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Feb. 17, 2014

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4 THE JOURNAL OF COMMERCE Editor's Letter ©2014 The Journal of Commerce — All Rights Reserved For more information, visit our Web site, EXECUTIVE EDITOR Chris Brooks 973.776.7818 MANAGING EDITOR Barbara Wyker 973.776.7817 SENIOR EDITORS Joseph Bonney, Finance and Economics 973.776.7809 Peter T. Leach, Trans-Atlantic 212.755.0940 William B. Cassidy, Trucking and Domestic Transportation 202.499.2285 Bill Mongelluzzo, Trans-Pacific 562.428.5999 Mark Szakonyi, Rail/Intermodal, Regulation, Policy 202.499.2295 SENIOR EDITOR, DIGITAL Harry G. Butler, 609.433.7215, RESEARCH EDITOR Marsha Salisbury 973.776.7828 ASIA EDITOR Annie Zhu +86 (21) 60396986 ECONOMIST Mario O. Moreno 973.776.7850 SPECIAL PROJECTS EDITOR Alessandra Gregory Barrett 973.776.7808 SENIOR DESIGNER Sue Abt, 973.776.7825, DESIGNER Bryan Boyd, 973.776.7827, WEB PRODUCER David Pulis, 973.776.7807, ASSOCIATE WEB EDITOR Grace M. Lavigne, 973.776.8506, PUBLISHER Tony Stein California, Minnesota, Georgia sales, 678.456.8530 SALES Cindy Cronin, Senior Account Manager Pacific Northwest, Midwest, Gulf, Canada sales, 954.551.8305 Zachary Gorman, Account Executive Northeast sales, Classifieds/Reprints/Copyrights 973.776.7820 Greg March, Asia Director Asia, Europe sales, 852.2585.6119 SENIOR MARKETING MANAGER, MEMBER SERVICES Debbie Walsh, 603.878.9926 For Magazine Subscription Customer Service: Domestic (Toll-Free): 877.675.4761 International: 847.763.4932 E-mail: 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105 973.776.8660 • 800.952.3839 CHIEF EXECUTIVE OFFICER, Gavin Carter CHIEF OPERATING OFFICER, Rhiannon James EXECUTIVE VICE PRESIDENT/CHIEF CONTENT OFFICER, Peter Tirschwell CHIEF FINANCIAL OFFICER, Ian Blackman VP, PUBLICATIONS, Amy Middlebrook VP, HUMAN RESOURCES, Cindy Mevorah GENERAL MANAGER, Julia Murphy DIRECTOR, PRODUCTION, Carmen Verenna William B. Cassidy The Journal of Commerce (USPS 279 – 060), February 17, 2014, ISSN 1530-7557, Volume 15, Issue No. 4. The Journal of Commerce is published bi-weekly except the last week in December (printed 26 times per year) by JOC Group Inc. 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105. Subscription price: $395 a year. Periodicals postage paid at Newark, N.J., and additional mailing offices. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, P.O. Box 1059, Skokie, IL 60076-8059. THE LATEST EARNINGS from UPS reveal two trends that might at first seem contradictory: e-commerce is growing in leaps and bounds glob- ally, and customers are choosing to defer delivery on packages to get greater savings. As the holiday delivery debacle at UPS seemed to show, people order- ing online want their goods as soon as possible. But the next day if not the same day? Apparently not, except, perhaps, when ordering a Christmas present on Dec. 23. "Customers put greater emphasis on cost rather than time in transit," Scott Davis, chairman and CEO of the $55.4 billion express carrier, said in an earnings conference call with investment analysts on Jan. 30. UPS's results show just how much emphasis. Despite the shortened holiday season and last-minute online bar- gains offering next-day service as late as Dec. 23, deferred domestic package volumes increased 8 percent year- over-year in the fourth quarter, and next-day volumes rose 1.2 percent. A similar trend is apparent at UPS's biggest rival, where FedEx Gr ou nd , not a i r b or ne Fe d E x Express, has been driving profit and growth recently. FedEx Freight, the company's trucking arm, is seeing strong growth in its deferred Econ- omy service offering. Do consumers really want same- day shipping? That's what we're often told. Retail giant is betting on it, building a network of distribution centers near cities to cut delivery times to consumers and offer same-day delivery services. Same-day delivery fits with the idea that consumers want instant gratification. A Stanford University study last year found more shoppers on e-Bay would rather "Buy It Now" than bid on an item in an online auction, Bloomberg reported. We've all felt the impulse to "Buy It Now" occasionally, and when cir- cumstances are right, maybe we do. But we're also looking for bargains, and consumers, like businesses, seem quite willing to wait a bit longer for gratification if they can save. The impact of what could be called the "deferred economy" on supply chains and transportation industries is apparent. Start with slow-steaming on the oceans, and continue to the con- version of truck freight to intermodal rail farther inland. Shippers in many cases can save up to 20 percent on transportation costs by switching to intermodal rail and adding a day to transit times. "Deferred delivery," whether of a package, a pallet or a trailer load, is acceptable when there are savings. Is there really a market for same-day delivery? Transporta- tion consultant Satish Jindel thinks that once subsidies such as "free shipping" — which is paid for by somebody, of course — are stripped f rom sa me - day on l i ne of fer s, demand drops. "People are more willing to wait for three to five days to get free shipping than to pay a premium to get second-day service, and they are reluctant to even do that," said Jindel, president of transportation consulting firm SJ Consulting. Logistics managers also are more willing to wait an extra day or two for a shipment and save 10 to 20 percent on transportation costs, building "delays" into delivery schedules to control their overall expenses. As the JOC's Peter Tirschwell said in a recent commentary on e-commerce delivery and the added cost of same-day service, "I may not like having to wait five or more busi- ness days, but I suck it up." Good things do come in small packages, and sometimes they really are worth waiting for. JOC FEBRUARY 17.2014 Buy Now, Receive Later

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