Chinese e-commerce giant Alibaba is on an investment spree. The latest is a $75 million minority investment in premium shipping site ShopRunner. Shoprunner offers services similar to those provided by Amazon Prime. The deal follows a similar investment in Fanatics, a US sports merchandise e-commerce company.
What does this mean for those of us in the shipping and and logistics field? The obvious message is that the Chinese and Alibaba, specifically, are clearly bullish on e-commerce. It is indeed the Chinese market that holds the key to extraordinary growth in retail. Anyone who is able to tap even a part of that market is laying claim to a golden goose.
Alibaba’s U.S. acquisitions are also indicative of its desire to learn some of the finer points of e-commerce as practiced in the U.S. as well as the importance it places on e-commerce in the run up to its expected IPO later this year or early next. E-commerce continues to grow at a rapid clip in the U.S., enjoying double digit growth as warehouse availability is at a premium.
This trend has been in evidence the last couple of years as Capacity LLC has worked a number of its retail clients to develop processes and systems that enable them to handle consumer orders directly. It has been an extraordinarily exciting time for us as we have increasingly served as the conduit between a number of consumer brands and their customers. From the vantage point of our warehouse floors, it’s a trend that we see increasing dramatically in the months and years ahead.
Warehouse demand is increasing as e-commerce becomes an ever more important part of the economy. The economic recovery and continued improvements in technology have enabled the warehouse sector to grow and emerge from the turbulence of past years, according to the Financial Times. Prologis, the world’s largest industrial landlord, has noted that this has caused rental rates to rise after falling by more than 25 percent during the Great Recession.
We’re wondering the growth noted by Prologis has been in part a result of the increased diversity of services offered by warehousing companies. As the economy expands beyond brick and mortar stores into a more diverse economy retailers and consumers are asking for an array of services ranging from custom packaging to same or next day delivery services.
Prologis, whose clients include Amazon, FedEx, Unilever and Home Depot reports that vacancies in its buildings greater than 250,000 sq ft, stand at only 1 per cent while there’s not room at those more than 500,000 sq ft.
In the Financial Times article Prologis also commented on the difficulty of modifying existing warehouse space for the demands of e-commerce. Those of you who know Capacity LLC are aware that this is a development that has occupied many of our waking hours. We’re obsessed with applying cutting edge technologies and offering the latest services to both our traditional and e-commerce clients. As the economy, thankfully, begins to grow once again, we’re excited about working with our clients to expand their businesses.
Amazon has now offered fine art to the products available for direct shipment to your home via its new Amazon Art marketplace. You can spend anywhere from south of $200 to more than $2 million, depending on your taste and the size of your wallet.
Spending $2 million on Amazon? Yes, you read that number correctly. But let’s start at the beginning. Last week Amazon opened Amazon Art, a marketplace to view and buy contemporary and classic art. Amazon is working with more than 150 high profile galleries from across the U.S. and Canada. Initially it is offering 40,000 works by 4,500 artists.
That $2 million piece, it’s Claude Monet’s “Fragment de Nympheas,” a piece that will set you back some $2.5 million. Also for sale are works by Andy Warhol and Norman Rockwell. In all, there are now 85 works priced above $10,000. These high-profile offerings may be more for public relations consumption than anything else, but Amazon Art is a very real initiative.
Art is not new to the realm of e-commerce but Amazon’s entry into the space represents a change of scale and perspective. With its visibility literally to millions of people, Amazon is making gallery art more accessible to a larger marketplace. The e-tailer is also aggregating works represented by dozens of galleries in one marketplace.
Only time will tell if people are willing to add Monets to their shopping carts – the same shopping carts that usually hold books and replacement ink cartridges. There are also a few unanswered questions. For example, how will the higher priced offerings be authenticated? There’s also the shipping. This is not your your average pick and pack. All art shipments require a special touch, one that we say modestly, we have come close to perfecting at Capacity LLC.
Shipping delays at the Port of New York are now causing concern among shippers and retailers before the start of the pre-holiday peak shipping season. The National Retail Foundation (NRF) recently sent a letter to the Port Authority of New York and New Jersey and the New York Shipping Association expressing concern about the two month hold up.
The initial cause of the congestion was the integration of new software by Maher Terminals, which handles a third of the port’s volume. Delays spread throughout the port as ships were diverted to other terminals, including Bayonne, NJ which itself is undergoing major construction. The Port of New York is the largest container shipping port on the U.S. East Coast.
Maher responded that service had now returned to acceptable levels during the past several weeks, albeit at reduced volume.” Maher had scaled back some of its software installation to effect delays. Ironically, the delay was caused by software intended to improve port efficiency. Instead, the software sometimes closed down terminals, sometimes for hours at a time.
Some retailers may turn risk averse at the thought of empty shelves during the Holidays while the nation is undergoing a slow economic recovery.The congestion at the Port of New York has led some retailers to consider using other ports, such as Baltimore and Norfolk, VA.
Low-price retailers like T.J. Maxx and Off Fifth, owned by Saks, Inc., have a difficult time with e-commerce. Since they’re dealing with odd-lots and sometimes limited quantities the online retail process can be complex and expensive. E-commerce is not for the weak of heart and not the weak of wallet if you’re doing it on your own.
T.J. Maxx is one of a number of low-price retailers are now weighing the costs against potential profits and deciding it’s time to make the investment. Analysts at Avondale Partners believe that T.J. Maxx can quickly reach annual sales of $1 billion. That’s a lot of odd lots. The computer upgrades are not cheap. Last year, T.J. Maxx spent $200 million to acquire online Sierra Trading for its tech and experience in e-commerce. Saks is spending $95 million over three years to upgrade Off Fifth’s retail capabilities.
Hudson’s Bay Co. saw the potential e-commerce value in Off Fifth last year when it bought the larger company for $2.9. That’s a serious investment. T.J. Maxx hopes that the market is more mature and that the technology is better this time around. It gave up its last attempt in e-commerce in 2005 having lost $15 million in the process.
If you don’t have the odd $95 million in your coffers to build your own system, Capacity LLC is there to help. We can apply our capabilities not only to resolve your challenges but also to take advantage of the opportunities that can get you to the next level. We can walk you though it and help you to fly over the potentially painful patches.