China is revolutionizing its logistics network through a new conglomerate setup by the Alibaba Group, China’s largest e-commerce group. The goal of the new logistics network is to change up China’s current logistics system and to be able to deliver parcels within 24hours to any location in China. Not only is the move expected to boost China’s e-commerce landscape, it will also bring opportunities to retailers that were previously not able to reach customers in remote places.
E-commerce in China is growing rapidly and has grown from virtually nothing to a 200+ billion industry in the last five years. A recent report from Price Waterhouse Coopers found that the Chinese consumer shops online at least once a week, the highest percentage in the world, above the US and EU average. During “Single’s day” in China, the biggest e-commerce giant reported sales of over $3 billion USD in 24 hours, once again proving the increasing purchasing power of the Chinese consumer.
The growing E-commerce industry and the fact that China’s consumers are becoming more affluent, has spurred several companies to team up and revolutionize China’s national logistics network. Alibaba Group, China’s largest e-commerce company and initiator of the new logistics network, said it plans to invest up to $16 billion USD over the next 5-8 years to develop what it is calling the China Smart Logistics Network.
The new company, CaiNiaoNetwork Technology Co., Ltd., has been created to form the base of the system and manage the network. Major shareholders include Alibaba Group, retailer YinTai Group (that possesses high-end malls scattered across China) and several large Chinese courier companies.
The new move is expected to transform logistics in China, which is still lacking far behind many developed nations. Retailers and online businesses alike are welcoming the new developments and are excited about the prospects of more opportunities for their businesses. The goal of the China Smart Logistics network is to be able to deliver packages to domestic customers within 24hours. In a country the size of China, this constitutes quite a challenge but also offers tremendous opportunities.
According to Alibaba’s Group’s founder Jack Ma, there are currently about 25million parcels delivered in China every day, and that figure is expected to rise to 200million in 10 years.
Not only will the China Smart Logistics Network benefit domestic companies, it will also benefit foreign-owned companies seeking to deliver a higher level of service to their customers in China. Offering a high level of service is still one of the key points for foreign-owned companies to distinguish themselves from the domestic competition. Due to the fact that the level of service in China is generally still quite low, the new logistics network is expected to be of great use to foreign companies involved in the Chinese market.
How will China’s future logistics network impact your business?
This article was written by Duco van Breemen, strategy manager at Launch Factory 88. For more information on doing business in China, follow us on LinkedIn & Twitter, or send an email to firstname.lastname@example.org
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