2) Need for speed? E-commerce and speed-to-market premiums
The need for speed is a fundamental change that we saw in 2020. It is really a combination of two things related to the overall effect of the COVID-19 pandemic:
- The immediate need in early 2020 for PPE sourced from Asia
- Changes in consumer buying behaviors and the acceleration of e-commerce
Instead of spending money on experiences, travel or restaurants, consumers are spending money ordering stuff while seated on the couch, and stuff is made in Asia. Both of these changes created an immediate need for faster ocean transportation services from Asia to the United States—even at a hefty premium.
What has happened in the marketplace as a result of those two changes, is the introduction of the premium and express ocean services that we think are here to stay—especially to Southern California. Historically, the market has always had Matson, which for years has been the gold standard for offering a premier service. Many carriers over the last five to ten years have tried to copy it but they have been unsuccessful; the market was simply not ready for more than one.
Recently, this type of premium offering has gained momentum. We now have numerous services in the marketplace that offer a similar 11 to 12-day service from between one or two ports in Asia—primarily into Southern California. These services come at a premium, and that premium is significant.
As a result, customers now have a menu of services available to them. As importers plan and strategize for 2021 and 2022, they are going to need to be able to react to those changes and flex up, flex down, speed up or slow down within their supply chains. And each carrier can have completely different programs. You may have a contract with one carrier for a specific service, but if you need to venture out and use an express service on that same carrier, you may not have access to that within your contract. Importers will have to know what their options are as they go into 2021 and 2022, because these speed-to-market premium services are here to stay. If you can create a strategy to incorporate that and, ultimately, be nimble, then you will be in a position to have a really strong and resilient supply chain.