This Week in Logistics News (June 18 – 24)

brexitI was so excited to write about the fact that Cleveland’s 52 year sports championship drought was over. The Cleveland Cavaliers had finally broken the streak. However, a much more important news event has taken place. Brexit is a reality. And even though the average of the last six polls was basically a 50-50 split, I am still shocked. The big question is, what are going to be the economic ramifications? There has been a lot of buzz around the rising cost of labor in the UK if Brexit passes. But looking at it from a logistical standpoint, things are quite interesting. According to the latest reports, about 50% of both imports and exports from the UK are EU bound. Now, since the UK is no longer part of the EU, things get tricky. Tariffs, duties, and customs costs suddenly change, and the price to do business with EU member countries changes as well. When it comes to importing and exporting goods, this can have a serious impact on the financial well-being of the UK, not to mention the EU. It also raises the possibility of significantly reduced trade between the UK and EU countries. This alone has the possibility to create a significant impact on the economies of many countries. As we are in the earliest stages of reporting on this, we will have to continue to watch.

And now, on to the news.

walmart logoWalmart is selling its e-commerce marketplace in China to JD.com, the second largest online retailer behind Alibaba in the country. JD.com will take ownership of the Yihaodian marketplace platform from Walmart in an all-share deal, the companies said. JD.com would issue shares amounting to about 5% of its total shares to Walmart, which would value the strategic tie-up at roughly $1.5 billion based on JD.com’s recent share price. Walmart and JD.com, meanwhile, plan to cooperate on the direct-to-retail part of Yihaodian’s business. Walmart has struggled to make inroads in the Chinese marketplace, so teaming up with JD.com gives the company a better chance to compete in the market. The move also helps build JD.com’s business as it continues to try to take marketshare away from Alibaba.

Dematic, a leading North America based warehouse automation & control provider, announced that it has agreed to be acquired by the KION Group. KION is one of the two largest suppliers of forklift trucks, warehouse equipment, and related services in the world. Dematic is global supplier of advanced integrated automation technology, software, and services to optimize supply chains. The combined company will aim to be a global leader in intralogistics solutions – specifically within advanced material handling, from hand pallet and forklift trucks to complete, fully automated warehouse systems. It will also expand the company’s reach within the US and help to continue to build out its business in Europe and Asia. The purchase price for the Dematic shares should be approximately $2.1 billion, with a closing date sometime in the fourth quarter.

amazon logoAmazon has announced that it is slashing shipping prices for merchants. Specifically, the company is lowering the fees it charges merchants that sell small, flat items that can fit in an envelope. This is a direct response to lower prices by other marketplace sites, such as Alibaba and eBay. The new rates will take effect July 1, according to an Amazon e-mail to marketplace sellers. Merchants will pay $1.61 to ship three, flat, 1-ounce packages, which is 67% less than the current price. The change differentiates between small, flat items that can fit in large envelopes and items thicker than half an inch that are subject to higher fees. The new rates apply to merchants using the company’s Fulfillment by Amazon Small and Light program, introduced last. Most items cost $10 or less, so low cost deliveries are essential for profitability.

062116-drone-rules1v3The Federal Aviation Administration (FAA) has finally completed its long-awaited landmark rules for commercial drones. The rules mark the FAA’s first attempt to make a comprehensive plan to ensure the safe use of drones in public space. The FAA’s 624-page rulebook allows commercial drones weighing up to 55 pounds to fly during daylight hours and lower than 400 feet in the air, or higher if within 400 feet of a taller building or tower. The aircraft must remain within sight of the operator, or an observer who is in communication with the operator. The operators must be at least 16 years old and pass an aeronautics test every 24 months for a certificate and a background check by the Transportation Security Administration. This is not the answer many companies were looking for, especially those counting on drones to be their answer to last mile delivery. Autonomous drones will have to wait for another time.

Shoes-RVShoes.com is embracing a new business model that is delighting customers: pay-after-delivery. The company has partnered with Klarna, a firm that provides a pay-after-delivery service for retail consumers. With Klarna Checkout, the product is shipped and the consumer pays for it after they try it on and see if they like it. The point was to create a payment method that was easy for the customer. During check-out, if the pay after delivery option is chosen, Klarna pays the retailer for the shoes, the shoes are shipped out, and the customer has 14 days to make a payment. Partnering with a company that deals exclusively with pay-after-delivery has made the program much easier to implement, and shoes.com has seen sales soar. With the success of the program, it will be interesting to see if other retailers look into this delivery model as well.

And finally, while Canadian retailers may be having a harder time getting customers in the store, shippers are certainly enjoying the trend. The rise of e-commerce in Canada has caused a spike in parcel shipments as well as overseas shipments. As more customers are buying online, they are also willing to pay more to receive the package when they want. This is certainly a big opportunity for shippers. Consumers are looking to have more control over the shipping experience, however, and parcel companies like UPS are taking note. Now, in order to satisfy customers, they are offering flexible delivery dates that allow the customer to change when they will receive the package. Canada Post has also established flexible delivery processes, as well as same-day deliveries as a premium service. The high cost of undelivered packages has companies exploring delivery lockers where customers can pick-up the package at a time convenient for them.

That’s all for this week. Enjoy the weekend, and the song of the week, in honor of the Cleveland Cavaliers title, Cleveland Rocks by the Presidents of the United States of America.