The integrated express carriers have been busy staking their claims in the e-commerce arena, and the international sector is moving increasingly into the foreground there. In March DHL’s eCommerce division opened a fulfillment centre in Hong Kong to handle international e-commerce flows in the Asia-Pacific region, particularly to and from greater China. According to the integrator, the new facility will enable e-tailers to move their goods closer to their clientele to ensure faster response and easier delivery.

The centre is designed to integrate inbound flows, inventory and last-mile delivery into a one-stop solution for e-tailers from overseas. All the constituent elements are offered on a pay-per-use basis to eliminate capital spend and fixed costs for the clientele.

“Cross-border e-commerce is expected to grow to US$1 trillion by 2020, and with approximately 40% of China’s online consumers buying foreign goods, linking foreign e-tailers with consumers in greater China with an efficient fulfillment service is crucial,” said Zhi Zheng, managing director, Greater China, DHL eCommerce.

Rival UPS moved to strengthen its position vis-a-vis China’s international e-commerce flows through a partnership with SF Holdings. Their joint venture deal announced in late May aims to cover e-commerce shipments from China to the US initially, to be later expanded to other countries. This first step will give e-commerce sellers based in China better access to the US market.

The rapid growth of e-commerce has turned this sector into a prime battleground for the express parcel carriers, and the emphasis is shifting increasingly from domestic to international markets. A study published by DHL Express earlier this year shows that cross-border e-commerce offers aggregate growth rates that most other retail markets cannot reach. It predicts that international retail volumes will rise at an annual average rate of 25% between 2015 and 2020, climbing from US$300 billion to US$900 billion. This is twice the pace of projected domestic e-commerce growth.

For express parcel carriers, this trend brings the juicy prospect of strong growth in the premium segment of their business.

“We see that virtually every product category has the potential to upgrade to premium,” said Ken Allen, CEO of DHL Express, adding that his company’s global door-to-door time-definite network is “perfectly positioned” to support retailers that aim to go down that avenue.

UPS has also tabled a study that indicates good times ahead in the international e-commerce business, showing that “avid US online shoppers” are increasingly turning to international retailers, drawn either by low prices or goods not available in their domestic market.

FedEx, for its part, has voiced reservations about the e-commerce arena’s magnitude. Commenting on its results for the quarter ended February 28, management said that the vast majority of its volume is business-to-business, “and while e-commerce is the fastest-growing piece, it’s also the smallest piece.” Moreover, management reiterated that it cannot afford the same capital intensity for peak e-commerce volume, “which is why we have been backing away from some customers and raising our prices significantly.”

Which is not to say that FedEx is backing away from e-commerce altogether. In February the integrator unveiled an e-commerce platform aimed at small- and mid-sized enterprises that delivers across multiple channels and manages inventory for participating retailers by utilizing the integrator’s suite of logistics services, namely the capabilities of Genco Distribution System, a third-party logistics provider that FedEx acquired in 2015.

The healthcare sector, the second major driver of growth in the express and air cargo sectors in recent years, has also seen much activity from integrators as they try to strengthen their position in this market.

In early June, UPS expanded its pharma drive into Latin America with the opening of a 7,000–square-metre healthcare logistics facility in Colombia. DHL recently tripled the footprint of its cool chain facilities at its European hub in Brussels, expanding its CEIV-certified cool centre there to 5,300 square metres. The integrator has been aggressively gunning for CEIV certification at its stations where pharma traffic is handled.

UPS took over medical logistics specialist Marken last year, a company that claims leadership in direct-to-patient services and biological sample shipments, handling some 50,000 drug and biological shipments in a month across more than 150 countries. In May, the new subsidiary launched a hybrid logistics service that leverages the parent company’s global network of both dedicated and third-party lift.

Given predictions of ongoing strength in the pharmaceutical industry, the integrators are bound to intensify their efforts in this sector.

By Ian Putzger

Air Freight Correspondent | Toronto