, forcing carriers to start bringing transformation and value to the table. What innovation and value are large retailers and B2B players looking for in today’s market?

I am attending this event with open ears and an open mind. I know some of our partners like Fillogic are revolutionary and technically savvy and will be at the event as well. . We know we are innovative and challenging the norms in the small package delivery space. It is time for a break in tradition and a change of direction. We are a new method…a new way.. that will forever change the face of logistics.

 

Psyched about Home Delivery World

I’ve been working for 10 years in Logistics and much of that time was at UPS. I am always amazed at how much innovation is being done in this space – That is why I am so excited about the upcoming Home Delivery World. The depth of the event looks like it will handle all components of the logistics and supply chain industry. I am even more excited since we will be speaking and have a booth on the busy expo floor.

I do have a few specific items I am truly interested in as they impact my world with all the e-commerce, pharma, electronics, and other companies I interact with daily. The easiest is how are UPS and FedEx dealing with their declining delivery performance and how are the market and new entrants taking advantage of this opportunity?

Another piece of information I am interested in learning from the presenters and many of the logistics professionals at the event is accessorial costs and their impact on their business. I look at these fees like the caveats that are voiced over pharma commercials on television or online. They always say something like – “It may cure your migraine headache, but your nose may turn green.” as an extreme example. But think about the list of fees customers need to be very aware of every day – Their shipping prices initially look very reasonable until the customer factors in fuel surcharges, weekend delivery, delivery area surcharge and so, so, many more.

We just had the prime day. And every time there is a prime day each company looks to evaluate their loyalty program, their shipping fees, and the overall “Amazon effect.” Considering Amazon is now the 3rd largest logistics service in the US, I want to understand how logistics leaders are dealing with their internal teams to compete with the 800-lb. gorilla.

I missed events during the pandemic -I get to have direct, fun conversations with professionals with all kinds of experience. More importantly, I learn and ensure I look at this great industry and the innovations that are being built and evolved.

Competing with E-commerce Delivery Giants is NOW Possible!

Is there an e-commerce company that doesn’t keep a close eye on Amazon? E-commerce organizations are always looking for a peak day, as well as information about their logistics and technical skills. Although many online shops do not have physical stores, almost every online retailer has a warehouse. It doesn’t matter what you sell, from batteries to clothing, motor parts to pharmaceuticals – if a consumer knows a local source that can always supply fast, they’ll come back when they’re ready to shop again.

Amazon: The Top Achievers in the Logistic Industry 

According to the eMarketer article, “the next 14 biggest digital retailers will make up just 31%” of the US e-commerce sales. Only roughly 30% of all other e-commerce businesses in the United States are left. Companies in the logistics industry are watching Amazon to see what they will do next. It is anticipated that

Amazon will account for about 40% of all US online sales

What is impressive is Amazon is now 3rd behind USPS and UPS and ahead of FedEx for US Parcel volume in the United States – and they continue to invest in the logistic of their business. Furthermore, Amazon partners with other airlines to fly Amazon parcels for themselves and their partners, increasing e-commerce competition.

Best Ways to Compete with Amazon

When you sell on your own website and ship from your warehouse or even a retail store, how can you compete with Amazon?

 

5 Ways to compete with Amazon

 

  • Immediate Delivery: Provide the same level of immediate delivery, which for many online businesses today means next day delivery, but Amazon Prime Now is increasingly giving same-day delivery.
  • Brand Promises: So, if you run an e-commerce company you may be thinking it’s a long task to compete. True, but competing and winning against Amazon requires focusing on your brand and its promises. Make your customers truly champion you and your brand.
  • Innovation: E-commerce businesses typically employ people who are fairly tech-savvy. They use their smartphones, tablets, computers, and even kiosks to make transactions. Make the internet infrastructure as smooth and intelligent as possible so that customers can make purchases and payments quickly.
  • Speedy Shipping: Ensure your shopping and buying processes are simple and fast. Additionally, ensure that you have detailed shipping policies and procedures that clients can simply locate and comprehend. I read and follow Neil Patel, and in his blog about competing with Amazon, he had a brilliant suggestion concerning shipping. His concept of “doing something radical with shipping” was brilliant.
  • Lower Shipping Charges: Because shipping charges vary greatly among carriers, it is advantageous for business owners to shop around for the best deal. So, to swiftly discover the cheapest choice without delaying order fulfillment, use an optimized platform or application.

SmartKargo:  Offering a Delivery Approach Comparable to Amazon

At SmartKargo, innovation is in our DNA, and we believe in being innovative when it comes to shipping services for e-commerce businesses. We can assist e-commerce enterprises in the India, Mexico & United States in becoming more like Amazon Prime. We work with local airlines to deliver e-commerce products in one to two days – it’s easy for us because our airline partners are already flying to all of the country’s major population centres. This means you can compete with Amazon Prime’s 2-day shipping model, allowing you to focus on providing a terrific online experience for your important customers. It’s a fantastic deal that gives you airspeed at ground rates.

ecommerce logistics

It may appear difficult to compete with Amazon, but you can do so and succeed. Make sure you concentrate on your core consumers and provide a basic and straightforward customer experience. Take risks where you can, and remember that the customer journey does not end with the purchase  e-commerce  delivery can be a crucial distinction for your customers.

