Forwarders adapt to serve growing Chinese e-commerce market

Today we begin an analysis of trends in with an overview of growth around the world and a look at how airfreight forwarders are leveraging growing cross-border volumes to boost airfreight consolidations. Tomorrow we’ll examine the way in which e-commerce is changing last-mile delivery to “last-mile pick-up.”

If you would like to learn more about the impact of on the air freight and express industry, join us at the Cargo Facts Symposium in Miami, 10 – 12 October, where we will devote a session to just this subject. To register, or for more information, go to CargoFactsSymposium.com.

By the end of 2016, China’s share of sales is expected to represent  47.0% of the world’s total, and be valued at US$899.1 billion, more than double the value of the total North American market, which is projected to reach $423.3 billion, according to the latest retail forecast from New York-based eMarketer

A SEKO e-commerce logistics warehouse in Hong Kong.

A logistics warehouse in Hong Kong.

The shift away from traditional retail is clearly illustrated by the steady growth rate of the total retail market, which is paltry in comparison to the staggering growth of the segment. Total retail sales were up 5.8% year-over-year in 2015 to $20.8 trillion, with 5.9% annualized growth expected through 2020 when the market is expected to hit $27.7 trillion. The segment on the other hand, jumped 25.5% in 2015, and is expected to continue double-digit growth through the end of 2019. As one would expect, ’s share of overall retail sales is expected to grow from 7.4% in 2015, with a value of $1.55 trillion, to 14.6% in 2020 when sales surpass the $4.0 trillion mark (an estimated $4.06 billion).

Although transactions are likely to continue an upward trajectory in most regions of the world, growth will be most rapid in the Asia-Pacific region. As a region, the Asia-Pacific market is already larger than that of any other region, with more than $US 1 trillion in sales expected in 2016, representing growth of 31.5% over last year’s figures. North America as a region is expected to post gains of 15.6% in 2016. Within Asia, China will continue to be the most important market, expected to clock $2.42 trillion in sales by 2020.

How then, can the airfreight industry capitalize capture its rightful share of this market? We have covered the rise of Chinese express airlines, and cross-border platforms like and FedEx CrossBorder extensively. Such platforms have indeed facilitated the process of purchasing goods from abroad, but often without involvement from the traditional forwarder. Today we look at how one Chicago-based airfreight forwarder Logistics, has refined its business model to serve growing demand.

Within the supply-chain, airfreight has traditionally found its role transporting goods from low-cost manufacturing centers and injecting them into distribution networks that then supply retail outlets within the country of sale. But this is changing, according to Brian Bourke, vice president of marketing at who says“shift happens.” In recent years has seen a major shift in its core business, which was once reliant on inbound volumes from Asia. “If you look at our numbers in just the United States alone, between 2014 and 2015, we have turned into an almost net airfreight exporter, doing more airfreight consolidations in the United States,” and this change is “almost exclusively attributed to the rise of ,” Bourke added.

But how exactly has managed to channel burgeoning in China to boost the volume of outbound consolidations from the United States? has been establishing “omni-channel gateways,” to serve as new hubs in the altered supply-chain. Such a hub can handle local, regional and wholesale demand from one facility, while assisting foreign retailers in linking up to the local market.

Turning back to Asia, last week recently opened a 50,000 square foot omni-channel hub in Hong Kong to support operations, and help overseas retailers overcome the common pitfalls of entering the . James Gange, COO Asia Pacific says many global retailers choose to enter China through a well-known gateway such as Alibaba or Tmall, but that retailers often face challenges when trying to ensure a quality consumer experience. “Especially [regarding] after-sales – what happens with returns, customer service and getting questions answered? Such platforms don’t allow getting those questions answered.” Having local support in Hong Kong enables to continue handling airfreight consolidations, while giving retailers peace of mind that they have local after-sales support.

In the U.S. context, goods are consolidated for export and move through facilities like the one in Hong Kong very quickly. “Usually within 12 to 18 hours upon arrival at the fulfillment center, they move out with labels destined for the final customer” says Gange.

Moving into the future, omni-channel hubs are not just about bringing cross-border imports into Asia, (or vice-versa) is also positioning its hubs to serve outbound demand as well. Noting the impact of trends like ‘fulfillment by Amazon’ (FBA) Bourke says is “developing an offering for FBA whereby customers can ship out product FBA-ready, rather than having it done in the U.S.”

Although the days of large business-to-business consolidations from Asia and Europe may become increasingly eroded for many retail segments, we expect to see more examples of innovative forwarders and carriers finding ways to capitalize on the shift to .

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