Sunday, June 2, 2013

Chinese ecommerce logistics heats up

Competition continues to heat up as China’s two largest ecommerce companies, Alibaba and Jingdong (formerly known as 360Buy) go head-to-head in the logistics and last-mile delivery space. Last week Alibaba officially announced its plan to create a logistics network to connect all of China with a goal to provide same day delivery anywhere in the country. Alibaba plans to accomplish this via partnerships – depending on express providers such as Shentong Express, ZTO Express and YTO Express for last mile delivery. As for regional distribution centers, it is likely Alibaba will take ownership of most of these facilities allowing its customers to utilize space and value-added services.

Meanwhile, Jingdong has opted to own its logistics network. The company is building its network across the country and currently has six large logistics centers, over 900 distribution stations and covers over 1,000 districts and counties. In mid-May, Jingdong announced the building of its newest logistics center in Shenyang. Expected to be completed end of 2013, the facility will be about 174,000 sq m and will be highly automated, similar to Amazon facilities.

Jingdong’s logistics subsidiary accounts for more than 85% of all orders placed on Jingdong’s websites. Interesting to note, not only does its logistics subsidiary handle deliveries on behalf of Jingdong but it also has an express license from the Chinese government to provide similar services for other companies.

The fierce competition between China’s two largest ecommerce companies has prompted Jingdong to expand its last-mile delivery options. Dubbed as the “speed-up” project, Jingdong now offers 3-hour delivery within Beijing, Shanghai, Guangzhou, Chengdu, Wuhan and Shenyang. Its courier network utilizes vans and bicycles to deliver from city warehouses directly to customers. Payment options include credit card or cash on delivery.

Simultaneously, the company is also offering evening delivery services and later cut-off times to the same cities. According to its press release, Jingdong now offers same-day, next-day and timed delivery to 150 cities across China.

Real-time tracking of deliveries is also provided for Jingdong’s customers.  The company outfits its employees with satellite-based tracking devices so customers can track everything from what time their purchases were packed to where the delivery person is via a map and also how to reach the delivery person by mobile phone.

Competition within the largest ecommerce logistics market will continue and perhaps improve a domestic network that has been lacking in technology, warehousing and distribution facilities and last-mile service options. No matter what option Alibaba or Jingdong may take in managing their logistics network, the ultimate winner in this environment will be the Chinese consumers and SMEs.