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January 7 2019

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Page 137 of 147

136 The Journal of Commerce | Januar y 7 2019 2019 Annual Review & Outlook Air Cargo GATHERING E-COMMERCE MOMENTUM is revolutionizing global air cargo supply chains, with rapid growth in cross-border shipments and greater pressure on last-mile delivery push- ing online shopping giants to grab greater control of the end-to-end logistics process. The most visible and recent sign of this came on Nov. 12 when Ama- zon added the 40th Boeing 767-300 freighter to its US network. While the services of FedEx and UPS are also heavily utilized, the convert- ed freighters allow Amazon Air to better manage demand, especially during peak periods. The company is planning a $1.49 billion freight hub at Cincinnati-Northern Kentucky International Airport. China's e-commerce retail giants also have been building internal air logistics capabilities as a key part of their expansion strategies., for example, launched a Boeing 737 freighter service under its JD Logistics brand in October, and Alibaba's Cainiao Logistics is part- nering with Singapore Airlines to handle cross-border shipments. Bringing logistics in-house as a core business resulted from existing service providers being unable to manage last-mile demands and reduce delivery times, according to Porter Erisman, a former Alibaba vice president and now an industry consultant and author of two e-com- merce books, "Six Billion Shoppers" and "Alibaba's World." "In markets with poor logistics, e-commerce companies will spin off their own logistics companies," Erisman told the JOC's TPM Asia Conference in Shenzhen, China, in October. Cross-border sales soar Since 2005, global internet retail sales have grown more than 20 percent a year on average, accord- ing to market research firm Euro- monitor International, much faster than traditional store-based sales. In addition to rising domestic volumes sent by large and small e-retailers, the fast-growing cross-border e-com- merce market remains a key growth driver. Between 2013 and 2015, e-commerce from the Asia-Pacific to Europe grew 66 percent, while the global value of e-commerce sales forecast for 2019 is expected to reach $3.5 trillion, International Post Corporation, an association of 23 postal operators in North Amer- ica, Europe and the Asia-Pacific, reported in its annual survey. "E-commerce is a future growth driver for the air cargo industry, as online shopping boosts demand for parcel delivery services worldwide," the International Air Transport As- sociation said. "On aggregation, the industry's parcel volume more than doubled over the last decade, growing at a rate far above economic growth." Nowhere is the demand more apparent than in China, illustrated every November during the 11.11 online shopping festival. This year, Alibaba processed more than 1 billion orders worth $30 billion in gross merchandise value on the day, while took in $23 billion. Domestic China demand has always been high, but cross-border trade now is playing a far larger role. The 11.11 shopping festival may be a domestic event, but such is the de- mand for products from around the Online giants tighten the reins Explosive demand is spurring e-sellers to build their own air cargo capacity By Greg Knowler "We have gone from zero to an estimated 20,000 tons (of e-commerce air freight) in only two years." Amazon's converted Boeing 767-300 freighters allow the company to better manage demand, especially during peak periods.

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