E-commerce is really big in China, surpassing the United States in making the most online sales last 2013. The e-commerce revenue is almost at 2.19 trillion RMB (266 billion euros) in China, now the biggest in the world. There are a lot of key factors in the success of e-commerce in China, from the products being sold, the different businesses going into the e-commerce platform, to, of course one of the most important factor in its success, parcel delivery.
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Logistics in e-commerce
Whenever someone buys something online, the next step in acquiring your product is actually someone delivering it to your doorstep. Delivery companies are hiring as many people as possible who are willing to travel for hours and hours every day, delivering parcels to different doorsteps or areas, with very little wages. With a very cheap labor force in China, it can be achievable. An ecommerce platform wouldn’t survive without these cheap logistics companies.
But nowadays, the prices of labor in China is increasing, with the lowest of positions having the highest increases in pay. How could e-commerce businesses cope with these possibly increase in payables, when the Chinese market loves the zero to very cheap delivery fees which as a result could mean very cheap items bought?
Solutions of big e-commerce platforms
There are quite a number of big e-commerce platforms in China, some of them are Alibaba’s Taobao and Tmall, and one of its competitors, JD.com. With the problem of logistics at hand, they have different answers or solutions for their e-commerce business structure.
Taobao and Tmall under Alibaba
E-commerce giant Alibaba uses third-party companies for its parcel services, making it harder to control this part in their business. Whether it’s delivered on time, the product is lost, or the product is broken, in the eyes of the clients, all of these are the fault of the e-commerce platform even though its the delivery company’s fault . And now, with the possible salary increase of different logistics men and possibly a higher salary for the e-commerce market or the Chinese market, Alibaba created a solution of joining forces with several e-commerce companies and parcel companies, having defined contract-based solutions that will benefit all parties involved. Alibaba called it the Cainiao allegiance.
This allegiance between companies is also to guarantee the Chinese market that buying from Alibaba could guarantee a same-day delivery nationwide. According to the allegiance and Alibaba, they will have to have nationwide warehousing over different key cities in China over the next 5-10 years, and transform a few of them into logistics hubs for the country. The allegiance will be under a very “Open Logistics Platform” where companies under the allegiance, Taobao sellers, and the B2C websites (Tmall sellers) can openly share all logistics plans, warehouses, and other facilities.
Alibaba is still very open to other companies willing to join this allegiance so as to work for the common goal of eliminating the possible arising logistics problem in China.
JD.com is one of the largest e-commerce industries in China, known for their wide range of electronics consumer gadgets in the online world. It is also, by far, one of the oldest e-commerce platforms in China. Unlike Alibaba’s Taobao and Tmall that has its own third-party payment company Alipay, JD.com usually relies on delivery couriers in getting their “payment on delivery” services. It is a bit unreliable as this method could mean a lot of problems involving money, giving them another problem involving parcel services. Seeing the up and coming logistics problem for the e-commerce markets and their current services like “payment on delivery”, JD.com decided to branch out and open its own logistics company instead. Hiring over 24,000 delivery guys for JD.com, they could deliver to your doorstep as fast as 3 hours after your transaction online. But could they stay in the game when salaries/wages of these delivery guys are supposed to increase, we just have to wait and see.
Understanding the importance of delivery services in e-commerce
To understand the importance of the problem here you have to bear in mind that delivery services are what will make the difference between e-commerce platforms on the long run. Indeed, Chinese clients are very picky when it comes to services and always have very high expectations about this aspect of buying online.
As a conclusion it is fair to say that whoever finds a cost-efficient solution to this problem will win the e-commerce war that has been raging for a few years now.
- For more information about the other keys to success in e-commerce in China, click here and here.
- If interested in entering the e-commerce industry in China or want to know more about it, go to our website at http://ecommercechinaagency.com/ or contact us.