One Weak Link

I am a marketer, and we, the marketers, especially in the B2B world, are focused on new customers and retaining and growing current customers. We focus on the customer journey in every aspect, as each part is critical if you want to delight the customer and ensure repeat business. This means for e-commerce companies, delighting the customer cannot stop until the package reaches the customer’s door at the right time, is secured, and is in great condition.

The focus on the entire e-commerce logistics process should be part of your customer communication strategy. We all know the logistics process starts at the purchase from the shopping cart to the first-mile pickup to middle-mile transportation and finally, to last-mile delivery until it is ultimately in your customers’ hands. There may be short warehousing stops, but that is the basic equation.

Now your brand needs to be prevalent throughout the process which is why communication is important to reinforce the brand. You need to generate brand trust. It all starts at the purchase where your company should already have your delivery partner integrated with your e-commerce platform. Most e-commerce companies have an omnichannel approach to communicating, so this should continue. Your company should be communicating via multiple channels like email, SMS, Mobile apps, WhatsApp, voice, and the web. Your customers will want to pick and choose the channels of communication they see fit, so you will want to ensure you have or are working with solutions that enable these options.

To continue building trust in your e-commerce brand you must provide transparency about the package’s journey to the customer. Partners that cannot do this seamlessly really do put your brand in danger. Customers want to know where the package is from first to the last mile at all times. This provides them with the convenience they require and expect. Real-time updates are the foundation of the e-commerce company and their customer, these real-time updates, driven by scans of the e-commerce packages, are the bedrock to great communications and insights for the customer.

Some additional components for the delivery equation are the ability to schedule, adjust drop-offs at the delivery address, contactless delivery, and as well a functionality called geofencing (location triggers) that generates a countdown to delivery communications. All of these should be driven across the entire journey regardless of your mode of transportation whether all ground or with air middle mile constant communication ensures a great customer journey. But anyone misstep in the linkages of the process will ruin a great customer experience.

Sky’s the Limit

We are at the end of Q1 in 2022, and I have been thinking about Air Cargo. I was at the Air Cargo Americas event a few weeks back. I had the opportunity to participate in the “trends to Watch” panel discussion with Amar More, Michael Zahra, Ed de Reyes, and Emir Pineda as the moderator. While at the show, I spoke to peers, customers, and prospects; as a result, I can say that the future of Air Cargo should be Meteoric.

First and foremost, being at this event in person was delightful. Nothing is like meeting face to face with my peers and learning about their challenges, ideas, and successes. Much of the conversation was about the global economy getting better and the next steps coming out of the pandemic. We all discussed the tragedy in Ukraine and the impacts on the supply chain worldwide because of this unfortunate event.

We heard one of our phenomenal partners, Amerijet, had their CEO speak about: the expansion of his fleet and that more will be coming. On my panel, the future of drones will provide air cargo with additional innovative air transportation. And one thing was consistent; all the players in the air cargo space are looking to advance in innovation and efficiency using technology. Air Senegal was there, and we discussed their approach and use of our platform – They are leading innovation in cargo.

One topic talked about the most in Miami was e-Commerce. There were discussions on the stage, at the dinner meetings, and even in the hotel lobby. It’s easy to see why the e-commerce market is huge, growing fast, and expected to be a $6 trillion market by 2025. This phenomenon leads to a vast opportunity for airlines that embrace e-commerce air cargo transport. Many of our peers wanted to understand the best way to take advantage of our platform to drive e-commerce from the cart to the door on our platforms like some of our customers: Azul, Wideroe, Rivo, and Volaris, do today. The air cargo market will drive at a 4% CAGR, which the industry will continue to experience for many years to come.

It was great to see my peers again, learn about the new opportunities in the industry, and meet with our great partners like Amerijet, Air Senegal, Copa, and so many others. However, there is no doubt anyone working in the air cargo industry is in a great market, immersed in innovation, and one that is taking off.

A four-letter word

I have been working in logistics for some time now, and I know the first topic of any sales call will always be “How much?” – Cost is paramount for e-commerce shipping. That’s why I joined SmartKargo. They help e-commerce shipping costs go low while ensuring speed is there for the customers.

Now there are so many issues that are going on that distress shipping costs. We are finally getting past the pandemic issues that forced so many of us to rely on e-commerce, but we are all watching for other mutations. We now have the tragedy of Ukraine affecting oil prices and subsequently disturbing gas prices. There is the “Great Resignation” which is causing employee costs to rise to attract drivers, warehouse workers, and logistic specialists.  Moreover, there is the issue of overall inflation which is a result of the Fed’s response to the pandemic and the other issues listed above.

What is the impact on costs for e-commerce delivery? Higher costs and climbing fast – FedEx and UPS had already announced 5%- 6% rate hikes for this year. Surcharges are on the rise, and they will put a big hit on e-commerce companies’ shipping. Surcharges could hit as high as 30% for shippers as economics, geopolitics, and pandemic issues move. The reality of these costs is that they will be passed onto their customers.  Nevertheless, many platforms, e-commerce companies, and retailers have announced increases in shipping costs from eBay to Etsy and of course Amazon.

Now, I know the Head of Logistics for e-commerce companies doesn’t care how the package gets to their customer – Just if it’s delivered for the right cost, safely, when the customer expects it! That is what is unique about SmartKargo, they have an interesting solution for the middle mile. They utilize the existing airline’s belly space to ship e-commerce shipments but what is unique is the airlines are already heading to the destination in the lane because the passengers are heading that way. For greater distances, it becomes very economically feasible even in a rising surcharge environment. So, finally, a positive impact on cost.

