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Pandemic's revolution in transportation and commerce rivals 19th-century railroad construction

"Alternative logistics providers are trying to create a private delivery network across the country — because that's what we need," said one trade expert.
Weld County Road 49 set to open between I-76 and Kersey.
Trucks and cars roar by on Weld County Road 49 between Interstate 76 and Kersey near Kersey, Colo., in November 2017.Helen H. Richardson / Denver Post via Getty Images

Nearly 200 years after the first freight cars carried goods over railroads, the country is in the middle of a new revolution in transportation and commerce fueled by the pandemic — online shopping delivery.

Millions of people have relied on e-commerce to get everything from toilet paper to groceries to puzzles to sweatpants during the pandemic. Online retail sales were up by 32 percent over last year, a figure that wasn't expected until 2022, according to the digital research company eMarketer.

"If the pandemic were to continue or a vaccine was distributed right away, it really doesn't change anything, because this was a train already moving down the track," said Rich Thompson, who leads the global supply chain and logistics solutions team for the commercial real estate company JLL. "It's just now accelerating."

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The surge in online shopping led Amazon to add delivery trucks and limit inventory. Target increased the number of employees dedicated to packing products bought online and mandated overtime at some warehouses. Walmart rolled out popup distribution centers to help deliver online orders during the holiday shopping season.

It all adds up to a historic expansion of delivery networks that rivals the railroad boom of the 19th century, Thompson said.

"Parcel deliveries are akin to the creation of the American railroad system," he said. "These alternative logistics providers are trying to create a private delivery network across the country — because that's what we need."

After decades of consolidation and labor abuse, railroad companies broke up into competing entities in the early 20th century as the federal government enacted antitrust legislation and created the Federal Trade Commission to enforce laws that promoted industrywide competition.

Today's online shopping delivery networks are not railroad lines. But the country's biggest e-commerce companies are snapping up smaller delivery players left and right. FedEx finalized its acquisition of Shoprunner this month to expand its online delivery network. Target announced this year that it would acquire Deliv, a same-day delivery startup. Last month, Walmart announced its acquisition of Joyrun, a peer-to-peer last-mile delivery service.

President-elect Joe Biden and Vice President-elect Kamala Harris — both of whom have been vocal about the potential dangers of a monopoly among the Big Tech companies — head to the White House in January, raising questions about how the next administration will wrangle industry giants like Amazon.

"In every other revolution that we've had technologically, it's taken somewhere between six years and a generation for a government to come in and level the playing field again," Biden told The New York Times in January. "All of a sudden, remember the Luddites smashing the machinery in the Midlands? That was their answer when the culture was changing. Same thing with television. Same thing before that with radio. Same thing, but this is gigantic. And it's a responsibility of government to make sure it is not abused."

IMAGE: Amazon deliveries
A contractor working for cleans a delivery truck in Richmond, Calif., on Oct. 13.David Paul Morris / Bloomberg via Getty Images

Amazon, Walmart and Target, whose stock prices have soared over the last nine months, have largely benefited as people stayed home during the pandemic. But brick-and-mortar retail was caught flat-footed. To compete with the heavyweights, smaller retail companies turned to "spot market" companies, which offer short-notice delivery services but at much higher rates, said Zac Rogers, an assistant professor of operations and supply chain management at Colorado State University.

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"A lot of the smaller guys are saying we have to eat the cost, because it's hard to pass costs on to customers because so many people are struggling," he said. "You have these big guys, and you have to keep up with the service level and competitive prices of these giants who have giant apparatuses — and that is a challenge."

As sales and stock prices soared for Target, Walmart and Amazon, small brick-and-mortar businesses were crushed under the pandemic. Sales at small businesses stood at negative 28 percent at the end of the summer, down by 9 points from May, said Christopher Carlozzi, Massachusetts state director for the National Federation of Independent Business.

Rogers said: "Big retailers who have their own fleets and their own ability to deliver to places, they've done well. It's the more specialty folks who rely on other logistics companies who really have a hard time, because supply has been exceeding demand for nine months."