Upset the Shopping Cart: Can forwarders survive Chinese e-commerce?

Expanding platforms, widening networks

But there is growing concern amongst forwarders that the high-times will not last for all players involved. Tiger Wang, air import director for Kintetsu World Express (KWE, China), said that Alibaba and China’s number-two e-tailer, JD.com, are increasingly pursuing closed-loop logistics models. With e-commerce, traditional import and export business processes change, Wang said. For traditional logistics

companies, the links in the chain become fewer and fewer. With a higher degree of integration in the supply chain, he warned, “the logistics market is getting smaller and smaller.”

Although Alibaba and JD pursue many of the same consumers through similar web portals, the strategies of both companies are in stark contrast. Alibaba relies on its asset-light logistics affiliate, Cainiao, which maintains a data-intensive platform that integrates more than 3,000 third-party

transportation companies and 15 express delivery companies to complete deliveries. JD, meanwhile, operates 256 warehouses and 6,906 delivery stations and pickup stations across China, and has its own last-mile delivery network. But both companies are united in their efforts to add international links to their fulfillment and delivery supply chains.

Exercising greater control over logistics is bound to reduce reliance on some partners and create opportunities for others, said Shek, of Cargolux. “So far we see no significant changes for carriers, since platforms like Cainiao mainly act as platforms for couriers and freight forwarders,” he said. “In the future, however, we see a potentially strong increase of airfreight tonnage from e-commerce via these platforms.”

In April, JD launched a new subsidiary – JD Logistics – to leverage its in-house delivery and fulfillment technologies, as well as its logistics infrastructure, to optimize deliveries. Richard Liu, chairman and CEO of JD.com said in a statement, “Leveraging our unparalleled access to data from every step of the e-commerce process, from ordering to delivery and after-sales service, JD Logistics will use [artificial intelligence], big data and automation to once again redefine the potential of e-commerce logistics.”

Almost immediately following the launch of JD Logistics, the company began stuffing parcels onto China Eastern Airlines flights as part of a pilot program. The partnership between the two companies was furthered in June with the signing of an MoU to leverage each other’s logistics and technology resources. Soon, JD will have capacity on more than 20 China Eastern flights. Sources familiar with the deal say that international belly or main-deck space is a likely extension of the agreement.

Cainiao, which routes the lion’s share of Chinese e-commerce parcels through its platform, continues to see rapid growth and, in parallel, has big 3PL ambitions. During the fourth quarter of 2017, Cainiao processed some 9 trillion records per day, with average daily parcel volumes exceeding 42 million. With 81 percent of its labels digitized, Cainiao claims to operate the world’s largest logistics database.

In the future, Cainaio will track Fulfillment by Amazon and JD Logistics by offering supply-chain solutions for small- and medium-sized companies. “Just as goods flow, information flows,” said KWE’s Wang. “With the advances brought about as part of the information age, the space in which logistics companies operate will become increasingly narrow.”