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GXO Eyes a $600B Logistics Market by 2027

The logistics of moving goods through the supply chain is potentially a $600 billion market by 2027, and GXO Logistics aims to be right in the thick of that exchange.

The current market is roughly $456 billion across North America and Europe. GXO currently counts $9 billion in annual revenue, which is why the company sees “significant growth ahead,” according to Mark Manduca, the company’s chief investment officer.

GXO manages outsourced supply chains and warehousing, with 974 warehouses and 1,200 global retail customers that include LVMH, Apple, Nike, Spanx, Kering, JD Sports, Marks & Spencer and Zara.

“Our growth is propelled by the three massive tailwinds of e-commerce, outsourcing and advanced automation,” Manduca said. GXO holds a 5 percent share of the $130 billion in logistics spend in North America and Europe that’s outsourced. “There’s opportunity for another $300 billion that’s currently in-sourced,” he said. “Given our asset-light business model and continuous deployment of technology, there is vast runway for expansion.”

GXO is the world’s largest pure-play global contract logistics provider. It was spun off from XPO Logistics in 2021.

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Manduca spoke about scaling the company’s expertise and how it has first-mover advantage. “We intend to keep that lead and grow that lead going forward,” he said. “I can see a scenario where the top players end up taking a significant market share in this industry.”

Automation is also playing a key role in the space. GXO adapts hardware and software options to suit specific needs. One example Manduca cited was Wayfair, noting that moving its larger furniture pieces requires solutions different from what other retailers might recquire.

Twenty years ago, businesses were pushing boxes around, but the warehouse of the future is becoming more and more automated. That means instead of 16 picks an hour, a robotic arm can do 300 per hour, Manduca, who was a presenter this week at the UBS Global Consumer and Retail Conference at the Lotte New York Palace, said. He told attendees there is a need for outsourcing since companies no longer are able to do it on their own.

“Reverse logistics” is another big issue for companies, where one in three items bought online are being returned directly to the warehouse. Manduca said some companies can take weeks to process a return before it can be resold. “It you’re dealing with a product that is seasonal—as a potentially fast-fashion item—by the time it’s resold, it may completely be out of season. It’s going to go to a third-party reseller for potentially zero margin,” Manduca said. The ability to process returns within hours or even days helps warehouse volume move faster, he said.

The company also uses AI to help retail customers better determine what’s selling and when. Manduca said a typical fast fashion business has 70 percent gross margins, but might be dumping 30 percent of the mix at “T.J. Maxx every six weeks.” In one example, AI data helped a fast-fashion retailer manage their inventory better. In the T-shirt category, pink tees weren’t selling at all, while blue tees were selling on Monday. Manduca said the retailer was holding the wrong inventory in their warehouse. AI data resulted in cutting the T-shirt stock-keeping units in half, which he said helped save about “seven-and-a-half percent in their gross margin.”

Manduca also sees nearshoring as an avenue for growth. He said automation can be implemented to do menial tasks so people spend less time picking and packing and “moving goods left to right.” Manduca said consumer tech companies have been diversifying across Southeast Asia, with “Bangladesh and Turkey the winners in the textile sphere.” Elsewhere, consumer technology is also playing bigger roles across the U.K., U.S. and the Mexican market.

“We’re very excited about that three-and-a-half trillion dollars of goods that are coming back on shore,” he said, adding that GXO views its as a “multi-billion dollar opportunity.”