Worth the hassle?
While SMEs are all-in when it comes to penetrating new overseas markets, other links in the air cargo supply chain aren’t convinced cross-border e-commerce is worth the effort. Rogier Spoel, policy manager of air-and oceanfreight at both Evofenedex and the European Shippers Council, said that an industry player’s choice to engage in the e-commerce game is a situation of “picking your battles,” because, for carriers, the cargo’s unpredictable size and weight could make it more trouble than it’s actually worth, in terms of profit.
“Like the iPhone cases coming from China,” he explained, “those are not really the high-yield goods,” when compared to commodities like pharmaceuticals or even machinery parts. “You have to ask yourself… ‘Do I want those streams that do not add a lot of value, or should I focus on specific markets?’”
During a roundtable panel discussion at Cargo Facts Asia, Kersti Krepp, vice president of sales and marketing for the Asia-Pacific region at Polar Air Cargo Worldwide, noted that for an all-cargo carrier, it’s all about balance between speed requirements, weight and volume. “Not all e-commerce demands 2-3 day service,” Krepp said. It’s necessary, “To put the right product on the right network at the right price.”
So, e-commerce may not be as viable an option for freighter operators as airlines, which are accustomed to dealing with homogenous pallets of freight, but rather, is better suited for smaller airlines or combination-carriers which are less concerned about their cargo strategy or whether not they are filling the bellies of their aircraft.
As some carriers debate where the typically low-yield e-commerce product should fit into a portfolio with higher-yield commodities, many actors in the supply chain are taking the plunge and making investments accordingly. Budapest Airport (BUD) is another European airport vying to position itself as an e-commerce hub. BUD’s director for property and cargo, René Droese, said the airport considered the requirements of e-commerce cargo in the design process of its hub renovation. As e-commerce becomes increasingly popular, airports that have made the initial investment will be the hubs attracting the attention of carriers and e-tailers – especially, said Droese.
Still, making room for the e-commerce boom requires more from airports than simply clearing out warehouse space. “You need to install functional and efficient screening technologies, such as high capacity x-rays and other screening methods to fulfill short handling-time expectations,” Droese said, which can start to really drive up a project’s budget.
Michel Fiorani, the chief operations officer at Swissport Cargo Belgium, whose clients include Alibaba-partnered carriers ASL Airlines and Qatar Airways, refers to e-commerce as “the cargo type of the future,” but expressed some of the challenges that the parcels present from a ground-handler’s perspective.
“We have to look at it as a business opportunity,” Fiorani said. However, he added, e-commerce shipments are not employees’ “favorite” to deal with, nor are they the most profitable for logistics companies, compared to traditional freight.
Unlike dense, palletized freight, e-commerce cargo are packed tightly with heavy bags of miscellaneous parcels with their own distinctive destinations that must be broken down at the airport and sent off within a tight time frame in order to meet the end-consumers’ standards for fast shipping.
“It’s a different type of operation, that’s for sure,” Fiorani said. “It’s heavier, it’s more labor-intensive, but that’s what we have to get used to, I’m afraid, for the future.”
Fiorani said that, in coming years, Swissport plans to find ways to better handle e-commerce cargo and increase operational efficiency and productivity. But it seems that, for the time being, optimal operational efficiency is still yet to be achieved in ground handling operations.
Looking ahead to 2021, air cargo will likely be better equipped to handle e-commerce, and even when assessed VAT, e-commerce isn’t going to fade away anytime soon. Overall, “these rules and regulations will help mature the e-commerce market in general,” said Dimerco’s Hsu.
Verhasselt ultimately expects the increased scrutiny over cross-border imports will further drive digitization. While it will mean slightly steeper prices for the consumer, he said, the scheme will ultimately, “Level the playing field for the many e-tailers that [already] play by the book.”