E-commerce has been a game changer for not only the retail economy but also the logistics and shipping businesses. Total e-commerce revenue today in the U.S. is nearly $425 billion, and it is steadily climbing. That is presenting a big opportunity but also some challenges for the shipping industry. While e-commerce is booming, so is the overall economy, which means more shipping from businesses as well. There are nearly 12 million trucks, rail cars and other land vessels moving cargo in the U.S. each year, and the demand keeps climbing. These conditions have led to some trends in the shipping and logistics industry that are causing carriers to have to adapt.
One trend is toward expedited domestic shipping services. The big disadvantage to e-commerce is that you have to wait for your purchase. The faster the retailers can get the product to customers, the happier they will be, and the more likely they will be to make repeat purchases. More and more companies selling online are offering free or discounted one-and two-day delivery, which puts a big strain on the companies responsible for delivering the goods.
The trend toward expedited domestic shipping services has fueled another trend, which is that trucks are actually traveling shorter distances on average. This is because companies, in an effort to be able to ship faster, are opening more permanent and temporary distribution centers. Putting product closer to buyers makes it easier to get it there faster, which is why expedited freight is becoming so important. Truckload carriers that can do overnight shipping and offer other services, such as less than truckload freight will get a leg up in the industry.
Another trend is that trucking companies are increasingly moving freight that is more valuable, as more people order electronics, such as flat screen TVs, from online retailers. There also is more specialty freight being moved. According to the U.S. Department of transportation, the value of freight is expected to hit $1,377 per ton by 2040, up about $500 per ton since 2007. This can mean bigger liability concerns for trucking companies and higher costs for insurance. That can lead to problems if there starts being downward pressure on shipping rates.
The trucking and shipping industries are booming these days, but it’s not all wine and roses. Many companies can’t find enough truck drivers and other employees to keep up with the demand for expedited domestic shipping services and other services. And at some point, shippers may start to push back on rate increases. It will be interesting to see how it all plays out.
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