CRI听力:China's Ecommerce Industry Presents a Big Opportunity

China's ecommerce industry presents a big opportunity with over 500 million internet users in the country.

An annual report on Chinese consumers released by consulting group McKinsey and Co claims over half of all households in China will prefer to shop online by 2020.

The most recent example of this growth was this month's Singles Day holiday which saw retail website Taobao achieve sales of around three billion US dollars in twenty-four hours.

Despite the successes, the surge is revealing signs of weakness in China's distribution chains.

Abhijan Barua has more.

"China today is the second largest market in the world for ecommerce. In year 2015, it's redicted that the total ecommerce in the world will be $1.4trn, 380bn of which will come from China and only $260bn will come from the US. And so we are talking about an explosion of ecommerce in China as well as an explosion across retail."

President and CEO of the Tompkins International consulting firm, Jim Tompkins, outlines the role of China in the global e-commerce market.

McKinsey & Co. puts the contribution from China down to a new mainstream customer in China which is wealthier, younger and more reliant on the internet.

The recent Singles Day holiday is testament to this growing customer presence.

Online retailer Taobao saw a nearly three hundred percent increase in sales during the holiday compared to 2011.

And competitor Suning reported a twenty-fold increase in sales for its three days promotion.

As these firms celebrate their record-breaking trading performances, delivery companies are reflecting on their strained service capabilities.

The Zhejiang Internet Supply Chain Service Provider Company provides sorting and delivery services for more than 40 businesses on Taobao.

The company's vice general manager, Luo Gui, describes the surge in orders during the Singles Day holiday period.

"Normally we have thousands of orders everyday, but on Single's Day, we had more than 250 thousand orders. And by the end of the next day, we had over 300 thousand orders in total."

Even with extra-staff taken from local universities and colleges, employees felt overworked.

"Usually we deal with 700 to 800 parcels daily, but the number surged to three or four thousand for the special day, we barely had time for a rest."

Analysts view the pace of order processing as a sign of the limited competitiveness online retailers can offer.

Tompkins International-Asia principal, Jim Serstad, believes companies are looking for new ways to gain competitive advantage in the online retail market.

"There are about 9 large online retailers in China who are all fighting to stay in the game. That's leading to some extreme efforts at client satisfaction because they really can't compete on price. They're basically all offering the same low prices so they have to differentiate on service. The key measure they're looking at is delivery frequency. Of course there's only so much they can do to deliver faster so they are looking for other ways to differentiate their service."

Measures include a thirty minute delay of order processing to give customers time to cancel an order if required and night time delivery.

While others are even using ‘try on delivery’ to give customers the chance to try on garments before the exchange is completed.
 
For the moment, online retailers are continuing to stick to quicker deliveries as their main source of competitive advantage.

As Tompkins International principal Jim Serstad explains, retailers are using any means to ensure purchases reach customers as soon as possible.

"Deliveries are made to the depots, regularly throughout the day, twice, maybe three times a day. The orders are taken then to the consumer by bicycle, or motorcycle or three-wheeled carts or whatever means they have."

Delivery companies have also expanded their warehouse areas, truck numbers and other equipment to get through the Singles Day holiday.

Statistics from the National Post Bureau claim there are nearly seven thousand legitimately registered express delivery services in China with more than 700,000 employees serving in the sector.

Jim Serstad points out the failings of China’s fragmented logistics and distribution chains.

"With a system like this there are huge differences in service levels throughout the country, if there’s any coverage at all. There are a lot of areas of China that aren’t covered."

Industry insiders say there is a need for technological upgrades to meet rising demand from domestic markets as well as foreign competition.

Major Chinese express delivery services like Yuantong and Shunfeng are purchasing or renting cargo aircraft to increase efficiency and reliability.

The Vice President of the Yuantong express delivery company, Wang Jinlong, describes the benefits of using the air routes.

"Having your own all-cargo aircrafts is the most important part of the transformation and upgrade process. Once we got our own aircrafts, we had much more capability over delivery, and we can make sure there are fewer delayed deliveries."

Yuantong has purchased 5 Boeing-737 aircraft to provide next-day delivery services in areas such as the Yangtze River Delta and Pearl River Delta.

Others are using IT to upgrade their services.

Taobao’s logistics manager Gong Tao explains how the firm is equipping itself with an early warning system to monitor timely delivery.

"We can see whether sellers have finished packaging their products, if the parcels are en route and whether or not buyers have received their parcels. We pay attention to the whole process."

While express delivery services like Yunda are promoting handheld electronic registration devices for couriers to update conditions.

Despite the difficulties of meeting consumer demands from Singles Day, companies are utilizing technologies to keep pace with the growing online retail market.