E-commerce had been growing impressively before COVID-19, with growth rates as much as 10 times higher than the growth of sales of physical stores.
COVID-19 has obviously accelerated that growth. Currently, around 20 per cent of all retail sales are online, with huge differences between commodities. For books the online share is over 50 per cent, for groceries the share is, in most countries, still below five per cent.
It seems fairly obvious that the rapid growth will continue once the pandemic is over, one noticeable reason is that many stores are closing and as a consequence it is harder to purchase offline, especially for specific products (ever tried to find a specific light bulb or board game in a physical store?….).
The e-commerce model deeply changes physical goods flows, as consumers can easily purchase foreign products online. The recent announcement of a strategic cooperation agreement between ZIM and Alibaba demonstrates the traction of global e-commerce flows. The Chinese e-commerce platform’s customers can directly purchase sea freight from ZIM.
These e-commerce flows are, apparently, more time sensitive than most container flows. ZIM specifically targeted e-commerce customers for a faster direct service connecting South China ports and Los Angeles, while CMA CGM has also developed a direct service on the Pacific trades aimed partially at e-commerce flows. Thus, e-commerce is probably a main driver of new initiatives to introduce the time-based service differentiation of shipping lines.
Shipping lines, such as CMA CGM and APL offer priority offloading and a ‘terminal fast track’ service. Cargoes using this service will be stowed in ‘priority discharge’ slots.
If these attempts to offer a differentiated, faster service succeed – and caution is due as previous efforts, such as ‘Daily Maersk’ failed – ports and terminals may need to be able to embrace such priority services and extend them into priority intermodal products.
So far, shipping lines offer priority discharge services only in the Port of Los Angeles, a port with huge call sizes and serious congestion issues. It seems unlikely such a premium product will eventually be offered at all ports. In some ports with moderate call sizes, the demand may not be there.
Competition may emerge between ports for implementing such a premium product. Having such a service may turn out to have an impact, as it may attract more time sensitive (e-commerce) flows and over time strengthen the position of the winning port in service networks.
First published @Port Strategy