Logistics Impeding E-Commerce Growth in China
Thanks to the hyper-growth of e-commerce in China, bicycles, scooters, pedicabs, and pedestrians increasingly have to compete with a new breed of guided human missile – the e-commerce delivery man. Led by Taobao the surge in e-commerce in China has also caused exponential growth to the country’s domestic logistics sector. In their Blue Book study into e-commerce in China, CSLA reports that private logistics companies are doubling their size every year to keep up with demand.
While speedy delivery times can be expected in the big first tier cities like Beijing, and Guangzhou, ensuring efficient, safe and secure product delivery across the entire country is a monumental challenge for any e-tailers in China. Delivering to office towers in Shanghai’s CBD is one thing, delivering the far reaches of Tibet, completely another.
This Technode article delves into the issues logistics companies are facing and the delivery impediments to growth for e-commerce in China. Although already 18 months old, the situation described is still the same today and there is no real solution on the horizon.
Luckily, the Chinese Government sees e-commerce as key to boosting domestic consumption and stimulating growth as China transitions away from being an export led economy. The Chinese Government has already spent billions of Renminbi to upgrade the nation’s highway system, and within a few years the bullet train network will be completed and criss-cross the entire country.
This action is encouraging, yet China’s logistics sector is still largely closed to foreign operators who may have the expertise to alleviate the problems. According to the Global Times, China’s State Postal Bureau just recently granted FedEx and UPS access to up to eight more cities in China. Although an important step, in the scheme of things, eight cities is a pittance considering China has hundreds of cities with populations in the millions.
International logistics company DHL did attempt operations in China and through worldwide fashion event partner IMG even sponsored China Fashion Week’s Young Designer Award. Yet after incurring massive losses DHL ceased their Chinese domestic operations in 2011 and now only focuses on international shipments in and out of China.
As infrastructure and access improves, efforts also should be focussed on improving the additional services included with e-commerce deliveries. International fashion e-tailer Yoox has been leading such initiatives in China and provides a wait-while-you try-on service that permits customers to return orders if they aren’t right.
Fashion companies may wish to take note of KFC’s delivery service in China that apparently caters to customers requests for handsome delivery boys.
The quickest solution for many e-tailers in China may be to invest and build their own logistics companies, yet covering every mile of China will always be a challenge. The reverse is occurring too and Chinese logistics operators including Shun Feng have opened their own e-commerce platforms to tap into the growing appetite for online purchasing.
Next week Maosuit will post an interview with specific China logistics issues that all fashion and luxury brands should be aware of.