Beginning of the end, a new beginning and an upcoming beginning.
Sorry about last week. We were blocked by Sengrid for sending suspicious links it seems. They still haven't figured out why they got that alert. We have tightened up a few things on our end. Hopefully, it was a false alarm.
Back to some good reading, folks.
We have an unprecedented holiday season ahead of us.
It is going to be great for eCommerce companies. BFCM (Black Friday Cyber Monday) is going to be largely CFCM. Thanksgiving shopping is likely to be all cyber.
There is early evidence of this. There is a rush of capacity-grabbing and we see that with 3PLs shutting down new sales operations as early as the first week of November. Usually 3PLs try to get new eCommerce customers as close to Thanksgiving as possible. This year, they have stopped early. Capacity is stretched already.
There are two major costs for eCommerce companies that show huge variance during the Thanksgiving/Christmas period – online advertising & logistics.
Beginning of the end
Online advertising capacity, while not infinitely scalable, gives you quite a bit of maneuverability if you have the money and the margins. Logistics is moving atoms and the capacity constraint cannot be solved with money.
BFCM 2020 is going to be a big win for big retailers and well-funded, big eCommerce companies.
They can absorb the digital advertising cost that is going to rise due to the incoming rush from every brand and retailer for whom store sales isn't an option
They would already have locked in the last-mile and 3PL holiday contracts
If you are in the industry all of this is known.
But I suspect this dynamic of constrained supply-chain is going to play well into Q1 and Q2. The (not-so) black-swan phase is the locking up of supply lines for shipping vaccines. Amazon won't feel the pinch as they are as vertically integrated as it comes. Other retailers might, in spite of locked-in contracts.
Even without considering the vaccine supply-chain, we already head into 2021 with truck driver supply constraint. The graph you see below is from ThermoKing. A lot of drivers are going to sit out in 2021 (80,000+) due to stringent drug tests. It looks like Marijuana legalization is good for the whole industry and shoppers. So if you see a truck driver smoking weed, remember that he is doing it for you – to get your beard trimmer right when you realize you look like an ancient greek god (minus the ripped body).
Is this the beginning of the end of the glorious COVID-propelled eCommerce dream run for small and mid-market companies – interrupted early by the gravitational pull of logistics? Logically, it seems so. Three quarters of constrained growth (however good it is, it is going to be less than what it could've been) followed by the opening of retail stores will mean that the peak is past us or will go past us right after Thanksgiving.
Yes, there will be less travel and more spending online during the holiday season. I might be wildly over-guesstimating the supply constraints. These two factors might just make Q4 the peak. But I am unsure if I am over-estimating beyond Q4.
New beginning and an upcoming beginning
The logistics constraints (at least the last mile part of it) is the failure of the trio – FedEx, UPS and USPS. If not failure, they have at least given an Amazon-sized window of opportunity for a specialized eCommerce delivery (and, oh yes, prescription med delivery as well). In 2021, we will see the launch of the AWS equivalent of the last mile world. Amazon will launch its last mile courier. The graph below will look different then.
That's not the "upcoming beginning" (such a corny term, right?) I am talking about. I am talking about this:
2021 is not going to be a big year for Shopify Fulfillment Network – not at least for the overall ecosystem. I still don't know if and how the last-mile part of SFN will shape up. But one thing is clear. The 202 dream-run of eCommerce and the constraints it is facing due to logistics has highlighted what we all know. The world needs more specialized fulfillment, smart micro-fulfillment and last mile – none of which are led from the front by the incumbents.
If you are in the logistics space and want to be a part of my podcast to talk about this, drop me a note.
PipeCandy is a market intelligence platform that tracks the global eCommerce & 'direct to consumer' landscape.
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