Is e-commerce worth the candle in the air freight world? Doctors differ
AMAZON is slashing delivery times for its Prime customers from two days to next day, reports Air Cargo News - but is it worth it? For now, it's just US market, but Amazon has indicated it intends to extend the next-day offer worldwide
AMAZON is slashing delivery times for its Prime customers from two days to next day, reports Air Cargo News - but is it worth it?
For now, it's just US market, but Amazon has indicated it intends to extend the next-day offer worldwide.
Retailers and parcel delivery firms, especially integrators, are seeing themselves forced to play catch-up again, and the exercise will be costly. Amazon is going to spend US$800 million on halving delivery times to its US Prime customers.
According to some, the online giant can leverage its low-cost network to subsidise overnight air delivery, but the revenue potential for overnight air is very limited.
For integrators, returns are not great. For the quarter that ended on February 28, FedEx posted a one per cent drop in revenues in its express unit, for which it blamed chiefly a rise in low-yield international services.
E-commerce looks appealing for growth, but yields less so. 'What seems a good revenue stream is somewhat negated by the volumetric nature of the cargo,' said Network Aviation Services sales chief John Gilfeather.
'The forwarder seems to want a standard cargo price, but when you load it, it's 30 per cent lower,' he said.
Air Canada cargo vice president Tim Strauss agrees that e-commerce margins are not as good as those in regular cargo.
'They may over-promise because they think they can get a discount, but $1.25 a kilogramme is not viable if the regular rate on the route is $4.50,' he said.
Said Airline Network Services CEO Jens Tubbesing: 'You have to put some rules into effect. I give x percent of my space to e-commerce - on days when we have less volume. Not on Saturday.'
Some disagree. Said Solutions International CEO Stan Wraight: 'E-commerce is not all volumetric. They give the good stuff to airlines that charge volumetric.'