Amid Market Challenges, Cost Cutting, eCommerce Innovation Flourishes

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Amid Market Challenges, Cost Cutting, eCommerce Innovation Flourishes
June 7, 2024

As economic realities force them to cut expenses in the face of lower consumer spending, brands and logistics companies are employing a variety of tactics to improve their fiscal picture. From partnerships to expand cross-border eCommerce, to reductions in packaging waste, and fulfillment network downsizing, innovation and creativity are helping businesses ride out a challenging time.

China Replaces U.S. as South Korea’s Top eCommerce Choice

China is now the go-to market for South Korean eCommerce shoppers, surpassing the United States for the first time. The reasons cited are the Koreans’ desire for inexpensive commodity items through popular platforms such as Alibaba, Temu, Shein, TikTok Shops, and JD.com. Shoppers in South Korea spent $5 billion on eCommerce purchases in 2023, with China accounting for nearly half (48%), up 121% from the previous year. Purchases from U.S. companies were $1.38 billion, down 7.3% from 2022 and representing 27% of the total. AliExpress, another major Chinese seller that’s part of the Alibaba Group, invested about 100 billion won ($75 million) to expand its presence in South Korea, offering more products and a better cross-border shopping experience. 

Warehouse Rents Continue to Climb, Hit All-Time High

U.S. warehouse and distribution center rents hit a record $9.72 per square foot last year, up 20.6% from 2022, according to data from real estate firm Colliers. More rent increases are forecast, Colliers predicts, even as vacancy rates remain historically low, although at a slower pace. Rents rose during 2023 in New York, San Francisco, Dallas/Fort Worth, Atlanta, Houston, and Chicago, but dipped in Detroit, Los Angeles, and Philadelphia. Prologis CFO Tim Arndt is also predicting warehouse rent increases of between 4% and 6% over the next three years, “with 2024 being modestly positive and ramping thereafter.” 

Warehouse Space Demand Shrinks Along With Inventory Levels

Demand for warehouse space continues to contract after the pandemic-era e-commerce boom, according to the Wall Street Journal (subscription required. Companies are deciding to consolidate space or upgrade existing facilities instead of building or buying new ones. The shift comes as retailers have turned the corner on a big drawdown of inventories and are aligning their supply chains with lower consumer spending. Major players, including Newell Brands, Rite Aid, and Fanatics, among others, are cutting costs and right-sizing their networks, either closing warehouses or giving existing ones a facelift in 2024. In a related development, employment in warehousing and storage was down to 1.85 million in December, the lowest figure since November 2021, according to the U.S. Bureau of Labor Statistics.

B2B eCommerce Sellers Suffer From Poor, Siloed Data

B2B sellers are missing the mark in terms of delivering a winning customer experience due to bad product or customer data, or both, according to a new study from Forrester Consulting, commissioned by Zoovu. Two-thirds of the companies surveyed admitted to having poor data, with 40% saying they siloed data is an issue, DigitalCommerce 360 reported. Those respondents also said they lack the technology, staff, and strategy to make data more helpful for eCommerce. Forrester surveyed 413 professionals who work in customer or product data strategy at companies in the U.S. or Europe with annual B2B ecommerce revenue of at least $200 million.

Cost-Cutting Happening Across Corporate America

In an effort to keep expenses in line with lowered revenues, companies across retail, technology, logistics, airlines and automakers are slashing costs by reducing payroll and through other means, CNBC reports. From Mattel to PayPal, Cisco, Nike, JetBlue, and Macy’s, executives are showing investors and analysts that they’re serious about keeping a sharp eye on the balance sheet. While in past years, higher costs could be made up by pricing power, that lever has been severely reduced in this economic climate. “You are in an environment where cost fatigue is very much part of the equation for consumers and business leaders,” EY Chief Economist Gregory Daco said. “The cost of most everything is much higher than it was before the pandemic, whether it’s goods, inputs, equipment, labor, even interest rates.”

Amazon Promotes “Ships in Product Packaging” for Sellers

Keying in on both consumer preferences for less ecommerce packaging waste and environmental trends, Amazon is now promoting an expansion of its “ships in product packaging” (SIPP) program. After being teased last year, it’s now available to hundreds of thousands of U.S. and Canada-based sellers that use its Fulfillment by Amazon (FBA) service. This is also a branding bonanza for sellers, who get to use the packaging to promote themselves instead of Amazon’s ubiquitous smiley slash. A 2023 pilot with a limited number of sellers “helped us develop what is a really scalable way to provide information to sellers,” Kayla Fenton, senior manager of packaging innovation at Amazon, told Supply Chain Dive.

An Expert Assist Can Help You Thrive in Challenging Times 

As one upbeat sage quipped recently, “If a door closes, try it again – it’s a door!” Use a time of disruption and uncertainty to employ a combination of perseverance, innovative thinking and the forging of valuable partnerships to seize new opportunities. 

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