The latest report from Ti shows a market still expanding rapidly, but one in which competition, challenges and new entrants are raising questions over future development opportunities
The global e-commerce logistics market grew by 18.2% in 2018. Still a relatively nascent sector, e-commerce logistics growth is well above that seen in other logistics markets. Emerging markets are showing the fastest expansion, but even in developed economies, growth rates in nominal terms are usually in double-digits. Ti expects the global market to grow at an expected nominal 2018-2023 compound annual growth rate (CAGR) of 11.8%.
Ti’s latest figures suggest the cross-border component is a significant driver of this uplift. Cross-border e-commerce is bringing supply chain stakeholders into direct contact and challenging the status quo. But while gaining access to millions, if not billions, of new customers is an attractive proposition for e-commerce companies, targeting purchasers in foreign markets is not the easiest of strategies.
The report also examines the trend for offering more omni-channel retail solutions, likely to be a key requirement moving forward. This is largely driven by the purchasing behaviour of consumers, who demand a seamless experience enabled by the use of different channels to order, pay, collect and return products. They demand more delivery and returns options and leverage retailers against each other to get the best value for their money.
In addition, Global e-commerce Logistics 2019 examines e-fulfilment and last mile cost structures, and provides analysis of structural variations by geography and retail sector.
The report authors spoke extensively with senior management and leaders at the largest e-fulfilment and last mile providers globally, as well as with niche e-commerce logistics providers. A common theme was the threat posed by global retail platforms managing their own logistics requirements whilst also offering services to third parties.
The entry of players such as Amazon, Alibaba and JD.com is forcing many to consider what the future of e-commerce logistics might look like. The report’s lead author, Viki Keckarovska, senior research analyst at Ti, said: “While some would say that Europe’s legacy infrastructure and market structures are unfit for the new e-retail world, it could equally be argued that Europe boasts probably the most efficient logistics and transport sector in the world. Ti’s discussions with logistics executives and leaders in the market suggest Europe’s legacy infrastructure is seen as a hindrance to the development of efficient e-retail distribution networks, with facilities in the ‘wrong’ place and markets which were more focused on B2B rather than B2C deliveries.”
Alibaba’s logistics arm Cainiao Smart Logistics Network said the first 100 million parcels generated during the record-breaking 11.11 Global Shopping Festival orders were delivered in just 2.6 days, nearly five hours faster than a year ago.
The new speed record comes even as the total number of 11.11 orders processed by Alibaba Group’s logistics arm topped one billion for the first time, significantly higher than 812 million at last year’s shopping event. Both are milestones in Cainiao’s drive to improve logistics sector efficiency amid ever-present consumer demand for faster delivery.
All told, the 10th anniversary of 11.11 resulted in over 1.04 billion orders generated within 24 hours. Prior to the shopping festival, Cainiao said it had upgraded its systems and technology to be able to handle over one billion 11.11 orders. That kind of capacity is important, because the societal and economic change may lead to one billion orders a day becoming the norm in the future.
“We handled 152 million parcels during the 11.11 festival in 2013. Today, the industry is now delivering 150 million parcels every single day in China. With this pace of change, we believe that the one billion parcels handled in this year’s 11.11 will become the daily average within the next decade,” said president of Cainiao Lin Wan. “Through non-stop technological innovation and open collaboration, we want our smart logistics network to serve as a robust infrastructure to help the industry meet future needs.”
In 2013, it took nine days to deliver the first 100 million parcels. This year’s record shows how Cainiao has steadily cut delivery times, even as the number of orders it processes has surged.
The steady improvement in delivery speed reflects Cainiao’s broader efforts in building a smart logistics network, which looks to handle the peak of 11.11 – a single day – to create a foundation for handling that volume every day in the future.
For this 11.11, Cainiao updated its technologies throughout its network, including opening the largest robotic warehouse in China. From planning routes to matching inventory allocation with consumer demands, the technologies have effectively deployed resources to maximise utilisation, avoid bottlenecks and accelerate deliveries.
