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Why logistics is the lifeblood of e-commerce

by:VIPUTRANS     2020-07-19
Let me talk about why logistics is the lifeblood of e-commerce:

Why is logistics important? It determines whether the product can be delivered to the user faster; whether it can be replenished as soon as possible for the temporarily lacking product; whether the efficiency of the supply chain resource allocation can be maximized... logistics is the user experience on the one hand for e-commerce On the other hand, it is a prerequisite for improving the efficiency of the supply chain.

However, there is limited room for improvement in gross profit margins, and huge operating expenses such as logistics. E-commerce is destined to be a profit-making industry. E-commerce websites are faced with these problems without exception. In 2002, the proportion of Amazon's logistics expenses in revenue fell below 10% for the first time, and Q4 began to achieve profitability in the same year. Since then, this fee has remained between 8% and 10%. Amazon's experience in logistics management efficiency is worth learning.

Unlike eBay, a platform-based e-commerce, which only controls the flow of information, Amazon centrally controls the two lines of logistics and information flow. Amazon leases a warehouse and logistics center with a total area of ??more than 40 million square feet in North America and overseas markets, and uses IT to digitally manage the entire process of goods transportation, loading and unloading, ordering, distribution, and returns. After Wal-Mart, in the end, the distribution link adopts social logistics, and cooperates with third-party express companies FedEx, UPS and other logistics companies to deliver the goods to users.

After the IPO listing financing, Amazon began to have a large-scale laying of warehousing and logistics infrastructure capital foundation. In November 1997, Amazon announced the opening of a logistics center with an area of ??approximately 202,000 sf (square feet) in Delaware. In January 1999, it announced the establishment of a 322,560 sf logistics center in Nevada. In April, it announced the establishment of a 750,000 sf logistics center in Kansas. May Announced that it will establish two logistics centers of 570,000 sf and 600,000 sf in Kentucky respectively. The logistics center of Georgia area opened in June is the fifth logistics center newly built by Amazon in 1999. So far, the total area of ??Amazon's 7 logistics centers in the country and overseas has reached 5 million sf, which is 16 times the area of ??the warehouse in 1998.

Over the next 5 years, the utilization rate of Amazon's warehouse gradually increased, effectively supporting the growth of the company's order volume and number of users. In 1999, Amazon’s sales increased by 169% year-on-year to 1.64 billion US dollars; new users increased by 10.7 million to 16.9 million, nearly three times the same as the previous year’s 6.2 million; the repeated consumption rate exceeded 73%. In 2000, the inventory turnover rate was 12, and it rose to 16 in 2001. In order to continue to attract users to repeat consumption, Amazon has adopted price reduction measures, including the provision of free delivery services. Due to improved system efficiency and improved cost structure, Amazon achieved profitability for the first time in the fourth quarter of the same year. In 2003, Amazon's net revenue reached $5.2 billion, making it fully profitable.

In the next five years (2004-2008), following the pace of expansion at home and abroad, and the introduction of the FBA open logistics platform service, the area of ??the Amazon logistics center has once again entered the state of large-scale expansion. In 2004, the total area of ??the logistics center was close to 6 million square feet, an increase of 42% year-on-year; in 2005, it increased by 71% year-on-year, and the total area exceeded 10 million square feet; in 2008, it reached 17.29 million square feet. At the same time, Amazon sales exceeded 10 billion US dollars in 2006, nearly 20 billion in 2008, and 24.5 billion US dollars in 2009.

In order to further keep up with the growth of orders, Amazon's logistics investment has been upgraded again in the past two years. In 2010, the leased area of ??the logistics center reached 26.1 million square feet, an increase of 48% year-on-year. As of the end of 2011, the total area reached 44.05 million square feet, of which the area in North America reached 26.36 million square feet (the lease maturity period is 2012-2026), and the overseas market lease area is 17.69 million square feet (the warehouse lease maturity period 2012- 2021).
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