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UPS Drones, Uber Freight, & the Rapidly Evolving Field We Call Logistics

February 18, 2020
Read-Time: 3-5 Minutes
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In today’s fast-paced economy, customer demands for faster and cheaper delivery are continually pushing businesses to develop more efficient distribution networks. And as business leaders recognize the extent to which supply chain efficiency impacts customer satisfaction, companies are toiling to lead the charge for the fastest and most cost-effective service structure. Resultantly, an abundance of investment across the logistics landscape in recent years has yielded some highly innovative models and solutions.

An Outdated Scenario: Choosing Between Faster or Cheaper Shipping

As an avid e-commerce user, I can vividly remember the first time I came across a same-day delivery option from an online marketplace. It was the summer of 2012 and, having just moved into a new apartment, I was in the midst of purchasing several new appliances for my kitchen. As I scrolled through several prominent sites to select my products, one of them had a “same-day delivery” ad featured prominently on the screen. Although the ad caught my attention, it also seemed slightly excessive. Was same-day delivery really necessary, and was it worth paying almost twice as much as the standard rate? For the appliances I was purchasing at the time, I determined it wasn’t.

However, fast-forward four or five months, and I would have done anything for same-day delivery as I performed some last-minute holiday shopping. As the days to Christmas ticked closer and closer, the cost of delivery became a much less important factor. Instead, accessing the fastest available shipping option was my top priority.

In both of my above experiences, there were two options presented to me; wait longer for delivery but pay less, or, receive expedited delivery but pay extra. And as you can see, my preferences for each option varied depending on the scenario.

But while the dilemma of choosing between faster or cheaper shipping will likely resonate with many readers, younger Gen-Z audiences may find the above story a bit “old-fashioned”. This is because e-commerce customers today are rarely having to choose between faster or cheaper shipping. They want, and are coming to expect, both.

From 2010 to 2020: Faster Shipping Goes from a Luxury to an Expectation

In today’s fast-paced economy, any company that cannot provide order delivery speeds of 1-2 days is at a significant disadvantage in the market. This is true for e-commerce merchants that only sell online, as well as for businesses that ship inventory directly to wholesalers and distributors.

The Ware2Go service model

As I speak with the various merchants we service at Ware2Go, there’s no denying the rapidly evolving state of logistics. There’s also no denying that much of the disruption is being driven by demand from customers for faster shipping options. Given that over 1/3rd of Millennials and Gen-Z shoppers see same-day delivery as a key factor in their purchase decision and 82% of 17-24-year-olds are open to paying extra for accelerated delivery, it’s clear that speed of delivery matters. However, with businesses like Walmart and Best Buy offering free next-day delivery on thousands of items and Amazon’s same-day delivery now available for virtually all their Prime members, the added cost for customers to access faster shipping has been marginal. As a result, the combination of fast and cheap shipping is no longer viewed as an added luxury in the market; it has become an expectation. An expectation that, as recent data shows, can be a significant driver for customers when making their purchase decisions. In fact, a 2019 NRF Study found that 39% of consumers EXPECT free 2-day shipping for their online purchases, and 29% have backed out of a purchase because 2-day shipping wasn’t free.

The result?

As the heightened expectations of today’s consumers are recognized by business leaders, companies are toiling to lead the charge for the fastest and most efficient delivery services. This has, in a sense, made logistics the new “battleground” through which companies are striving to differentiate themselves. And over the past few years, an abundance of investment has yielded some highly innovative results. Among these include logistics giant UPS’s recent announcement that their delivery drones have been approved for expanded business use, Shopify and eBay announcing plans for their own fulfillment networks to compete with Amazon’s FBA service, and Uber’s decision to enter the logistics field with their freight brokerage solution.

From UPS to Uber: New Logistics Innovations Take Center Stage in 2020

When evaluating recent logistics developments, it makes sense to start with UPS. For UPS, the achievement of becoming the first parcel carrier to hold the coveted FAA “Part 135” certification is a major milestone. The certification effectively authenticates UPS’s subsidiary Flight Forward Inc’s development of a drone carrier program for parcel deliveries. UPS will initially expand its drone delivery service to further support hospital campuses around the country, and to provide solutions for customers beyond those in the healthcare industry. Moving forward, UPS Flight Forward plans to transport a variety of items for customers in many industries, and regularly fly drones beyond the operators’ visual line of sight. In the not-so-distant future, drone-centric delivery programs could become the driving force behind “mainstream” same-day delivery, and UPS’s progress in the market is evidence that change is happening fast.

But it’s not just the longstanding logistics providers that are disrupting the space.

Given the high-growth prospects of the logistics industry, a number of new players are entering the field. This includes Uber, who recently announced the formation of their Uber Freight service. Uber Freight builds upon the infrastructure Uber created through their innovative ridesharing program to deliver a variety of “on-demand” transportation and carrier brokerage services. Elsewhere, other new providers are crossing over from the e-commerce space, following in the footsteps of Amazon to expand their service model beyond just online shopping. eBay and Shopify are the most recent entrants in this regard, as each announced plans over the summer to develop their own fulfillment networks that merchants can leverage to store and deliver goods purchased online to customers.

When you couple these developments with the rise of the “on-demand” warehousing and fulfillment sector (enter Ware2Go), the launch of next-generation shipping services like DoorDash, and the ongoing expansion of Walmart and Amazon’s industry-leading distribution networks, it’s obvious that evolution within logistics is occurring at a breakneck pace. And, it’s impacting almost every industry, across both B2B and B2C markets, around the world.

NEW LOGISTICS DEVELOPMENTS TO WATCH IN 2020

2020 e-commerce, distribution, and logistics developments to follow in 2020

So, what do these developments mean for businesses today?

Final Thoughts: Take Advantage of Democratized Logistics Technology

As widespread development and innovation in logistics continues, the democratization of enterprise-grade distribution technology is making same-day and next-day shipping capabilities available to businesses of all sizes. And as a growing number of businesses implement streamlined distribution networks, any organization that remains stuck on a legacy fulfillment model will likely struggle to retain customers as they transition to providers that offer a higher degree of efficiency. For businesses that target Gen-Z or Millennial customers, this is especially true.

So, as merchants prepare for a new decade of business, it’s time to recognize the importance of optimized distribution and work to find a solution, in-house or outsourced, that you can deploy. A new era of logistics is upon us, and it’s not enough to simply take notice. It’s time to take action.

For more information about how to optimize your fulfillment and distribution network, we encourage you to contact Ware2Go.

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