Globalization and international trade define the commerce industry. The Covid 19 pandemic is also redefining the rules of sales with the digitalization of commerce. Transportation and logistics are now hot topics, as businesses and consumer behaviors are changing worldwide.
One of the biggest changes is the explosion of eCommerce. Buying online has been a necessity sometimes during lockdowns and the transportation of goods is more important than ever. The global transportation services market is expected to reach $7. 8 Trillion by 2027. Estimated at US$6. 2 Trillion in the year 2020, the market is projected to reach a revised size of US$7 Trillion.
E-commerce market is supposed to reach almost $5 trillion this year and this number will keep growing over the next few years.
The United States e-commerce market might reach over $843 billion in 2021, but it’s still a third of China’s market. Europe is growing by more than 26%.
Transporting these goods bought online or in store is becoming more and more a gigantic business. Let’s see the two main international transportation modes used by companies: air cargo and marine transportation.
The International Civil Aviation Organization (ICAO) reported that seating capacity fell by around 60% in 2020, for a loss of $370 billion for the airline industry.
About fifteen companies have already gone out of business, such as Air Italy, South African Airways or Miami Air International and despite the increase in the number of travelers, many more are currently bankrupt.
However, there is one sector of international aviation that is doing well: air freight.
According to Iata, its turnover increased by 14.9%, or 117.7 billion dollars. Paradoxically, the price of air freight is way more expensive than that of sea freight, but with the Suez Canal blockage and the almost complete shutdown of freight vessels, the prices exploded in 2020. Air freight price is therefore becoming more competitive. Transport by cargo plane is faster than by boat, so it’s becoming a means of transporting goods favored by companies.
Being fast is a real competitive advantage because of the Covid Crisis.
Many countries are ordering medical supplies from different parts of the world and with the urgent needs for masks, gloves, plexiglass, air freight has been seen as the best solution to transport medical supplies in a fast and effective way, to fight Covid.
The maritime transport sector has been strongly impacted by the Covid crisis. But in 2020, lower oil prices coupled with increased purchases of goods (online) have enabled many companies to achieve record profits.
Then the Suez crisis happened: a shortage of containers for goods and congested ports have resulted in a sharp rise in freight costs for shippers.
But things are slowly getting back to normal. According to UNCTAD, maritime flows are expected to grow by 4.8% this year, while the WTO expects the volume of world merchandise trade to grow above 7%.
The principal impact of e-commerce is that customers want more: they want to know the exact location of their package in real-time, they need to know if it’s going to be delayed.
But the most important impact of e-commerce, thanks mostly to Amazon, is the same day delivery. Buyers want to have what they bought immediately delivered and it’s one of the offers from the retailer that provides more value to their product.
But same-day delivery puts a bigger load on freight transportation companies, now having to manage increasing volumes of goods and less time to ship them.
The sector is slowly evolving to answer to the increase in demands and will obviously innovate to face all these challenges.
As always, stay safe, especially with the new variant rising.
-Team OTONOMI
OTONOMI is a blockchain-enabled parametric platform that transforms cargo insurance policies into fast, cost-effective, and transparent digital products. Powered by our proprietary technologies in data-activated triggers, smart contracts, and integrated digital wallets, we reduce claim resolution times from 45 days to 45 minutes, lowering admin costs by 75%. Our dynamic pricing and advanced risk scenario capabilities unleash new markets while achieving unparalleled profitability.