The recent announcement of Chinese ecommerce platform
company, Alibaba, to invest in logistics infrastructure should come as a
welcome economic boost to China. Long dependent on exports, China is showing
signs of a marked slowdown as external demand for manufactured goods are on the
decline. As such, the government and private companies are making investments
in the country’s logistics infrastructure to spur domestic spending. Estimated
at about 18% of its GDP, logistics costs remain high due to such issues as the
lack of warehousing, the need for roads and rail to connect to all parts of
China and the cost of delivery in general.
Despite the economic slowdown, ecommerce remains strong in
the country. In fact, according to market research company, iResearch, for the second
quarter, the value of online shopping transactions climbed almost 52%
year-on-year to 268.4bn yuan or about $42.3bn. For 2012, it is expected
ecommerce will represent 6% to 7% of China’s total retail sales. That’s about
on par with the US.
However, it’s beginning to look a bit like a free for all as
logistics providers - domestic and international - as well as retailers vie for
a piece of the ecommerce logistics action. For example, in 2011, Alibaba
announced it would invest a considerable amount to build a network of
warehouses across China. So far, the company has acquired land in Tianjin,
Shanghai and Guangzhou to build large warehouse complexes. The company plans to
build six to eight regional warehouse hubs.
Last week, Alibaba announced it was in talks with Chinese
logistics companies – including a warehouse operator and a parcel-delivery
company. The company plans to invest at least $100m in these logistics
companies by the end of this year.
According to some reports, delivery charges have declined
and package delivery speed has improved. Despite these supposed improvements, many
e-retailers, such as VANCL, are developing their own express delivery departments
(which include delivery service and warehouses) rather than depend on logistics
and/or delivery providers.
For other ecommerce companies, such as Tencent, partnering
up with logistics providers is another alternative solution. Tencent and TNT
Express signed an agreement in August in which TNT Express would be the
ecommerce company’s primary road delivery service provider in China.
Meanwhile, domestic express providers such as SF Express and
YTO Express are buying and leasing additional aircraft to meet this growing
demand. They are also leasing additional cargo storage at airports and adding
more delivery options. All of this while international integrators such as UPS
and FedEx wait for approval to operate in the domestic market.
