Spending on ecommerce logistics in the U.S. reached $117.2 billion in 2017, representing 6.9% of all domestic logistics costs, up from 5.2% in 2016, according to a new report from third-party logistics research group Armstrong & Associates, as online buying continues experiences 14% annual growth.
The report estimates that ecommerce logistics costs will reach $196.2 billion by 2020, for a compound annual growth rate of 18.8%. Their estimate includes inbound and outbound transportation, warehousing and distribution, reverse logistics, administration and inventory carrying costs, and outstrips the projected ecommerce CAGR of 14.4% in the same period.
“Keeping up with the ‘new normal’ (as defined by Amazon’s Prime’s two-day delivery service level) is the biggest challenge facing ecommerce retailers today,” Armstrong & Associates said in its report. “Above all else, these three factors—delivery speed, delivery price, and assortment—have transformed ecommerce logistics from a niche service to a $117.2 billion industry.”
In addition to the frequently cited “last mile” from final sortation to the customer, Armstrong & Associates has created a category called it calls the “extra mile” to describe the complicated flow pattern of online goods from seller to buyer that is driving the ecommerce logistics boom.
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