Costs are always first in my conversations, but there are innovative solutions that will help e-commerce shippers to have options to attack rising costs and ensure their customers are delighted. Cost does not need to be a four-letter word we avoid.

Delivery can be luxurious

The luxury market is exploding this year and is expected to reach the 2019 sales levels. According to Bain “over the next four years, with the personal luxury goods market reverting to annual growth rates between 6% and 8% until 2025.” Although coming off a loose base of 2020 due to the pandemic growth has returned. Additionally, the USA and China showed were the marketing with the largest growth rates for 2021. However, will we just go back to the 2019 levels, or has the luxury market changed.

The pandemic reduced luxury purchases – Luxury furnishings were the only part of the market that grew because of all the time we were spending at home. Many of the luxury brands were very reticent to sell online. It did not mesh with their brand image and the in-person concierge service that many of the brands tries to foster. Many of these companies are changing faster than expected according to Deloitte. But they are changing.

Expansion into the e-commerce channel was inevitable for the brands that were dragging their feet to move into the e-commerce channel because of the pandemic. But there is also the rise of the Gen Z segments and the addition of the Gen Alpha.  In the Deloitte report,  Gen Alpha (those born since 2010) will consist of over two billion consumers and have a key impact on luxury brands and their growth. Traditional large luxury brands have an advantage over the new and smaller brands to change and adapt new technologies even is many of them were late to digitalization.

Many of the luxury brands will look to adopt technologies that will enhance and be in line with the brand and its promise. Utilizing video for cosmetics or accessories like handbags and jewelry is already being adopted. Extending the brands into social and apps and partnerships with other brands will continue to expand. But the metaverse is even more appealing to many of the brands. They can extend their brand to the virtual world – Many brands have announced their exploration of the metaverse, but we will see where it develops.

A key to luxury brands’ success is the same as non-luxury brands. Keep your customers delighted and that includes getting the e-commerce packages into the hands of your customers as fast as you can for the right price. Given the margins that many of the luxury brands generate they can take advantage of unique delivery experiences to enhance the customer experience.

Supply Chain Issues Continue

We know of the supply chain disruptions and the impact they have on the economy. We see grocery stores with bare shelves, inflation rising with scarce goods and even impacts on payment disputes among trading partners. At the same time, we see economies around the globe opening up and hitting growth numbers not seen in decades. For instance, the US saw a  booming economy with a growth rate of 5.7% for 2021 –  but will we see an end to the supply chain issues in 2022 or even in 2023?

Let us be honest, Covid will not be going away. As countries roll-out vaccinations to their population, you will see more countries roll back mask mandates and allow economies to get even stronger. However, the effect of all that positive news is more stress on already fragile supply chains. More people out and about traveling, shopping and dining out mean more consumer demand. 2022 will be a year where things will improve slightly at the end of the year but the supply chain disruptions will move into 2023. And we cannot forget that we have no idea whether there will be another Covid variant that may have an impact. This undoubtedly leads to uncertainty, especially in 2022.

Ports continue to suffer from delays. For some ports, like the Port of Long Beach, there can be a waiting time as long as 6 weeks. These delays further intensify the supply chain issue. Interestingly, this has led to some retailers beginning to hoard and use excess warehousing capacity. Again, this is a short-term issue but it further demonstrates the reality of current supply chain issues.

Of course, all of this has exacerbated inflation. Costs have rocketed for every mode of transportation in the supply chain. According to Bloomberg, there was an increase in trucking cost of 18.3%, a rise of 29% in ocean freight costs as of January of last year, and the cost of shipping by rail had the biggest growth in 12 months ever. Finally, inflation, according to Bloomberg, was the “highest in a decade.”

All of the existing economic factors, combined with other external issues, continue to support air cargo growth. However, supply chain disruptions were slowing growth because of labor shortages, quarantined employees, and shortages in warehousing at some airports. Moreover, the issues with processing delays because of the end of the year activities further drove cost increases for air shipping. Given the current conditions, these costs will likely be passed onto their customers.

We will continue to keep an eye on the supply chain issues and the impact on air cargo, but it’s very unlikely we will see significant improvements in 2022 – which means 2023 will be even more interesting.

Zoned Out

Sticking with a Superbowl theme I want to talk about zones, not end zones, but ground delivery zones. UPS, USPS, and FedEx each have their respective zone maps, and there is a direct correlation between zone and price, “How much to ship to zone 8?”  The next correlation is time, “How long will it take to reach zone 8?”  This factor directly impacts customer experience and by extension sales and consumer loyalty.

In the current industry state, all retailers are programmed to operate within the constraints of the zone models dictated by the carriers.  The available solutions to address these constraints include setting up multiple distribution centers or using warehouse and fulfillment partners.  These solutions can be costly and complex to implement but do help retailers optimize shipping costs and enhance customer experience.

At the 2022 NRF and Manifest tradeshows, I was able to view a huge variety of services, technologies, and people trying to change this approach. According to the Wall Street Journal, “Supply-chain technology startups raised $24.3 billion in venture funding in the first three quarters of 2021” We all know retailers and manufacturers want cheaper and faster, with greater transparency. So, my biggest question is, how do we start?

