eCommerce's rising costs

Due to the coronavirus, e-commerce providers have seen a surge in demand. Still, regulatory changes, pressure on companies viz. USPS FEDEX, UPS, and high demand levels are driving up logistics costs.

According to recent reports, the e-commerce logistics market grew by 16% in 2019 to €287 billion and is expected to top €500 billion by 2024, representing a 12.2% compound average growth rate.

Global pandemic lockdowns played an important role "for a further shift in consumer behaviour" to the benefit of e-retailers. On the other hand, Walmart saw a 97% increase in e-commerce sales in the second quarter.

During the first three months of the pandemic, DHL eCommerce Solutions, part of the global logistics giant Deutsche Post DHL Group, saw e-commerce volumes in the US rise to "Holiday peak levels" as stay-at-home consumers shopping for health, wellness, and home office supplies. From February's daily averages, the e-commerce provider saw a 36% increase in US domestic volume and a 28% increase in cross-border volume.

Global e-commerce companies have signed agreements with postal operators in multiple countries to deliver e-commerce volumes via airmail. The majority of cross-border parcels weigh up to 2kg, meeting the general definition of airmail.

Retailers, direct-to-consumer brands, marketplaces, and marketplace sellers riding the lockdown boom in cross-border e-commerce sales are going to get a massive 'wake-up call' in the mail from July 1 as global postal rates into the US start to soar by as much as 150% or more.

Retail stores were subsidizing e-commerce, and B2B parcels were subsidizing e-commerce. Still, now we have peak surcharges, and those subsidies have all vanished at the same time due to Covid-19 and regulatory changes.

The EU's executive law-making arm created the VAT e-commerce directive to combat VAT fraud, which was already a problem in various European industry sectors but was complicated by e-commerce.

Although Covid 19 seems like the significant catalyst to increase the cost of the supply chain, eCommerce companies need to juggle many factors to optimize their costs. Such an environment creates a new playground for new initiatives to help eCommerce companies to decrease their costs.