Article by Cathy Morrow Roberson from Transport Intelligence - Published on 12th January 2013
This article was originally produced at http://www.americaslogistics.blogspot.co.uk/2013/01/fulfillment-and-logistics-are.html by Cathy Morrow Roberson
China’s ecommerce market continues to skyrocket with estimates of 2012 B2C sales likely to top $107bn. However this growth has placed pressue on the logistics infrastructure resulting in delivery issues. Not only is delivery a problem, but according to 360Buy, one of the largest Chinese ecommerce providers, “Ecommerce is developing quickly but fulfillment and logistics are the key bottlenecks.”
As such, a particular emphasis on fulfillment and logistics to satisfy this ecommerce demand is underway. Not only are express providers such as SF Express, YTO and STO providing targeted warehousing ecommerce solutions, but ecommerce providers such as Alibaba, 360Buy and Vancl, are creating their own logistics divisions.
STO recently announced it would begin warehousing services to serve the Shanghai, Hangzhou and Jiangsu markets. According to its website, SF Express operates 14 warehouses primarily along the country’s coastal region. However, as ecommerce increases, particularly for those tier 2 and tier 3 cities further inland, the need for adequate warehousing will continue to increase. In fact, based on an AT Kearney study, cities such as Macau, Luche, Ezhou and Quiqihar are among the fastest growing in terms of total online spending. Adequate warehousing is indeed in short supply which is evident in rental rates. According to DTZ, rent at a logistics park in Shanghai has increased 85% year-over-year.
Besides warehousing, delivery still remains problematic. The fragmented domestic express market is highly competitive and to achieve a profit is difficult for these providers. However, most ecommerce retailers tend to rely on the top ten largest Chinese domestic express providers which have resulted in a pricing war among these providers. Still, as logistics competition from ecommerce providers increases, the need to differentiate and make a profit in this market is necessary. Not only are some express providers expanding service offerings into the warehousing segment but many of these providers are also launching their own ecommerce websites.
To add to the worries of these providers is the fact that 360Buy’s logistics subsidiary, Jiangsu Jingdong Information Technology Company, received approval for an express delivery license last year. It is now able to run as an independent business and be open to third party orders. This may be more of a concern to domestic express providers than that of UPS and FedEx receiving limited domestic licenses to operate in select cities.
The Chinese ecommerce logistics market is definitely not for the faint of heart. Competition remains fierce as inefficiencies in delivery and fulfillment options persist. Still the opportunity is too good to pass up for many providers. Perhaps last year’s government mandate to improve and expand warehousing across the country will help. Also, the limited domestic licenses granted to UPS and FedEx may also have an impact, although the two companies face stiff competition.