When I joined SmartKargo in October of 2021 I wrote a post about how excited I was to join the team.  Since then my excitement has grown exponentially.  When we power the e-commerce delivery engines of our partners like Volaris and Indigo, we disrupt the status quo. By empowering airlines to transport e-commerce packages on their airplanes and existing flights, we can provide retailers with an innovative solution. We can get a package from New York City to Los Angeles much faster than moving a ground package from zone 2 to zone 8 for far, far, far greater value.

For an innovative retailer, they can truly differentiate their delivery as part of their brand by moving their product further distances at greater speed and exceeding the expectations of their customer. And do it while getting far more value – because the airplane is already heading in that direction, in some cases, 3-4 times a day, this allows us to offer a cost-competitive with a ground rate.

Looking at innovative solutions like SmartKargo can help your bottom line and enhance your customer experience. You just need to worry a little less about the zones and think about faster time, greater distance, and higher value –all of which we need a little bit more of today.

 

Air Transportation Optimism Prospers

There is truly a reason to be optimistic – In case you had not seen UPS had a great quarter.

They beat expectations and beat FedEx and UPS with 97% on time deliveries over the holidays. The one thing I took away is, there are still great opportunities in the logistics market. Whether you are an air cargo company, airline, or e-commerce delivery – the opportunity is great, and the window is now.

There are still supply chain issues as the globe navigates Omicron and the pandemic. And we will continue to see these issues throughout 2022. We will see divergent changes in the globe. China has been in lockdown to stop the spread of Covid. Other Countries are beginning to move forward and dropping pandemic safety measures like Sweden. This will further open the opportunity for air travel as we get back to pre-pandemic travel levels. This will open further opportunities for airlines and extend into e-commerce specific revenue.

Air cargo is benefiting from the continuing supply chain issues.  The challenges at many of the global ports provide an opportunity for Air cargo companies to take advantage of the congestion and Omicron supply chain disruptions.  According to the International Air Transport Association (IATA), demand for air cargo rose by 7.9% in 2021 (compared to 2019) and is on track to grow by another 13.2% during the coming year.

We will see global e-commerce sales reach $5 trillion in 2022 and $6 trillion by 2024. And countries like Mexico, India, and Brazil are seeing significant growth rates of over 20%. This is an organic opportunity in many of these countries. Airlines do not need to worry about affecting their current partnerships, utilizing their excess space in the bellies of planes can drive a new revenue stream by using e-commerce delivery.

All of us in airlines and air cargo should all be optimistic. We see logistics providers generating great returns and utilizing technology to make the companies more profitable. Countries will open from the pandemic throughout the year and begin to look at air travel for family visits and vacations. The supply chain disruptions will continue to provide opportunities for air cargo and e-commerce. Although countries are opening, they will be opening at a different rate will means air transportation may be the best option in 2022.

The Need for Speed

I am a movie fan, and when I heard that the next Top Gun is coming out, I was reminded of the scene with one of the film’s most famous quotes, “I feel the need for speed, the need for speed.” Now, this sentiment is completely relevant to today’s e-commerce customers. E-commerce companies are in a constant balancing act. The e-commerce market is huge, growing fast, and is expected to be a $6 trillion market by 2025. Retailers want to ensure they are paying the lowest cost to get a package from point A to point B, while their customers want ASAP service, As-soon-as-Possible. Current consumer expectations for delivery are next day or at the absolute minimum, two days for delivery, even with known constraints of ground transportation in many countries.

Given the growth and adoption of e-commerce and the speed of change due to Covid across the globe, the expectations of e-commerce customers are to get their packages fast. It is becoming the norm across the globe, with expectations growing fast in countries like Mexico, Canada, and Brazil. Moreover, e-commerce is growing far faster in other countries, compared to the US. According to eMarketer, India, Brazil, Russia, Argentina, and Mexico all grew over 20% in retail e-commerce sales in 2021. And these countries will continue their double-digit sales growth.

However, many of these countries are vast lands and, unlike the US and Western Europe, do not have well-established ground transportation networks. In addition, many countries have terrain that makes ground delivery difficult in certain geographical areas. This creates limitations for the e-commerce company, and more importantly, extends these limitations to your customer. As a result, many companies choose air transport – considered a pricey option for many retailers. And recent studies have shown that many customers are not willing to pay extra for a faster delivery option. So, are you left with giving your business to the ‘Amazons’ of the world with their own logistics and global contracts with carriers like DHL, FedEx, etc.?

This is where new partners in e-commerce shipping and delivery such as Azul, Wideroe, Indigo, Volaris, and Air Canada can help. These well-known passenger air carriers can deliver at great distances. because they are heading there every day with scheduled service. And SmartKargo powers its e-commerce solutions with advanced technology that streamlines the shipment journey from the online transaction to the end customer. As an example, Indigo already has flights to and from Mumbai Guwahati and they can easily deliver e-commerce packages to and from the area. Since Guwahati is a difficult terrain to navigate, air transport provides a natural advantage. All of the partners mentioned have the air advantage and can provide next-day air delivery, at near-ground rates. These partners are experts in air travel and have the security and the innovative technology to ensure your package gets there at the right time and at the right price, all to the delight of your customer.

