Foreign media evaluates the current status of China's e-commerce logistics: profound changes are about to hit

Foreign media reported that according to statistics from international logistics consulting firm Armstrong & Associates, the global logistics market is currently worth about $9 trillion, and the Chinese mainland market accounts for $2.2 trillion. Among them, the express delivery industry, which is worth $43.5 billion, is the fastest growing sector, with an annual compound growth rate of more than 30%.

Therefore, while low express delivery costs are gaining more and more favor among consumers, many investors are also beginning to become interested in China's express delivery industry.

Current situation of e-commerce logistics in China

"In a way, Chinese consumers are spoiled," said Duncan Clark, chairman of international consultancy BDA. "Because of the low delivery costs, Chinese consumers prefer online shopping compared to the United States and Europe."

Duncan said that the average express delivery fee in China is only $1.9 (about 13 yuan), while the average express delivery fee in the United States is as high as $5-10 (about 35-69 yuan). Therefore, Chinese consumers have no worries about buying half a dozen sweaters and then returning five of them by express delivery. At the same time, it is common to see couriers walking around the streets parking their bicycles on the side of the road to sort packages.

However, scenes like this may soon disappear from China's logistics industry.

John Song, head of Deloitte China's logistics and transportation industry, said: "China's logistics industry is changing very fast. There are already many companies calling themselves 'tech logistics' that have invested huge amounts of money in IT systems, big data, drone delivery, autonomous driving and last-mile delivery."

Perhaps the most typical example is Cainiao Network, of which Chinese e-commerce giant Alibaba holds a 47% stake.

Unlike Amazon , JD.com and other companies that have built their own logistics systems , Cainiao Network has created a logistics map that radiates across China by joining forces with dozens of large Chinese express delivery companies (including SF Express, STO Express, YTO Express, ZTO Express, Yunda Express, ZJS Express, Huitong Express, etc.), and has helped express delivery companies to achieve more efficient delivery through data platforms. The company's ultimate goal is to "ensure that any region in China can be delivered within 24 hours", and as of now, 70% of express parcels are running on the Cainiao platform.

Clark Duncan, chairman of BDA, noted that the emergence of Cainiao Network is similar to the creation of a private parcel delivery service by Wells Fargo in the mid-19th century out of dissatisfaction with the inefficient way the national post office does business. Wang Wenbin, CTO of Cainiao Network, said that even if our IT systems are upgraded, Chinese express delivery companies are still far behind companies such as UPS and FedEx. Fortunately, although we started late, China is fully capable of achieving a leapfrog change in the express delivery field.

To be sure, China is still a labor-intensive market and faces a host of problems, such as inaccurate postal codes and the emergence of new addresses due to rapid urban expansion. However, Cainiao Network has reduced delivery time, cost and error rates through a standard address database and unified digital coding.

By reducing paper documents and adopting electronic waybills, express delivery companies can reduce costs by an average of RMB 0.54 per order. Wang Wenbin revealed that Cainiao Network saved about RMB 1 billion in costs in 2016 through this method.

But a topic that the outside world is more concerned about is how long it will take for Cainiao Network, which has been established for three years, to achieve profitability.

Profound changes are coming

Jim Tompkins, head of supply chain consulting at global consulting firm Tompkins, described Cainiao Network's operating model as "pre-click competition and post-click collaboration."

"Through multi-party cooperation, Cainiao and traditional express delivery companies can achieve a larger scale. This is very smart and an ideal cooperation model. In other words, sending your package and my package together means maximizing data utilization, improving efficiency and reducing costs," said Tompkins.

Wang Wenbin also said that the involvement of big data also means that we can manage inventory more accurately and know in which area the goods should be stored in advance.

“If we can integrate product sales data from platforms such as Tmall and Taobao, we can know exactly how many packages will be shipped to Shanghai tomorrow. Ultimately, we can provide end-to-end forecasting services for express delivery companies, warehouse management companies, merchants and supply chain management companies.”

Elinor Leung, head of communications and internet research at CLSA in Hong Kong, said the data showed Amazon’s self-operated logistics model would not work in China.

He said that Amazon's 230,000 employees need to handle 5.8 million packages a day, while JD.com's 100,000 employees need to handle 3.5 million packages a day. If we increase this number of packages to Alibaba's level of tens of millions of orders a day, we will need to hire 1 million employees. But the fact is that Cainiao Network has only more than 1,200 employees.

John Song of Deloitte believes that industry consolidation of express delivery companies is imminent, and there are only three largest express delivery giants in the world: UPS, FedEx and DHL.

Evan Armstrong, president of international consulting firm Armstrong & Associates, said: "Today, competition in the logistics industry is still very fierce, and many large international express delivery companies are spending huge sums of money to build express delivery networks in China. Therefore, we believe that the rapid development of this market in the future will attract more investment, and at the same time, it will be accompanied by more internal industry consolidation."

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.