For the first time, new logistics systems such as a high-speed, local-to-local delivery network, made it possible for goods ordered during 11.11 to be delivered directly from stores to customers. For example, the first cup of Starbucks coffee during the 11.11 promotion was delivered by Ele.me to a customer in Shanghai in just over nine minutes after the festival’s midnight start. Delivery within minutes offers consumers a brand-new customer service standard.
Just as technology has improved significantly from last year, so has the capacity for cross-border logistics. In this year’s 11.11, five million import parcels were processed through customs clearance within less than five hours, compared to around eight hours and 57 hours to process the same number in 2017 and 2016 respectively.
To achieve this, Cainiao has worked closely with the customs in China to upgrade their systems, which can now finish clearance of some items within a matter of seconds.
Cainiao and its partners have also arranged bonded warehouses covering over one million square meters nationwide. This bonded warehouse network, which is China’s largest of its kind, has enabled international brands to store the right goods at the closest point to consumers, thereby cutting delivery time. Consumers in over 251 cities in China received their 11.11 overseas orders within same-day or next-day.
Alibaba Group says it generated RMB213.5 billion (USD30.8 billion, AUD42.7 billion) of gross merchandise volume (GMV) during the Singles’ Day sales on 11 November 2018, an increase of 27% compared to 2017.
Australian products Swisse (first) and Bio Island (fifth) ranked in the top 10 products, whilst Australia maintained its position in the top five countries selling to China at fourth spot. In the first hour of the event, sales of Australian lamb increased 775% from last year.
“Today we witnessed the strength and rise of China’s consumption economy and consumers’ continued pursuit to upgrade their everyday lifestyles,” said Daniel Zhang, CEO of Alibaba Group. “Participation from the entire Alibaba ecosystem enabled our brand and merchant partners to engage with consumers like never before.”
In the hours leading up to the shopping event, Alibaba’s video streaming platform Youku hosted the fourth annual countdown gala to celebrate the official launch of the festival. Viewers were able to watch the gala live via Youku, as well as across China on two major Chinese TV stations. This year, the gala featured international celebrity appearances and performances from Miranda Kerr, Mariah Carey and Cirque du Soleil.
Key highlights from the 2018 11.11 Global Shopping Festival:
Top 10 countries/regions selling to China by GMV:
Top 10 imported cross border brand into China:
Swisse (majority Chinese-owned Australian)
Bio Island (Australian)
a2 (New Zealand)
In the first hour of 11:11 Global Shopping Festival, sales of Australian lamb increased 775% from 2017.
Top 10 categories of imported products bought by Chinese consumers by GMV:
Infant and toddler nutrition
Make up remover
Total GMV settled through Alipay was RMB213.5 billion (USD30.8 billion, AUD42.7 billion), an increase of 27% compared to 2017.
Cainiao Network processed more than 1 billion delivery orders.
More than 180,000 participating brands.
Over 40% of consumers made purchases from international brands.
237 brands exceeded RMB100 million in GMV, including leading international brands Apple, Dyson, Kindle, Estée Lauder, L’Oréal, Nestlé, Gap, Nike and Adidas.
230 countries and regions with completed transactions.
Lazada participated in 11.11 as part of the Alibaba ecosystem, bringing the festival to consumers.
The Alibaba Group’s inaugural Sydney eCommerce Expo was held on 21-22 September with the launch of the event at the International Conference Centre (ICC Sydney). Over 175 exhibiting Australian and New Zealand brands and retailers took part in the two-day event focused on helping local businesses tap into the e-commerce enabled Chinese economy. The organisers expected 10,000+ visitors through the expo over its two days.
Australian and New Zealand exhibitors experienced first-hand the retail technology developed by Alibaba Cloud, which allows them to build relationships with Alibaba and its ecosystem of partners, meet with Chinese buyers, and engage directly with Chinese consumers who livestream product demonstrations on Taobao, claimed to be China’s largest mobile commerce destination.
Managing director for Alibaba Australia and New Zealand Maggie Zhou said the Expo’s aim was to provide value to Australian businesses large and small: “The 2018 Expo has been designed to engage big businesses already having great success with our online marketplaces like Tmall and Tmall Global, as well as SME who are looking for knowledge and support to tap into the Chinese market.”
