HONG KONG – Nov. 11 is known in China as “Singles Day,” a time to recognize people who are single by purchasing goods online, making it the busiest e-commerce day of the year. With one-day sales totaling $9.3 billion, the holiday also reveals just how difficult it is for China’s express industry to keep up.
George Li Dongqi, group vice president at the rapidly expanding express delivery service SF Express, told attendees at the Asian Logistics and Maritime Conference (ALMC) here this week that the express industry in China has not kept pace with demand. Li said the express industry capacity has been growing by about 15 percent per year in China over the last few years. But even that impressive, double-digit annual growth is not enough to handle the rise of e-commerce.
E-commerce accounts for about 12 percent of sales in China today, making it the largest e-commerce market in the world – one that is expected to grow another 46 percent by the end of this year to US$446 billion, according to iResearch. Henry Tan, CEO of Luen Thai Holdings Ltd., a publicly traded manufacturer for a wide variety of brands, with more than US$1 billion in annual sales, said he expects traditional brick-and-mortar retailing to “collapse” as e-commerce continues to ramp up. Tan said he thinks e-commerce could soon account for half of all retail sales in China.
This growth has led some e-commerce providers to manage logistics on their own. Some, like JD.com, are setting up warehousing, while others are actually facilitating shipments. Alibaba, the largest e-commerce company in China (whose Hangzhou headquarters are pictured above), does not actually maintain inventory, like Amazon. Yet, Alibaba has allocated $200 million to develop its logistics capability, a move that will likely change Alibaba’s approach to inventory, industry insiders said.
“If we cannot provide different options, the e-commerce [companies] will focus on building logisitics in their core competence,” Li told ALMC attendees.
All this e-commerce in China, of course, bodes well for air cargo; as Tan remarked: “We should all buy FedEx stock.” But can the current infrastructure maintain 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.