HONG KONG — November 11 revealed more than just the profound growth in e-commerce in China.
Singles Day in China on the 11th of November – a day of online shopping, not necessarily romance – spurred $9.3 billion of sales, and the truth is China’s express industry simply cannot keep up.
E-commerce accounts for about 12% of sales in China today, making it the largest e-commerce market in the world. And according to iResearch, China’s e-commerce is expected to grow another 46% in 2014, to a projected $446 billion. Henry Tan, Chief Executive Officer, Luen Thai Holdings Ltd., a publicly traded manufacturer for a wide variety of brands that does more than $1 billion of sales per annum, said that he expects traditional brick-and-mortar retailing to “collapse” as e-commerce continues to ramp up. Tan thinks e-commerce could soon account for 50% of retail sales in China.
But even at today’s level of demand, express companies are struggling to keep up. George Li Dongqi, Group Vice President, SF Express, China’s largest private express company, told attendees at the Asian Logistics and Maritime Conference here this week that the express industry in China has not kept pace. Li said the express industry capacity has been growing about 15% per year in China over the last few years. Obviously, that’s not keeping up with the growth in e-commerce.
This has led some e-commerce providers to move toward handling their own logistics. Some, like JD.com, are setting up warehousing, some are actually facilitating shipments. Unlike Amazon, Alibaba, the largest e-commerce company in China, does not maintain inventory, yet Alibaba has allocated $200 million to develop its logistics capability. This will likely change Alibaba’s approach to inventory, industry insiders said.
“If we cannot provide different options, e-commerce will focus on building logistics in their core competence,” Li told attendees.
Yes, all this e-commerce in China bodes well for air cargo (Tan: “We should all buy FedEx stock”). That is, if the infrastructure will allow it. Steven Verhasselt, an Air Cargo Management Group senior consultant based in Hong Kong, said that there simply are not enough pilots in China to fly the freighters needed to handle all the e-commerce and express volume. And China does not appear to be inclined to change its regulations to allow for more foreign pilots. That, too, is revealing.