Augmented reality technology powered by Alibaba Cloud was on display at the Expo including the ‘Magic Mirror’, through which real-time personal images can be combined with beauty product to drive sales conversion for brand merchants. Artificial intelligence on display included the ‘cloud shelf’, where Chinese retailers include virtual products on the shop shelf that are available to order online.
A select showcase of Hema supermarket features was also available at the Expo, where attendees experienced the future of grocery shopping in China. QR codes enable Hema shoppers to access product information while customers can pay for their purchases through their mobile devices.
General manager of Alibaba Cloud in Australia and New Zealand Raymond Ma commented: “Retail and technology trends in China are continuing to change the way consumers, sellers, service providers and producers buy and sell. Alibaba Cloud underpins much of this technology, and organised this expo to share it with Australian industry over the two days.”
Executive general manager international services Annette Carey said Australia Post was delighted to participate in the Expo for the second year in a row (it was held in Melbourne for the first time last year). “We’re proud to use our trusted brand and international reach to help Australian businesses grow locally and overseas. We recognise the importance of global trade to local businesses and economies, and we’re committed to helping grow cross-border e-commerce through new international products, services and partnerships with global players like Alibaba.” The Alibaba eCommerce Expo will return to Melbourne for the second consecutive year at the Melbourne Convention Centre from 18-20 October.
Following Tuesday’s announcement of driving its logistics green, Alibaba founder Jack Ma has provided further details on his plans for the group’s logistics arm.
Alibaba Group will invest over 100 billion yuan (approx. AUD 20bn) to build the technical backbone for a smart logistics network aimed at improving delivery reach and efficiency, as well as sharply driving down logistics costs, said executive chairman of Alibaba Group Jack Ma at the 2018 Global Smart Logistics Summit.
The network mainly aims to push 24-hour delivery across China and push logistics costs down to less than 5% of China’s gross domestic product from around 15% at present, and thereby increasing profit margins for the manufacturing industry and logistics sector. It also aims to push 72-hour delivery to the rest of the world.
Over the past five years since its establishment, Cainiao Network, Alibaba’s logistics arm, has witnessed an increasingly intelligent logistics industry as a result of the joint efforts of Cainiao and its partners. Through technology innovation and open collaboration, Cainiao has reduced cross-border shipping time from an average of 70 days to less than 10 days for some countries. The number of B2C parcels that go through customs clearance is now one million every day. Within China, Cainiao’s same-day and next-day delivery now covers 1,500 counties and districts.
“This network is not only national, but global. This is on what we will work closely with our partners to achieve and bring benefits to all,” said Mr Ma. “As the industry will increasingly become tech-driven, Cainiao aims to be the ‘brain’ of the logistics industry. Since the first day of its birth, Cainiao’s mission is not to deliver goods, but to help delivery firms to deliver goods by building a network that links all logistics elements and connects every deliver person, every warehouse, every hub, every city, and every house.”
Today, about 100 million parcels are processed through Cainiao’s logistics platform every day. What has made it possible is Cainiao’s efforts in driving industry digitalisation. For example, the electronic bills and labels have helped digitise and standardise the industry infrastructure.
China’s logistics landscape has undergone massive change in recent years, reaching unprecedented scale. Ma noted the industry started from zero ecommerce parcels and is now delivering 130 million parcels per day, while there are about five million people working at courier and food-delivery companies in the country, and seven delivery companies have gone public.
With that pace of change, it’s not unreasonable that the peak handling during the company’s 11.11 mega-sale will become the daily average a decade later.
“We want to build this network to help the industry to meet the future needs,” said Mr Ma. “Today, the industry can process 100 million packages a day. In the future, we will need to process 1 billion packages a day. The logistics industry need to get prepared for that with a robust infrastructure.”
The company has also announced plans for five global distribution centres. More details in Tuesday’s newsletter.
Cainiao Network Technology Co., Ltd, the logistics arm of Alibaba Group Holding Limited, is to embark on what it claims is the most comprehensive green campaign in China’s logistics industry to date, Alibaba Green Logistics 2020.
