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Feb.8, 2016

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Logistics companies that deliver those orders are investing heavily to keep pace. "The impact of global growth is double- edged," said Greg Hewitt, CEO of DHL Express in the Americas. "From an infra- structure viewpoint, the biggest impact of double-digit outbound and inbound growth from e-commerce providers has been on where we needed to have facili - ties, roofs and vehicles." A lot of the growth in global e-com- merce orders is spread out in rural areas, where consumers don't have access to all of the retail goods in urban-based brick- and-mortar stores. Alibaba, the Chinese equivalent of Amazon.com, reported $14.3 billion in online sales on Singles Day, the Asian giant's version of Cyber Monday. That was more than four times as much as U.S. consumers spent online everywhere on Cyber Monday, underscoring the fact that China now accounts for about 35 percent of global e-commerce sales, according to David Roth, CEO of The Store, the global retail practice of Brit - ish advertising agency WPP. India soon will become the world's second-largest e-commerce market as its population of 1.6 billion rapidly gains access to the Internet. It took 20 years for the Internet to reach 100 million Indian consumers, three years for it to reach the second 100 million and less than a year to reach the third 100 million, Roth said. India's Internet market is expected to reach half a billion by 2018. The growth of e-commerce in the U.S. and around the world complicates the delivery challenges online retailers and logistics companies face. In the U.S., for example, out-of-stock rates on Cyber Monday reached a record high, with 13 out of 100 product views showing an out-of-stock message. That was more than double the normal rate, accord - ing to Adobe, which tracked more than 125 million visits to 4,500 retail websites on Cyber Monday, accounting for 80 per- cent of all online transactions from the top 100 U.S. retailers. The growth of online retail sales comes at a time when consumers are making fewer shopping trips to brick- and-mortar stores, according to data compiled by Kantar Worldpanel, which analyzes consumer behavior. In the U.S., consumers are making 2.8 fewer weekly trips to stores. European consumers' weekly shopping trips have fallen by 1.9, and Chinese are making an average of three fewer shopping trips each week. The decline in shopping frequency has translated into an increase in online gro- cery sales globally. Internet orders now account for 0.8 percent of U.S. grocery sales, 3 percent of China's grocery sales, 6 percent in the U.K., 1.4 percent in Ger- many, 4.3 percent in France, 1.2 percent in Russia and the world's largest share of 14 percent in South Korea, according to Kantar Worldpanel. A lt houg h g loba l on l i ne s a le s increased 28 percent last year, consumers "are subjecting brands to greater scrutiny and are more skeptical of claims," Roth said. "Consumers have become more value conscious and are finding price more important than brand names." As a result, as much as 10 percent of online sales in North America are gener- ated by special promotions and discounts. DHL Express recorded 5 percent growth in international express pack- ages sent from the U.S. last year and a 30 percent increase in inbound ship- ments to the U.S., much of which can be attributed to e-commerce. To accommodate the growth, DHL is investing heavily in its U.S. distribu- tion network, including $100 million on its major hub for international air freight shipments in Cincinnati. "When we were in an international-only environment, we didn't have the domestic infrastruc- ture that our competitors had, so we've had to expand small facilities at key points in some markets where we need to have roots," Hewitt said. For example, he pointed to north- eastern Pennsylvania, where the influx of volume meant DHL had to build a ser- vice center that operates 15 to 20 routes, "THE GROWTH OF E-COMMERCE IS FORCING ALL OF US TO IMPROVE OUR TECHNOLOGY AND TO ADAPT TO LIVING IN A SMARTPHONE WORLD." 22 THE JOURNAL OF COMMERCE www.joc.com FEBRUARY 8.2016 JOC GUIDE TO 3PLS SPECIAL REPORT

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