The global market for Third Party Logistics (3PL) is projected to reach US$1.3 trillion by 2025, driven by the rise of e-commerce and m-commerce as the future of shopping. Few of the advantages of e-commerce over traditional retail include eliminates the cost and time associated with travelling to the store; ability to find required products quickly; enables easy comparison of multiple brands; availability of lower prices, better deals, offers, discounts and coupons; access to complete information about the product; ability to shop 24/7/365; even niche products have higher visibility and can be easily accessed. For merchants, e-commerce offers the advantage of low financial costs, investments, overheads; ability to scale target markets internationally without investing in physical offices and assets; easy to showcase products and brands; ability to provide personalized shopping experiences; easy to encourage impulse purchases and retarget or remarket to the customer; ability to process higher volumes of orders; and access to rich and valuable customer big data. A key requirement for running successful e-commerce businesses is nevertheless the ability to efficiently handle distribution, warehousing, and fulfillment operations. A key challenge in this regard however is the complexity of supply chain management against the backdrop of a scenario where maintaining profitability in an inherently tough business/economic environment requires the ability to augment logistics efficiency. This juxtaposed with the fact that logistics is the largest cost component of an online business, adoption of third party logistics (3PL) services are gaining in prominence in the e-commerce sector. Also pushing up the competitive pressure on logistics efficiency are competitive service claims such as easy and fast delivery and same day delivery.
With easy returns being the prime advantage and unique selling proposition (USP) of e-commerce, reverse logistics is emerging into a critical part of logistics. Reverse logistics complicates an already complex logistics chain. Reverse logistics process includes physical shipping of the returned product; quality testing of the returned product; and documenting quality issues with the returned product. The scenario is driving adoption of 3PL services given the unrivalled cost benefits involved in outsourcing these operations to third party service providers. Expanding breadth of 3PL service capabilities such as custom brokerage, warehousing operations, product labeling/packaging, cross-docking, order fulfillment, reverse logistics etc. is additionally encouraging service adoption rates. Availability of industry-specific, tailor-made 3PL services from established 3PL vendors will contribute towards market growth. Another factor driving growth in the market include liberalization of economies, globalization of trade, recovery in global trade and the resulting increase in imports and exports of cross-border shipment agreements with international suppliers. Other noteworthy factors include rise of the on-demand society and a parallel need for faster delivery services; skills shortage and financial burden of maintaining in-house logistics management departments, growing awareness over the benefits of 3PL such as optimal cargo turnover, distribution efficiency, superior inventory management and holistic cost economies; an increasingly connected world, digitalization boom and rising capex on logistics. The United States, China and Europe represent large markets worldwide with a combined share of 67% of the market. China ranks as the fastest growing market with a CAGR of 9.2% over the analysis period supported by the steady expansion of the manufacturing sector, rising standard of living, growing disposable income, increased consumption of manufactured goods and a parallel increase in retail and wholesale distribution activities; and continuous improvement in the expertise of 3PL service providers in terms of quality of service provided and contract fulfillment.
Competitors identified in this market include, among others, CEVA Logistics, C. H. Robinson, DACHSER SE, DB Schenker, DHL INTERNATIONAL GMBH, DSV Panalpina A/S, Expeditors International of Washington Inc., FedEx Corporation, FM Logistic, GEODIS, Hitachi Transport System Ltd., J.B. Hunt Transport Services Inc., Kuehne + Nagel International AG, Nippon Express Co. Ltd., Sinotrans (HK) Logistics Limited, UPS Supply Chain Solutions Inc., XPO Logistics Inc., Yusen Logistics Co. Ltd.