Enabled by world-class technologies, the company says, the campaign represents the joint effort across the Alibaba Group to improve material recycling, packaging, route planning and delivery methods in order to work towards a greener future.
By 2020, Cainiao will apply AI algorithms to drive smart routing in 40,000 villages that will shorten the average delivery journey by 30% in rural areas, while the deployment of new-energy vehicles to 100 cities in China will minimise carbon footprint. Cainiao will also expand the coverage of e-shipping labels, an initiative launched by the company in 2014, to 40 billion parcels by 2020.
President of Cainiao Network Lin Wan said: “The logistics industry across the world is looking for green solutions that go hand-in-hand with increased efficiencies. Cainiao, with its market-leading technology, a vast logistics data platform, partners in the Alibaba ecosystem and other industries along the supply chain, has the potential to do much more that will benefit future generations without compromising the interests of our customers now. Green is an important element in building a brighter future for the logistics industry.” Alibaba Green Logistics 2020 will be launched across a number of the businesses in the Alibaba Group. Tmall, Taobao and Xianyu will increase the use of recycled packaging; Lingshou Tong will reuse delivery boxes to serve millions of mum-and-dad stores; and Ele.me will encourage users to place orders without asking for disposable cutlery. These are some of the examples of how the Alibaba ecosystem intends to promote green logistics through this campaign.
Pursuing green logistics has been a long-term commitment for Cainiao. In 2016, Cainiao initiated the Green Logistics Project in collaboration with 32 logistics partners. The following year, the company established the Cainiao Green Alliance Foundation, China’s first charity foundation specifically focused on alleviating the logistics industry’s environmental impact. The foundation pledged RMB300 million to research the promotion of green logistics, consumption and supply chain. Driven by Cainiao’s green initiatives, in 2017 alone the company decreased its carbon footprint by 136,000 tons, saving seven million trees.
Opinion – Lisa McAuley
Attending the inaugural Alibaba E-Commerce Expo in Melbourne helped shed light on the opportunities e-commerce platforms like Alibaba present for small and medium-sized Australian businesses.
Already valued at over USD 16 trillion, online sales are one of the world’s fastest-growing retail channels.
Selling online gives businesses access to a whole world of new customers without many of the challenges, risks and expenses that often come with establishing a physical presence in a new market.
To harness this opportunity, it is imperative that small businesses invest upfront in developing and equipping themselves with the necessary knowledge and skills to make informed business decisions.
Success in online exporting, as in all business, relies on careful planning, risk mitigation and dedication.
Platforms like Alibaba offer new pathways to market in many ways, each of which may present new challenges for new-to-online manufacturers or retailers.
For example, bricks-and-mortar commerce requires a focus on location, merchandise assortment and display, as well as the in-store experience. E-commerce, on the other hand, requires a focus on order fulfillment, logistics, the online customer experience and customer lifecycle management.
Businesses must also ask themselves a number of new questions, such as: is growing a global business via online channels appropriate for my product or service, and what are the right platforms to consider? What tax or regulatory considerations need to be taken into account? What logistics and financing solutions will be required? How do I protect my intellectual property?
Alibaba’s Melbourne conference was a perfect opportunity for aspirational buyers and sellers to explore the cross-border export opportunities provided by ecommerce platforms such as Alibaba. Through exposure to a network of reputable and experienced service partners and buyers, businesses were able to advance the knowledge and skills needed to successfully export to China.
Alibaba is one of many established online marketplaces that Australian businesses can leverage to access the massive international consumer market, but there are also several tools available to Australian businesses who opt for more proprietary solutions to reach new consumers in overseas markets.
Starting a new business or extending market reach overseas is never easy, but by working with platforms like Alibaba and their partners, companies have a new opportunity to grow.
Of course, the Export Council of Australia is always here to help as well. We offer a range of services that can support you to successfully grow your online business, including our international business coaching service and various education programs.
I would like to congratulate Maggie Zhou, Alibaba Group’s managing director for Australia and New Zealand, for convening such a great event in Melbourne. The Alibaba platform is an excellent tool to assist Australian companies in accessing new opportunities, in particular small businesses interested in leveraging the global marketplace to fast-track their own growth. Lisa McAuley is the CEO of the Export Council of Australia.
