Is Regional the new Local?
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Is Regional the new Local?

For those of us in the Logistics/Postal industry, we are all watching the accelerated market evolution of eCommerce driven from COVID, especially in places that have seen protracted lockdowns. It might be too early to tell, but a trend has captured my attention.??I have noticed what appears to be a new type of localisation of consumer purchasing.?

?In exploring this matter, I suggest countries have generally seen a surge in domestic eCommerce as citizens adjust to various degrees of lockdown. In a New Zealand context, with a lower impact from COVID than most, there remains significant growth in first-time online shoppers, with 60,000 new shoppers just in the first quarter of this year (in a total national population of only 5 million). It is worth noting that the average basket size is also steadily increasing and there is a higher frequency of purchasing. Statistics also point to growth in shoppers moving up the price scale. As a total eCommerce market percentage, Kiwis are shopping for fewer low-value items. For example, a greater proportion of Kiwis shop in the NZ$40-NZ$100 price range.

?In addition to this spike in domestic purchasing, New Zealanders are purchasing more from Australia, showing disproportionate growth compared to traditional shopping destinations. In our business, Australia now ranks as New Zealand’s most significant eCommerce destination, and we understand that New Zealand now ranks as Australia’s most significant destination where until recently it ranked third.

I suggest that this is likely a result of the following:

  1. ?Supply chains demonstrate more stability and reliability the closer their proximity to the destination market,
  2. As international travel remains closed, the commodities previously purchased while travelling have now become desirable eCommerce purchases instead,
  3. COVID has placed an acceleration effect across all market influences, and
  4. Consumers are conscious of access to sustainable product choice and this appears to be a driving factor in purchasing.

?Very recently, COVID re-emerged in New Zealand triggering an immediate nationwide lockdown. As suggested in item 3 above, COVID accelerates all market trends, especially in eCommerce. In my view, it appears to be proving the positive evolution of a localised regional purchasing behaviour. A metric supporting this thinking is an almost 40% increase in orders from key Australian eCommerce providers to New Zealand consumers since the start of this current lockdown.

We all know how disruptive COVID has been for our markets, but these trends make me wonder if we will see this behaviour persist in a recovered supply chain economy??

?The price of sea freight is surging. In some cases, I have read about rates spiking 10x to 12x those of pre-COVID times. In speaking to some leading eCommerce businesses in New Zealand, they explained that for small consumer goods, freight makes up a relatively small proportion of the cost of the sale price of goods (circa 3%). Larger goods or goods coming from further afield have a significantly larger freight cost. They also explained that their supply chains are so constrained that they would soon be making choices about which product lines they would carry, which may lead to a reduction in domestic/local consumer choice.?

?When I consider this insight, and the surge in local and close regional (Australia) eCommerce purchasing, I wonder where Kiwis will turn to seek both variety and higher-value goods. It seems likely they will source these items from more distant markets, such as US/UK/EU which then raises the question where products are manufactured? I assume these markets will be able to have these goods on hand thereby addressing longer supply chain time and costs. This will either mean that we will all see an influx in local distribution manifesting in additional warehousing and 3PL growth or we will see manufacturing coming closer to source?

There are not yet enough eCommerce volume data points available to empirically validate this hypothesis. Yet, when looking at South East Asia, there is a 35% growth across the region, and platforms such as Lazada are reporting an increase of eShops of 950% against last year in the Philippines alone. This seems to indicate an eCommerce proliferation in this market. One wonders how many of these online marketplaces and/or major brands will service regionally, thus creating a similar environment to the new local we see developing between New Zealand and Australia??

?An associated trend that I can see developing around the recent duties/tax changes around the world could drive a similar outcome in so far as consumers in markets where this occurs. For example, they may start purchasing lower value goods locally. For those merchants serving this global market it seems likely we will see a new wave of thinking as to how they will provide streamlined and efficient services for these customers. European imports appear to be picking up on this trend, as reports indicate eCommerce import items valued at €24 and under have fallen proportionally from 30% to 24%. Similarly, products valued over €24 now make up a greater percentage of total spending. The European eCommerce product shelf space could therefore be expected to evolve into a channel for high value and niche goods.

?It seems that this change in the market might provide new opportunities for the worlds quality exporters to sell their goods directly to consumers. Is the time approaching when sellers of premium goods will reconsider distribution-based supply chains, supplementing or even abandoning them in favour of direct-to-consumer solutions and global marketplaces?

?Understanding the drivers of these market changes at a global, regional and local level could help to herald a new era in cross-border logistics for eCommerce, informing us on how we need to adapt to partner with our customers.?

?Your thoughts?


Simone Iles

business transformation and activation | digital | data | technology | MC & Facilitator

3 年

The impact on Christmas retail sales is likely to be runious …. An interesting read in the Washington Post about the US market states that “mounting challenges — including factory shutdowns, computer chip shortages and clogged ports — are rattling the industry as it prepares for the crucial holiday shopping season, an eight-week window that can account for more than half of a retailer’s annual sales.” https://www.washingtonpost.com/business/2021/09/01/holiday-shipping-delays-inflation/

Timothy Byrnes

Global Logistics Consultant and Speaker

3 年

thanks.. well written and something we have been discussing for some time.

Ali Merchant

Business & Customer Solutions Manager

3 年

Very interesting sir , In my opinion reasons for this vary from actively supporting local stores or national products, or as quest for authentic and artisan products. Which has change consumer behavior = change in domestic supply chain.

Dene Green

My passion is supporting the strategic transformation of my customers.

3 年

Sohail This is an articulated and challenging hypothesis One challenge is how SMEs (in particular and as an example) develop a suitable and scalable business model with regard to the sales and digital transformation crucial to regional success The potential for a one regional retail sector that lies in opening up new customer areas and income streams is thought provoking

Abdul Ghafoor (Building Support Networks)

Entrepreneur. Network Builder. Content Creator. Advisor to Micro businesses. Mentor/Coach to Micro Entrepreneurs

3 年

When we focus on Local as global then regional is definitely local ?

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