Air Cargo Strong growth in 2022

Air Cargo was the hero in many ways in 2021. It was able to deliver Covid vaccines globally and provide food for those countries in need, while also ensuring that e-commerce shipments made it to their destination – even while other modes were mired in bottlenecks. The airline industry was adaptable and continued to evolve in 2021 to meet the needs of commerce during a world health crisis. 2022 should be even better for the Air Cargo industry.

Overall, worldwide air cargo traffic is expected to be approximately 69.3 million metric tons in 2022. This growth is fueled by the expectation of robust e-commerce and more planes in the air this year. Moreover, airlines will continue to utilize the passenger-to-freighter (PTF) model as a continuing trend to generate additional revenue, at least until the EASA and FAA deadline for the preighter usage ends in July.

The global supply chain bottleneck will continue into 2022. We still have issues with cargo ships and containers which weigh heavily on global commerce. This is a great opportunity for air cargo to promote and provide additional capacity at a premium price in the first half of 2022. The second half of 2022 will see an abatement in the bottleneck as manufacturing increases, inflation eases and people come back into the workforce.

The Omicron Covid mutation is front of mind with most industries. Unfortunately, it is highly contagious, and it will spike after the holidays. It has already impacted air travel; however, with milder symptoms. If we do not see any major mutations, it is expected to be a short-term issue allowing air travel to continue to move toward 2019 levels. This is something I know we all have our fingers crossed for in 2022.

The pandemic forced or accelerated changes to the Cargo industry that were already moving, but at a slow pace. The digital transformation of airlines has hastened as well as the adoption of consistent standards for the cargo industry. This is key as the air cargo industry continues to shift to a view focused on the rewards of e-commerce shipping and delivery – from a view centered on purely containerized and palletized freight.

The opportunity ahead for air cargo is tremendous. There will be rate and volume increases in standard cargo as well as e-commerce packages. 2022 will be a year where passenger airlines will continue to increase flights, as many of us want to get away to travel the world again. Those extra flights are opportunities for airlines looking to continue to grow their volumes and their cargo revenues every year.

Taking E-Commerce to the Skies

E-Commerce requires a different way of thinking about air cargo. Yet, while a change in mindset is never the easiest thing to come by in our industry, there really is no better time than now for airlines and air cargo carriers to start playing a significant role in e-commerce transport.

On Tuesday, November 16, I was fortunate to moderate a panel at the Dubai Airshow on the state of e-commerce as it relates to the ever-evolving air cargo industry. I was joined on the stage by Teddy Zebitz, CEO of Saudia Cargo, and Abhishek Shah, Co-Founder, and CEO of RSA National. The insights provided by these two gentlemen were invaluable, and they offered the audience with essential perspectives for industry experts and leaders considering e-commerce air cargo for the first time.

One of the highlights of our discussion was the astounding rates at which e-commerce continues to grow. It is anticipated that between January 2019 and December 2021, there will be close to a 45.8% increase in e-commerce as a percentage of all global retail sales.

While some of this is a natural outcome of the global pandemic and some imposed shifts in consumer behavior, we are seeing compelling trends indicating that the migration to e-commerce is permanent and will be resilient far beyond the initial impacts of the pandemic.

In our conversation, we explored the many facets of e-commerce and air cargo, particularly how it can lead to significant revenue across the value chain. We discussed how collaboration and data must go hand-in-hand and how critical it is for airlines to examine their approach with that of air cargo. Moreover, we see how businesses may be approaching e-commerce via their own business, partnerships, or others.

With the need for millions of e-commerce packages to be transported every day, airlines are poised to reimagine air cargo with the right technology. The demand is at an all-time peak right now, and airlines have the upper hand when it comes to getting e-commerce packages from destination to destination quickly and efficiently.

We all agreed that with the right technology, data sharing, and collaboration, airlines would capitalize on this tremendous global opportunity.

Observations – The ALTA Airline Leaders Forum

Earlier this week, I attended the 2021 ALTA Airlines Leaders Forum in Bogotá, Columbia. Our company was pleased to be a Prime Sponsor of this premier Latin American airline event. Over the three-day event, I met with key leaders from over 50 Latin American airlines, ALTA, IATA, the financial services industry, and had the privilege to meet and listen to the President of Columbia, Mr. Iván Duque.

One of our successful clients, Azul Brazilian Airlines, was represented by their exemplary CEO, John Rogerdson. Mr. Rogerdson was on a panel that discussed the role of air cargo during the global pandemic. This panel, moderated by IATA’s Peter Cerda, VP Americas, consisted of Mr. Rogerdson, Andrés Bianchi, CEO LATAM Cargo; Gabriel Oliva, CEO Cargo & Courier, Avianca; and Andreea Pal, CEO Fraport. Mr. Rogerdson and his peers reflected upon the changes in infrastructure, public policies, connectivity, security, and logistics over the past 23 months since the earliest days of the pandemic. The insights of this panel were representative of our experience across the board with other clients of SmartKargo.

As discussed at the ALTA Airlines Leaders Forum, air cargo has played an integral role during the pandemic. Air cargo is critical for speedy shipments of necessary medical supplies like vaccines and personal protective equipment (PPE). Airlines have the singular ability to transport cargo across long distances same-day—something desperately needed for temperature-sensitive vaccines and other medicines.

Finding ROI through Air Cargo + E-Commerce

In essence, the changes and progress made in air cargo over the past nearly two years are leading indicators for exciting developments forecast across the industry for the next 3-5 years. There is substantial revenue potential for airlines in the air cargo space from not only vaccine and PPE distribution but also e-commerce as consumers turn more and more to online shopping.

