Online shopping has become the new normal for people, giving them access to products from across the globe with just a simple tap on handsets. As the e-commerce industry grows, its need to deliver swiftly with complete visibility is turning up its reliance on airfreight — the fastest available mode for goods transport. In this feature, we explore the sector’s growing reliance on the air cargo industry, as we try to understand air cargo’s efficiency to capitalise on the growing needs of the industry and see whether this trend will be maintained in the post COVID world.
Long before a single trace of COVID was ever discovered, the e-commerce market, due to increased internet users and competitive prices, was showcasing a steady and continuous growth at a pace of 20% per year. This growth of e-commerce was already pushing the entire supply chain including air cargo to better business models with greater visibility and speed.
With a new definition of normal after the outbreak of the pandemic, this growing e-commerce sector witnessed a surge that was almost difficult to imagine. This increased the need for e-commerce to not just deliver but also do it more efficiently and swiftly at a much larger scale.
During the pandemic, many companies were forced to go online overnight and even the buying behaviours of consumers changed— they were now completely relying on e-commerce. So, the delivery cycle was a key element that needed to be enhanced, and in order to meet the consumers’ demand, cargo had to be switched to air freight as per the consumption cycle, which occupied the premium space of airline capacity.”~ Madhav Kurup, Regional CEO (Middle East and South Asia), Hellmann Worldwide Logistics
With more and more households turning to home deliveries and purchase of manufactured products, there has been a consequent growth on express shipping. Express shipping again, relies on the transportation of goods via air, which has expanded rapidly during these trying times. Airfreight thus has emerged as a lifeline.
The latest figures provided by ACM suggest that the money yielded by each pound of cargo was 75% higher in January 2021 than a year earlier. COVID-19 and increased reliance on e-commerce via air transport have changed the scenario in such a way that airlines now plan their networks based on where they can fly cargo, and have brought innovations that exploit the regulatory exemptions and allow them to fly freight on passenger seats.
“When COVID hit, the resulting lockdowns took away many of the competing inter-city/longhaul transportations out of the market, leaving a bigger piece of the pie for air cargo. At the same time, given restrictions on physical movements and operations of physical stores, the public’s reliance on e-commerce also increased significantly. The combined effect of these two has helped air cargo win over a much larger share of the e-commerce demand. At GMR Hyderabad Air Cargo, we are supporting the growth by providing exclusive infrastructure and services at the cargo terminal.”~ Saurabh Kumar, CEO of GMR Hyderabad Air Cargo
Another example that proves the growing reliance of the E-commerce sector on air cargo is e-commerce giant Amazon’s step to grow its fleet faster than planned before Covid-19, with a new focus on buying aircraft rather than leasing them.
While we believe that the e-commerce growing reliance on air cargo is increasing manifold and yielding high figures for the industry, Ashish Asaf, Managing Director, S.A. Consultants & Forwarders paints a different picture for us.
Where on one hand he shows his trust in the e-commerce market to grow even in the post-pandemic times, on the other, he is a bit sceptical if this growth will completely move to airfreight.
The pandemic induced demand for health and wellness products among the consumers, as well the acceleration of online shopping since the crisis began may continue to drive the e-commerce even after the pandemic days, however what percentage of this growth will move on airfreight needs to be ascertained.”~ Ashish Asaf, Managing Director, S.A. Consultants & Forwarders
“If the movements are not of cross-border in nature, and the products are not of high value or perishable nature, it may move on a surface mode. There can be an increase in perishable consignments as many wealthy communities would prefer to have access to exotic fresh produce and food products globally. We see a clear growth trend in the perishable segment shipments globally,” he adds.
As more products will be transported across the globe, whether perishable or generic, the air cargo industry will need to exhibit growth and innovation to meet the increasing speed and visibility, higher priority, and reliable services.
Plugging The Gaps
The growing e-commerce market and its reliance on air freight are putting the air cargo industry through a litmus test. While air cargo has shown tremendous growth due to the increased e-commerce activity across the globe, IATA figures however reveal that 59% of the current e-commerce shippers believe that air cargo meets their needs only ‘partially’.
In a special report, ‘The E-commerce Impact on Air Cargo Operations,’ IATA says that the air freight industry, in order to capitalise on this momentous growth potential of e-commerce, has to focus on the particular challenges this business sector brings. It says that innovation, collaboration and data-sharing are a must to deliver on online retailers’ expectations.
This story was originally published in the July issue of the Logistics Insider magazine. To read the full unabridged version, download your e-copy now.