E-Commerce Fulfillment Services Market

Market Overview

The global e-commerce fulfillment services market size was valued at USD 85,323.5 million in 2021. It is expected to reach USD 207,869.29 million by 2030, growing at a CAGR of 10.4% during the forecast period (2022–2030).

E-commerce retailers can outsource warehousing, bundling, shipping, and other value-added services such as urgent parcel and return management services through fulfillment service centers. A fulfillment center is a perfect solution for retailers who do not have robust warehousing capabilities to manage inventory directly and do not want to invest additional effort in shipping.

The demand for e-commerce fulfillment services is being driven by the rise of e-commerce across the globe and the subsequent rise in the number of people shopping online due to this trend, particularly in developing economies. The e-commerce industry has become more productive and accessible due to the increasing acceptance of cutting-edge technologies such as automation, robotics, and augmented reality (AR). Consequently, the fulfillment of e-commerce orders has progressed from traditional warehousing use to the more contemporary use of modern warehousing.

Market Dynamics

Market Driving Factors

• Growing Internet and Smartphone Penetration Rate

One way to define electronic commerce is as a transaction that takes place over the internet to purchase goods and services. E-commerce revenue has been growing significantly over the past few years, largely thanks to the notable increase in the rate at which people worldwide have access to the internet. The ever-increasing rate at which people have access to the Internet enables an ever-increasing number of people all over the world to use online retailing services and take advantage of their many advantages, including doorstep deliveries, a wide variety of products, and a reduction in the amount of time and effort spent on shopping. In addition, the widespread availability of smartphones has made it much more convenient for customers to shop from any location they choose. This has also resulted in a significant rise in overall sales and demand for several categories of products, including clothing and footwear, consumer electronics, and pharmaceuticals, over e-commerce channels across the globe.

This rise has been brought about directly by the first factor. The significant increase in online sales necessitates the development of robust e-commerce fulfillment services market to guarantee the timely and trouble-free delivery of high-quality products to customers. Throughout the period covered by this forecast, it is anticipated that the expansion of the global e-commerce industry will be the primary driver of growth in the market for e-commerce fulfillment services. E-commerce has become more productive and widespread due to the general use of cutting-edge technologies and the overall accessibility of mobile devices such as smartphones. The primary factor driving the expansion of the e-commerce industry is the increased availability of convenience. Customers increasingly turn to their mobile devices, such as smartphones, to purchase goods and services online, causing the retail industry to experience a paradigm shift from electronic commerce (e-commerce) to mobile commerce (m-commerce).

• Growing Use of Automation, Robotics, and Augmented Reality

E-commerce companies have been able to excel in efficiency and reachability due to the growing use of cutting-edge technologies such as automation, robotics, and augmented reality (AR). Online shopping has several advantages that make it more appealing to customers than shopping in physical stores. These advantages include lower prices, shorter lead times, and more product options. As a result, more consumers are opting to do their shopping online rather than in stores. E-commerce companies depend significantly on their shipping and warehousing capabilities to transfer products from retailers or manufacturing units to end-users in a shorter time. In addition, automation is helping the warehousing sector become less labor-intensive. This is because merchants have begun automating operations to improve fulfillment productivity, reduce the amount of human intervention, and decrease order delivery times.

The introduction and adoption of robots and augmented reality technology are also helping improve operational efficiency in warehouses. Some companies in the global market have also begun using robots for fulfillment services. For example, Amazon.com, Inc. uses robots in its eCommerce fulfillment centers to assist employees in completing operations and drive faster shipping and shorter lead times. Those are just two examples. Because e-commerce businesses worldwide continue to outsource these services to speed up delivery times, it is anticipated that this trend will contribute to the expansion of the market.

Market Restraining Factors

• Impact of Stringent Government Regulations

Businesses that provide e-commerce and fulfillment services need to be flexible to keep up with the ever-changing shopping habits of their customers. Companies are focusing their attention on strategies such as the introduction of mobile applications, the timely updating of online stores, the sale of products and services on social media platforms, and the provision of subscription services to meet the demand for their services to be more easily accessible and to maintain their position as competitive players in the market. As a result of the explosive growth of the e-commerce industry and the ever-shifting nature of customers' expectations regarding delivery, fulfillment service providers are under increasing pressure to modify their workflows and the underlying technologies that underpin them.

In addition, numerous governments worldwide are working toward enforcing various rules and regulations to standardize and regulate the order fulfillment processes involved in online commerce. For instance, the Japanese government has established laws and regulations such as the Pharmaceutical Affairs Law, the Food Sanitation Law, the Freight Forwarding Business Act, and the Warehouse Business Act.

According to the Pharmaceutical Affairs Law, a government authorization or license is required to handle medical (and quasi-medical) products and cosmetic products. This applies to both the handling of medical products and cosmetic products.

In Japan, cosmetics, medical devices, pharmaceuticals, and quasi-drugs are subject to the law regulating their production, usage, and sale. The legislation was enacted to preserve the quality and effectiveness of the aforementioned products and the standard of hygiene practiced nationwide. The law also contributes to the development of medical technology and pharmaceuticals by helping to foster and advance research and development efforts in these areas. To follow these regulations, market participants in the e-fulfillment industry need to focus on various aspects, such as acquiring the necessary licenses and authorizations, clearing products through customs, and making arrangements for transportation, processing, storage, and delivery of these products.