From personal experience here at SmartKargo, we also know that the pandemic has been a massive boon for retailers across Latin America but also in the delivery of e-commerce products that needed to be delivered quickly to people who had to stay home more often. This overall shift in consumer behavior is reflected in a surge of e-commerce growth for Latin America. In some countries, the growth in online eCommerce has reached and surpassed ~70% last year!

Latin American E-Commerce Surge

According to Americas Market Intelligence, e-commerce growth throughout Latin America is expected to be in an impressive range between 21% growth and 42% growth by 2024. Brazil, home of our client Azul Brazilian Airlines, is expected to see a 30% growth in e-commerce by 2024 and Peru, a staggering 42% growth rate. The adoption rate of mobile devices across the region continues to propel e-commerce across the region. AMI predicts that 75% of all e-commerce purchases will be made via mobile device by 2024 in Latin America. Even better for airlines is that 14% of all e-commerce transactions made in Latin America will be cross-border. Our airline clients like Azul Brazilian Airlines have demonstrated that e-commerce is a promising path forward for the air cargo space, particularly in a high-growth market like Latin America.

It was a pleasure being a part of the 2021 ALTA Airlines Leaders Forum in Bogotá, Columbia. To all of my industry colleagues present at the conference, it was great to discuss the future of airlines in Latin America and, particularly, the exciting times ahead for air cargo and logistics with e-commerce.

 

 

How Do We Anticipate the Future of Air Cargo?

While Q4 will bring unique challenges to the air cargo industry due to ongoing issues with the global supply chain, we remain confident that the strong growth we’ve seen over the past two years will only continue in the coming years. August 2021 numbers showed promising growth of global demand over pre-pandemic August 2019 numbers. Global demand for air cargo is up 7.7% measured in cargo tonne-kilometers (CTKs) which is 3% higher than the long-term average growth rate of 4.7%.

In a few weeks, our team will be in Dubai for the Dubai Airshow discussing the future of air cargo, and I will be highlighting SmartKargo’s significant learnings and points of view in this space. My presentation will examine how airlines can devise new strategies to adapt to the future of cargo by figuring out their role as they manage the supply chain and focusing on the things that make them most successful and profitable.

There has never been a more critical time to consider investing in a technology partner in the air cargo space. To prepare for tomorrow’s demands, airlines will need to establish means to get ahead. We maintain that to do that, airlines will need to embrace cutting-edge technology, enabling them to create new business models that are forward-looking and anticipatory. In essence, leverage technology to enforce what they want to do to grow revenue and make the most of the organic global growth, we’ve seen over the past 24 months.

And with that, airlines are now able to do one of several things with their air cargo business: keep their existing model, own part of the logistics supply chain, outsource the supply chain entirely, or conversely, own 100% of the supply chain. All can be made available to today’s airline. Airlines should not feel completely bound to their old way of operating with cargo and e-commerce. Depending on which model they choose, airlines will be able to decide how much control they want over their supply chain as they adapt to the future of air cargo. And with those decisions a corresponding revenue.

What we have seen with our partners is that there are a few key models that airlines can follow to generate critically important revenue from air cargo right now: palletized cargo, a combination of palletized and e-commerce cargo, and, most profitably, fully implemented e-commerce cargo. There is an incredible opportunity in the air for airlines who embrace e-commerce air cargo transport. Our team estimates that global airlines’ annual potential e-commerce revenue is upwards of $648.3 billion alone.

If you are searching for higher ROI with your air cargo, we suggest looking at e-commerce. The average package is smaller (2-4 kilograms) and is more profitable on a per kilogram basis than purely palletized cargo. E-Commerce packages can fit into the underutilized belly space of most narrow-body and wide-body passenger planes, and retailers can take advantage of an airline’s pre-existing flights and fleet.

While we don’t profess to have every answer of what will happen in the next few years of air cargo, one thing is certain. There is room for e-commerce, and for airlines that choose to embrace owning more of the supply chain and optimizing the trends just described, ROI will follow.

Chaos the Fuel of Innovation

Disruption causes chaos and chaos is what logistics is in today. Some may say chaos is too extreme term, but it is the right term. We see container ships waiting 4 weeks plus to dock and a shortage in those same containers. We are seeing restrictions on e-commerce package shipments around the world and rising costs. E-commerce is in double digit growth across the globe. We all know much of this is a result of the pandemic, but it did not trigger these, it simply accelerated the changes in the market.

Where there is chaos there is great opportunity. There are VC firms that are now focusing only on logistics investments and more on the way. The overall supply chain VC investment topped $50 Billion in 2020 and is on track to exceed that number in 2021. These innovative companies are looking to disrupt the logistics market and drive revenue for airlines, ground transportation, shipping containers and a variety of new logistics services.

So, what does a person do who wants to join in the innovation and disruption; join SmartKargo.  Many of my colleagues were surprised at my decision to leave a company that I had been a part of for 18 years. UPS is 114 years old and a leader in what it does. It has processes and viewpoints that will continue to capitalize on that expertise and the future will look very similar to the past. I realized that I had done what I could do at UPS and that remaining, did not promise to actively anticipate in innovation and disruption in the logistics area. I was looking for something innovative and visionary, and SmartKargo is a leading cloud provider of logistics solutions that extend markets and enhance revenue growth for global airlines and ecommerce companies.

