The last mile is the key
It’s not just CEP providers that are happily surfing the e-commerce wave. Classic forwarders also bank on this growing market, seeking to score in selected growing fields – as is the case with XPO Logistics after a difficult year.
Internet shopping platforms have been amongst the winners in the pandemic; but CEP service providers are hot on their heels. The trend is set to continue in 2021, according to an study, which says it’s also down to the fact that 80% of retailers welcome and serve such dispatch solutions, with their omni-channel principle. On top of this, the B2C market in e-commerce is growing. By 6% annually in North America; by 5% in Western Europe; and by 14% in Asia. Let’s check out the state of play with a closer look at a Middle Eastern player.
A success story with exceptions
The Dubai-based Emirati CEP service provider Aramex recently published its financial results for 2020. Sales came in at approximately AED 5.51 billion (USD 1.49 billion), representing a rise of 9% vis-à-vis 2019. Booming e-commerce activities in the course of 2020 had an impact, and that far beyond national borders. Thus Aramex’s international express business rose by a hefty 10% vis-à-vis the previous year – from AED 2.4 billion (USD 650 million) to AED 2.6 billion (USD 702 million) in sales.
Aramex’s freight forwarding sales in 2020 – and this is an aberration – nevertheless declined by 5% to AED 1.1 billion (USD 297 million), in comparison with the AED 1.2 billion (USD 324 million) registered in 2019. Lower demand in the oil and gas industry and in the retail sector left their mark here.
There were interesting exceptions in this field too. Aramex’s business with logistics and supply chain solutions grew by 6% to AED 375 million (USD 101 million) in the course of 2020, compared with AED 355 million (USD 96 million) in 2019. This growth was down to the flourishing healthcare and FMCG segments.
How, in contrast, did multinational forwarders fare?
Tough times and new sectors
The challenges emerging for forwarders were already ascertained in the course of 2020. Even before 2021 started, Agility, for example, cited four operational risks – capacity bottlenecks, above all in the maritime shipping segment; fluctuating demand from consumers, parallel to lockdowns; geographic risks, such as the sudden elimination of the Chinese workbench; difficult projections concerning stocks worldwide.
So how did an atypical industry player cope with all this in 2020? XPO Logistics, which is headquartered in Greenwich CT (USA), has a reputation more for the acquisition and integration of other companies than for banking on organic growth – and is proud of this successful practice and tradition going back decades.
This wasn’t a very advantageous strategy in 2020; the firm’s results didn’t shine. It generated sales worth USD 16.25 billion, a decline of 2.5% vis-à-vis 2019. This result had an even greater impact on its returns. Its operating result declined substantially (–52%), from USD 821 million in 2019 to USD 391 million. Whilst its sales in the transport segment fell by 4.6%, they rose by 1.5% vis-à-vis 2019 in the logistics segment, coming to USD 6.2 billion. In this sector too, the operational result declined by 41.9%, namely to USD 140 million, compared to USD 241 million in 2019.
Differences in North America and Europe
There’s an interesting aside to all this. Whilst the logistics sector lost around 4% of its sales in the North American region in the period under review, the segment registered sales worth USD 3.8 billion (+5.2%) in Europe. Chairman and CEO Brad Jacobs didn’t comment on rumours that XPO Logistics wants to sell its European activities. The corporation has reacted to the trends of the era, however, by naming Eric Caldwell as the president of its newly-formed ‘last-mile division’ in September 2020.
Since XPO acquired 3PD in 2013 it has run the largest provider of last-mile services for heavy household goods, training equipment and furniture in the USA. The firm handles more than 10 million home deliveries and installations a year.
Whilst it’s true that heavy goods have accounted for but a small overall proportion of all online orders so far, an analysis carried out by FedEx has nevertheless ascertained that this category of goods has the greatest online growth potential in North America.