Australia Post is participating in an initiative with e-commerce company Alibaba and natural health company Blackmores to combat the rise of counterfeit food being sold across China, with PwC acting as an adviser to the project.
The initiative will target the traceability of food products, reducing the risk of fraud and ensuring Australia remains a trusted exporter of high quality food, said Bob Black, CEO, StarTrack, and Executive General Manager Parcels, Australia Post. The project would help guarantee genuine products arrive safely into the hands of Chinese consumers, he added.
“We are delighted Alibaba has invited us to create an innovative platform, which will track food from paddock to plate, strengthening the supply chain,” Black said.
“The initiative will leverage our secure, reliable and fast service to support the authentication of Australian products bound for the Chinese market. Our food producers have a global reputation as being a clean, green and safe provider of food and we are pleased to help deliver a solution to enhance the integrity of their produce.”
The project will explore new technologies, including blockchain technology, to obtain crucial details from suppliers about where and how their food was grown and map its journey along the supply chain. The technology also has the potential to enable up-to-date audits, increasing transparency between producers and consumers.
“Food fraud is known to be one of the biggest issues facing the global food industry, considering the potential health risks associated with adulteration and loss of trust from consumers and governments,” Australia Post said in a statement. “In recent years counterfeiters have targeted popular Australian products such as health supplements, beer and wine, honey and cherries.”
Chinese e-commerce giant Alibaba Group has opened a base in Melbourne to serve as headquarters for its operations in Australia and New Zealand.
“With a local office and expert team, Alibaba Group will help Australian and New Zealand businesses share their world-famous products with billions of customers around the world,” Alibaba Group Executive Chairman Jack Ma said in a statement at the opening ceremony on Saturday, 4 February 2017.
The office on Melbourne’s Collins Street is led by ANZ Managing Director Maggie Zhou, a 17-year veteran of the company who most recently served as deputy general manager of cross-border B2C shopping site Tmall Global. Zhou and her team will support the 1,300 Australian and 400 New Zealand businesses selling on Tmall and Tmall Global, while also working to bring new merchants onto the platforms.
“A physical Alibaba headquarters is a key step in ensuring Australian businesses have the support and information they need to succeed in China and the rest of the world,” Zhou said in a statement. The goal, she explained, is “to build the entire operating infrastructure needed to enable local businesses to expand globally,” including cloud computing, online payments and logistics.
In a separate development, Alibaba stepped up its partnership with Australia Post, signing a memorandum of understanding that will bring the state-run logistics company to Southeast Asia’s e-commerce market through Alibaba-owned Lazada Group. The MOU also states that Australia Post will work with Alibaba’s logistics arm, Cainiao Network, to improve data integration and develop a co-branded, cross-border delivery service for Australian outbound parcels destined for China.
“Our enduring relationship with Alibaba will allow local Australian businesses to access the biggest online marketplace in the world,” said John Stanhope, Chairman, Australia Post.
The two companies first partnered in 2014 when Australia Post set up a storefront on Tmall Global that connected Australian SMEs with Chinese consumers. Australia Post then provided the logistics necessary to get the orders to China.
The demand for overseas goods continues to drive cross-border e-commerce in China and, as a result, further growth for virtual storefront Tmall Global, owned by Alibaba Group.
The B2C shopping site, which provides Chinese consumers with a direct sales channel to overseas retailers, saw the total number of international brands on the platform skyrocket 169 per cent to 14,500 in 2016 from 5,400 in the previous year year. The number of product categories soared 85 per cent to 3,700 from 2,000 over the same period. Alibaba Group has revealed that Australia is China’s fifth most popular choice for import of goods, following Japan, the US, Korea and Germany. Business Insider reported that the top six Australian brands over 2016 were Chemist Warehouse, Swisse, Blackmores, NaturesWay, dairy farmer cooperative Devondale and Woolworths supermarket. In fact, Woolworths set up its online presence of Tmall after noticing some of its products, including baby formula, were being exchanged there.
Australian products proving popular on the platform include health supplements, milk powder and coffee, according to the study conducted by Tmall and CBNData.