Logistics a Challenge for Chinas eCommerce Growth

STO express crew deal with express packages at assembly line on November 12, 2014 in Wenzhou, Zhejiang province of China. Online shopping websites offered massive discounts on Singles' Day (November 11) every year, which brings huge pressure to China's express delivery business during that day.

Copyright ChinaFotoPress, Getty Images

Logistics a Challenge for China’s E-Commerce Growth

As the market expands the issue is the scarcity of high-quality logistics providers in China, according to  a new report from A. T. Kearney. This causes problems for e-commerce firms, including late deliveries, damaged and lost parcels, negative attitudes from delivery people, slow cash-on-delivery processes, poor return procedures, and no special services such as installation or the ability to try on purchases.

E-Commerce will be making quite a leap in sales over the next three years.  A projected 25% growth rate will move sales to $718 billion by 2017, according to a new study by A.T. Kearney. Currently the market is at $390 billion.

The factors underlying the increase are:

More online shoppers The number of online shoppers continues to grow. China has 600 million Internet users—after 53 million new users connected in 2013. However, at only 46%, Internet penetration is still low compared to 83% in the United States.

More purchasing power. Personal disposable income per capita reached $3,000 in 2013 and is expected to rise to more than $5,000 in 2018.

More online security When Web 2.0 arrived, e-commerce sites in China began tracking and publishing credibility records of online sellers, reducing the risk of fraud.

A challenge to the expanding market is the scarcity of high-quality logistics providers in China, according to the report . This causes problems for e-commerce firms, including late deliveries, damaged and lost parcels, negative attitudes from delivery people, slow cash-on-delivery processes, poor return procedures, and no special services such as installation or the ability to try on purchases.

“As the overall geographic coverage of the Chinese e-commerce market expands, the ability to offer reliable and consistent services and delivery will be the major source of competitive advantage,” says A.T. Kearney partner and study co-author Mui Fong Goh. 

"The research group offers  e-commerce companies  three options to solve these issues: build their own logistics networks, outsource to third-party providers, or form partnerships and acquire existing providers. 

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish