New report from Armstrong & Associates provides deep overview of U.S. e-commerce logistics market

By Jeff Berman, Group News Editor · September 28, 2020

A new report recently issued by Milwaukee-based supply chain consultancy Armstrong & Associates pointed to how the ongoing upswing in e-commerce sales is driving gains in e-commerce logistics costs.

The report, entitled “Rising Tide: The Rapid Growth of E-Commerce Logistics, 3PL Solutions, Last-Mile Delivery, and the Dominance of Amazon,” addresses United States e-commerce logistics growth, including e-commerce fulfillment and last-mile delivery, third-party logistics provider alternatives to Amazon, and Amazon’s leading market position, among other related topics.

The release of the report is timely, in that second quarter adjusted retail e-commerce sales—at $211.5 million—saw a 31.8% over the first quarter, with Armstrong noting that this gain was buoyed by more consumers shopping online over the course of the COVID-19 pandemic, and a 44.5% annual increase, based on data from the U.S. Department of Commerce. And the firm observed that e-commerce retail accounts for 16.1% of total U.S. retail sales, with this segment seeing a 14.6% compound annual growth rate (CAGR) from 2015-2019.

What’s more, the report noted that the gains in e-commerce sales continue to push U.S. e-commerce logistics costs, with a 19.9% CAGR through the end of this year and e-commerce logistics costs representing 9.9% of total U.S. retail costs.

When asked if it was reasonable to expect e-commerce logistics growth to remain intact current levels even after there is eventually a COVID-19 vaccine, Evan Armstrong, president of Armstrong & Associates said it is likely.

“The pandemic has forced e-commerce on to many consumers who have rarely or never shopped via the Internet previously and expanded the use of current digital shoppers,” he said in an interview. “This new way of life has made consumers more comfortable in making digital purchases, and we think this trend will continue. For 2020, we expect U.S. 3PL E-Commerce Revenues to expand 23% with or without a vaccine.”

And with e-commerce logistics costs now at 9.9% of total U.S. logistics costs, Armstrong identified myriad logistics cost drivers, including:

the continued rapid expansion of e-commerce retail networks (both domestic and cross-border) to meet demand;

increasingly complex last-mile delivery, which can account for 30%-40% of the total cost of transportation;

a shift to B2C in the parcel segment (one package per delivery in B2C, on average, compared to three packages in B2B);

a tight warehousing labor market as e-commerce fulfillment requires three times as many employees per square foot than a traditional 3PL or Retail warehouse, with wages and incentives to retain employees are increasing and also driving increased use of autonomous robots to support activities such as picking and replenishment; and

reverse logistics as e-commerce merchandise is returned up to three times more frequently than products purchased in store

As for Amazon and its significant presence in e-commerce logistics, the report points out that Amazon now represents and estimated market share of 60% of the U.S. e-commerce 3PL segment, a figure that is expected to increase, according to Evan Armstrong.

“Sixty percent is our 2020 estimate, and we expect Amazon to continue its 3PL growth over the next 3-5 years eventually slowing relatively as major e-commerce 3PLs become more competitive and retail brands increasingly strive manage their own marketing and distribution channels outside of Amazon,” he said.

The Armstrong Associates’ report, “Rising Tide: The Rapid Growth of E-Commerce Logistics, 3PL Solutions, Last-Mile Delivery, and the Dominance of Amazon,” can be accessed here.

September 28, 2020