Global e-commerce sales accelerate from an estimated $5 trillion sales globally this year to a projected $6.4 trillion in 2024. This is the key for me to join SmartKargo – We utilize the existing space in airlines planes to ship e-commerce packages from cart to the door. This market is exploding and when I saw the pioneering solution, I knew this was the place for me. When we see companies like Azul and what they have been able to accomplish with the SmartKargo solution and transforming into a leading cargo company in Brazil. There are so many more companies in India, Canada, Norway, and the US that are driving more revenues from e-commerce than they ever envisioned.

My decision to leave my career of 18 years involved significant risk. But I wasn’t happy with the status quo and knew I would not achieve my personal goals if I remained. The only way to get where I wanted was to do something different, to try a new way, a different way. That’s where the industry is today.  If you don’t adapt and seek out new and innovative ways of achieving your goals, you may get left behind. I am on the right track but if you doubt me I would argue that when Sunday morning news programs like GPS on CNN begin show news on logistics and supply chain chaos it is a great time to join a company that is helping airlines and ground shippers increase their revenue and drive innovation.

It’s Time to Capitalize on E-Commerce

The Dubai Air Show is coming up in a few weeks, and on November 16th, I will be moderating an exciting panel entitled “How to Capitalize on E-Commerce.” Panelists featured are Mohsen Ahmad, the CEO of Logistics for Dubai South; Abhishek Shah, Co-Founder and CEO of RSA National; and Marc Houalla, Executive Director, Paris-Charles de Gaulle Airport Managing Director, Groupe ADP. SmartKargo has been at the forefront of helping airlines figure out how to capitalize on the impressive e-commerce surge over the past few years. We know this panel will undoubtedly provide informative insights into how innovative approaches to air cargo can change the face of e-commerce delivery.

From our experience at SmartKargo, the explosive e-commerce growth we’ve seen over the past two years is both global and organic, and its spike came from the most unusual and unfortunate of sources: the global pandemic. It goes without saying that COVID-19 has impacted the entire world, and it has changed the way people view commerce transactions and engage with retailers.

The pandemic has driven a dramatic change in consumer behavior with respect to e-commerce. More than ever before, early 2020 prompted a stark need for consumers to get products into their homes and workplaces more safely—which almost always translated to much less use of brick-and-mortar retail stores. Despite more retailers re-opening their physical stores in 2021, the rise of e-commerce continues, and the opportunity for airlines to ship e-commerce packages has never been better. Here is a fact we like to share often: e-commerce growth sales are projected to grow globally at a CAGR of 6.4%, from an estimated $5 trillion this year to a projected $6.4 trillion by 2025.

We know that for airlines to capitalize on this impressive CAGR, they will have to think differently about their passenger-to-cargo relationships. With passenger revenue still underperforming relative to 2019 pre-pandemic levels, airlines need to create additional revenue. The profitability of e-commerce packages is a significant component of not only offsetting but increasing revenue. On a per-kilogram basis, e-commerce air cargo is by far the most profitable type of air cargo. By increasing air cargo through e-commerce package delivery (averaging between 2-4 kilograms each package), airlines can increase revenue now, when it’s needed the most.

Right now, as we start the fourth quarter, we need to think differently about the future. We need to think of air cargo as a demand-pull to get the most out of organic growth. Airlines already have a great deal of information about their passengers. Passenger information is rich in data points, and it will inform an airline’s foray into e-commerce. Here’s our message to our airline partners: your passengers are also e-commerce buyers. You already know their behaviors in one area in which you specialize. E-Commerce air cargo is simply a fantastic extension of that body of knowledge.

I am looking forward to our panel with these three industry experts as we discuss these and other opportunities in the exciting world of e-commerce. We will update our readers after the event to share highlights to partners and supporters who cannot attend the Dubai AirShow event. In the meantime, we hope that these exciting trends help you to consider breaking with the norm. There is much innovation happening right now in our space, and the time to act is now.

Cargo: The Unspoken Hero of the Air

From November 14-18, 2021, SmartKargo’s CEO Milind Tavshikar and I will be attending the Dubai Airshow with the key leadership team members. We will be joining industry leaders from across the world as we contemplate and anticipate the future of air cargo. We are thrilled to be a part of this vital air cargo and global air traffic management event.

In a preview of what we’ll be discussing, we will highlight all the remarkable developments in technology in this space. I’ll be leading a panel on how to capitalize on e-commerce through the innovative use of air cargo with representatives from Dubai South, RSA National, and Group ADP. Milind will be speaking on various topics, including ways to adapt to the future of cargo and build a resilient cargo ecosystem.

Air Cargo Continues its Growth Trajectory Despite Pandemic

According to IATA, the July 2021 global air cargo demand was up 8.6% relative to 2019 as measured in cargo tonne-kilometers (CTKs). They also assert that current economic conditions support air cargo growth. Willie Walsh, IATA’s Director General, stated, “July was another solid month for global air cargo demand. Economic Conditions indicate that the strong growth trend will continue into the peak year-end demand period.”

