• ITVI.USA
    16,350.840
    -55.350
    -0.3%
  • OTLT.USA
    2.731
    0.025
    0.9%
  • OTRI.USA
    21.660
    -0.160
    -0.7%
  • OTVI.USA
    16,343.200
    -45.660
    -0.3%
  • TSTOPVRPM.ATLPHL
    3.520
    0.380
    12.1%
  • TSTOPVRPM.CHIATL
    2.960
    -0.660
    -18.2%
  • TSTOPVRPM.DALLAX
    1.610
    0.250
    18.4%
  • TSTOPVRPM.LAXDAL
    3.340
    -0.130
    -3.7%
  • TSTOPVRPM.PHLCHI
    2.100
    -0.250
    -10.6%
  • TSTOPVRPM.LAXSEA
    3.860
    -0.220
    -5.4%
  • WAIT.USA
    126.000
    -2.000
    -1.6%
  • ITVI.USA
    16,350.840
    -55.350
    -0.3%
  • OTLT.USA
    2.731
    0.025
    0.9%
  • OTRI.USA
    21.660
    -0.160
    -0.7%
  • OTVI.USA
    16,343.200
    -45.660
    -0.3%
  • TSTOPVRPM.ATLPHL
    3.520
    0.380
    12.1%
  • TSTOPVRPM.CHIATL
    2.960
    -0.660
    -18.2%
  • TSTOPVRPM.DALLAX
    1.610
    0.250
    18.4%
  • TSTOPVRPM.LAXDAL
    3.340
    -0.130
    -3.7%
  • TSTOPVRPM.PHLCHI
    2.100
    -0.250
    -10.6%
  • TSTOPVRPM.LAXSEA
    3.860
    -0.220
    -5.4%
  • WAIT.USA
    126.000
    -2.000
    -1.6%
American Shipper

China’s e-commerce race

   If it sometimes seems as though the momentum of e-commerce in North America has the force of a runaway train, chew on this: e-commerce sales in China are estimated to surpass those in North America this year.
  
Indeed, China’s consumers have taken to buying online as quickly as multinationals took to producing goods in China. There are a couple key dynamics driving this surge of $265 billion in e-commerce revenue.
  
First, a cadre of e-commerce retailers offer a wide range of products, along with enticing services like free shipping and returns. And second, the nature of China’s economic expansion means consumers in far-flung places want goods, but don’t always have access to them in brick-and-mortar shops. Those consumers do, however, have access to the Internet.
  
Here’s the thing, though. E-commerce in China may be growing wildly, but it’s nowhere near a profitable business.
  
“All e-commerce companies in China are losing money,” said James Wemyss, sales manager in China for Pacific Millennium Packaging. “It’s a bloody business. It’s a rosy picture with growth, but logistics costs are killing them.”
  
Speaking at the Journal of Commerce’s TPM Asia conference in Shenzhen in October, Wemyss said e-commerce companies have been most concerned with growing market share and legitimizing the idea of online shopping and delivery.
  
The competitive landscape is cutthroat, with a handful of companies vying to be the most recognized names. Among those competitors are firms that are familiar to North American e-commerce consumers: Amazon and Walmart. But those two giants are near the bottom of China’s totem pole, where the leader is Alibaba, followed by a collection of China-based e-commerce retailers with Chinese names.
  
Walmart, incidentally, operates under the name Yihaodian in China. Amazon, the leader in North America, has an estimated market share in China of between 3 percent and 4 percent.
  
Wemyss said the big names in North America and Europe are hoping they can leverage their global networks.
  
“There’s an opportunity for collaboration between the U.S. and China entities in terms of shipping goods from one region to the other,” he said. “Right now, they use trading houses to get goods from one region to another.”
  
The fierce competition manifests itself in some sky-high service expectations. In Shanghai, goods bought online can often be delivered in three to four hours. The more problematic, and costly, issues come about when retailers seek to serve buyers located in inland provinces.
  
“E-commerce companies are facing big issues,” Wemyss said. “They’re offering free shipping from Shanghai to inland provinces. If the customer says, ‘I don’t like the color (of the product),’ they lose a lot of money. No e-commerce company can make a customer pay for shipping because they’ll just jump to another competitor. But there will be some limits, and the e-commerce providers are building (distribution centers) to cut down on these costs.”
  
Indeed, there is growing recognition that the logistics costs are not sustainable.
  
“If you look at all the e-commerce companies, they’re all backed by big resources,” he said. “What they really need to do is address logistics costs. I’ve heard it’s anywhere between 20 and 40 percent of costs. And it’s largely the last-mile costs. I’ve seen motorcycles carrying 20 boxes at a time. Is that sustainable?”

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