By the Food Sanitation Act, all food products brought into the country from other countries are obligated to meet the prerequisite criteria established by the Ministry of Health, Labor, and Welfare. Every item imported is put through rigorous testing at specialized government facilities that are kept in secure locations. MHLW has also established specifications for various materials that come into contact with food and the raw materials that go into packaging production.

Additionally, Japan is compiling a list of the materials and substances permitted to be used to produce food contact materials. To comply with these regulations, market participants in the e-fulfillment industry need to amass a wide range of knowledge regarding the hygiene, quality, and contamination control measures that should be taken when working with food products. Such rules and regulations hamper the proliferation of businesses that provide e-commerce fulfillment services market.

Market Opportunities

• Growing Trade Liberalization Policies and Cross-Border Shipping Agreements

Countries worldwide have seen an increase in the amount of trade that takes place and in the number of shipments that cross international borders as a direct result of policies that liberalize trade. The Comprehensive and Progressive Agreement for Trans-Pacific Free Trade (CPTPP) and the African Continental Free Trade Area (AFCFTA) are recent examples of expanding multilateral free-trade agreements. The proliferation of free trade agreements (FTAs) drives the demand for transportation services supporting international online commerce. In addition, the market for international e-commerce services is affected by several different bilateral free-trade agreements, such as the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) and the Costa Rica-South Korea FTA.

Countries in the Asia Pacific region, such as China, South Korea, and Japan, are among the top 10 exporters of merchandise and are responsible for a significant portion of the total sales made through online commerce worldwide. Over the past few decades, Japan has worked toward the liberalization of trade while adhering to the guidelines established by the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO).

Nevertheless, during the most recent few years, Japan has primarily concentrated its efforts on Economic Partnership Agreements (EPAs) for trade liberalization. In addition to the liberalization of trade, the other objectives of EPAs include the acceleration of trade in services and investments, the protection of intellectual property rights, the alleviation of restrictions on the movement of people, and the consolidation of economic cooperation in a diverse array of domains. EPAs are based on the principle that all trade will be liberalized substantively within a specific time frame. This is done so that EPAs can continue to be compatible with the rules established by the WTO. Because of these factors, there will be a significant increase in opportunities in the market.

Regional Analysis

The global e-commerce fulfillment services market is analyzed across North America, Europe, Asia-Pacific, and LAMEA.

The Asia Pacific leads the global e-commerce fulfillment services market. The Asia-Pacific e-commerce fulfillment services are expected to grow at a CAGR of 11.9% during the forecast period. The Europe e-commerce fulfillment services market is projected to reach USD 50,190.98 million by 2030, registering a CAGR of 10.8% during the forecast period.

On the back of increasing internet penetration and the growth prospect offered by relatively untapped markets in the region, it is anticipated that the part will continue to dominate throughout the forecast period (rural areas and second-tier cities). In addition, countries like China, Japan, and South Korea are not only among the top 10 exporters of goods but also account for a significant portion of the total sales made through online commerce around the world. Therefore, the most critical factor contributing to the expansion of regional markets is the optimistic growth forecast for the e-commerce industry in the region.

The presence of significant market participants in the area, such as Red Stag Fulfilment, Ship fusion, Inc., and Amazon.com, Inc., amongst others, is the primary factor that has contributed to the market's growth. E-commerce businesses in the region have developed a greater confidence level due to the increased adoption of automation technologies that enable more effective management of fulfillment services. This has led to the expansion of the market. In addition, the United States has recently surpassed China to become the world's second-largest market for online shopping, which has increased the demand for companies that provide fulfillment services.

Segmental Analysis

The global e-commerce fulfillment services market is segmented on the types of services offered and the applications.

The market is segmented into the following categories based on usefulness: shipping, bundling, warehousing, storage fulfillment services, and other services. The market is segmented into the following categories: home and kitchen application; sports and leisure; books and stationery; beauty and personal care; consumer electronics; clothing and footwear; healthcare; and consumer electronics; beauty and personal care; automotive; and other.

Based on Type

The shipping fulfillment service was the highest contributor to the market, with USD 34557.91 million in 2021, and is estimated to reach USD 84191.67 million by 2030, at a CAGR of 10.4%. The warehousing and storage fulfillment services have the second-largest market and are expected to witness significant growth at a CAGRs of 9.2%.

Based on the Application

The clothing & footwear segment was the highest contributor to the market, with USD 23019.39 million in 2021, and is estimated to reach USD 58408.73 million by 2030, at a CAGR of 10.9%. Customer electronics is expected to witness significant CAGRs of 12.7%.

When considering market share in terms of revenue, the shipping fulfillment service type segment held the largest market share. The expanding activities of cross-border trade, in conjunction with the policies of trade liberalization, have been a significant contributor to the high percentage of this segment. A substantial increase in disposable income available to consumers is another factor that has helped pave the way for market expansion. Customers' growing preference for foreign brands is another factor.

Throughout the forthcoming period, it is anticipated that the high internet penetration rate, in conjunction with the high number of people who use social media, will further drive growth in the market for shipping fulfillment services. Bundling and kitting products are two methods that online retailers are increasingly turning to reduce the expenses associated with shipping and handling orders placed through their websites. The retailer’s revenue can be increased because it encourages customers to buy and use an unused product that would otherwise be sitting on the shelf. Therefore, e-commerce businesses are actively searching for their fulfillment service provider to handle this task to reap the benefits of bundling. This is one of the factors contributing to this segment's high growth throughout the forecast period.

Recent Developments

• May 2022- Rakuten Super Logistics Expands Order Fulfillment Facilities to Miami and Denver Markets