Here at SmartKargo, we solidly believe the future of air cargo has incredible upside potential, and e-commerce parcel delivery on both narrow-body and wide-body planes will be a great source of currently untapped revenue for airlines worldwide. Pre-pandemic, there were approximately 38.9 million total global flights across domestic and international airlines. Due to the pandemic, the number of flights significantly decreased. However, we anticipate that with the acceleration of vaccinated passengers going back to air travel in 2022 and a substantial rise in e-commerce, those numbers will slowly continue their hastening back to pre-pandemic levels.

E-Commerce Revenue Potential by the Numbers

Because airlines can use existing fleets, current flight patterns, and already established security and warehousing, airlines are poised to tap into this great source of recurring revenue that will add to both top and bottom-line revenue.

Using our estimates based on existing partner outcomes, we anticipate that flights should resume to their pre-pandemic levels by 2022, and, assuming fifty percent of their fleet is comprised of narrow-body planes, there is a global opportunity of $649.3 billion in potential e-commerce revenue on an annualized basis for airlines.

We like to refer to this revenue growth potential as an “opportunity in the air.” As we have already begun to see with our current airline partners in Norway, Mexico, Canada, and India, the future of air cargo for e-commerce is one a burgeoning revenue driver and that has the potential to make up for weaker business travel and passenger sales on traditional passenger airlines due to large-scale events like the global pandemic we are currently facing. We have found a way to capture additional revenue—and that future, we believe, is e-commerce air cargo.

What I learned at the Airline Strategy Awards

The Airline Strategy Awards held in London yesterday, on September 27, provided me with the good fortune to spend quality time with colleagues in the industry as we recognized outstanding leaders in air cargo leadership. Nominees were reviewed against key criteria, including network strategy, business performance, and innovative thinking during the pandemic crisis. We were so excited to sponsor the first-ever cargo award and even happier to present it to Ethiopian Airlines Cargo.

As I reflected on the past couple of years since we last met in the fall of 2019, it occurred to me that so much has changed in the industry—particularly in our air cargo space. The pandemic truly changed the world we live in, both from a societal to a business industry standpoint. We have been impressed with how adaptive airlines have been during this crisis while facing their biggest headwinds, possibly ever.

In 2020 alone, the global airline industry had to stave off a loss of $391 billion in revenue. To recapture some of that revenue loss, passenger airlines across the world had to come up with alternative strategies to make up for very low passenger volume. Many turned to implement an incremental air cargo strategy on passenger flights (both on wide-body and narrow-body planes) as a source of supplemental revenue.

Inspirational Vaccine Distribution through Air Cargo

Once there were approved vaccines beginning December 2020 for COVID-19, many in our industry stepped up quickly to aid those worldwide by distributing critical vaccines. Air cargo space was available due to lower passenger levels on passenger planes, and airlines used that vital space to get vaccines to needed locations. However, because of the nature of the vaccines (temperature-sensitive, etc.), it was a logistical feat to get these vaccines where they needed to be.

According to a study from DHL and McKinsey, at least 10 billion doses are needed worldwide (conservatively)—which would require 15,000 flights. The winner of today’s award for air cargo, Ethiopian Airlines, played an instrumental role in the distribution of vaccines in Africa. In addition, SPICEJET of India, Azul Brazilian Airlines, and many, many others are playing critical roles in transporting vaccine consignments in their regions. We attribute much success of increased vaccination distribution to the innovative solutions in logistics provided by the airline and air cargo industries.

Global Demand for Air Cargo is Approaching Double-Digit Growth

Overall, the growth trends for air cargo are improving rapidly. According to IATA, global demand increased 9.4% between May 2019 and May 2021 as measured in cargo tonne kilometers (CTKs). This incredible growth is approaching double-digits this year relative to pre-pandemic levels, and we are excited about the prospects for airlines around the world as they explore new ways to capture revenue through air cargo.

Air Cargo Solutions for E-Commerce

While the pandemic has wrought seemingly endless havoc to society in the past two years, there is one very bright spot as it pertains to the air cargo space. In addition to vaccine distribution, we are also seeing passenger and cargo airlines enhance their revenue through e-commerce parcel delivery.

E-Commerce sales are expected to grow globally at a CAGR of 6.4%, from an estimated $5 trillion in 2021 to a projected $6.4 trillion in 2024. The explosive expansion of global e-commerce presents a markedly optimistic opportunity for the air cargo industry. Airlines can now optimize unused belly space in their existing wide-body or narrow-body planes to ship these smaller e-commerce parcels—typically between 2-4 kilograms in weight.

The CAGR forecast from 2021-2025 globally is a 6.29% growth rate, promising news for airlines looking to embrace the e-commerce cargo shipping phenomena. As more and more global nations adopt e-commerce shopping habits, we expect these international e-commerce growth rates to be a substantial upcoming opportunity in cargo air transport in the coming years.

Using our estimates based on existing client outcomes, we anticipate that, should flight resume to their pre-pandemic levels by 2022, and, assuming fifty percent of their fleet is comprised of narrow-body planes, there is a global opportunity of up to $649.3 billion in potential e-commerce revenue on an annualized basis.

Again, we wish to congratulate Ethiopian Airlines on their outstanding achievement of earning the Air-Cargo Leadership Award 2021. Their immense and meaningful contributions to their region through providing critical vaccines to identified areas in Africa were critically significant in the global fight against COVID-19. As with all of our current airline partners, all of which operate in the air cargo space, we have much to be grateful for as we begin to look forward to 2022 and beyond.