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Online Fulfillment and E-Commerce Challenges Magnified in Developing Economies

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We have penned many commentaries regarding the challenges for supporting multi-channel B2C and B2B E-fulfillment on Supply Chain Matters.  One area that we hope to add more commentary and coverage during 2013 are the unique challenges and emerging players who are supporting E-fulfillment activities in specific developing economies.

Earlier this month, The Wall Street Journal featured an article, Scooters Rule as China Shops Online. (paid subscription required or free metered view) The article was very timely since online sales in China are exploding and are expected to surpass those in the U.S. and Europe in the coming years. The WSJ cites a Forrester Research forecast indicating a near doubling of activity from about $170 billion last year to $356 billion in 2016. In contrast, U.S. online sales are forecasted by Forrester to be $327 billion in 2016.

The WSJ highlights what is termed “terrible logistics” across China with delivery companies and industry players like Alibaba planning to invest roughly $15 billion in last mile logistics and infrastructure. Many of China’s large populated cities lack adequate warehouses and distribution centers to coordinate the logistics of delivery to online consumers.  The WSJ notes that last year, 116 delivery companies were stripped of their delivery permits following customer complaints.  Existing facilities lack proper technology and rely on large amounts of manual labor to coordinate deliveries. Worker retention is described as a significant challenge since China’s more educated workers do not view logistics and delivery as an attractive occupation.  Yet, couriers and logistics workers have the potential to earn more than a factory worker, as well as advance into broader supply chain related careers.

Today, all forms of scooters, motorcycles and motorized carts currently clog the roads of major Chinese cities as couriers deliver online orders. The working conditions are described as harsh, but those workers willing to stick it out are finding paths of lucrative growth.

No doubt, with new infusions of billions in investment, China will address its “last mile” delivery challenges, especially if China’s political leaders follow-through with their commitment towards greater levels of urbanization.  We may well see a broader presence from global delivery companies such as FedEx and UPS in these markets, along with new upstarts and market disrupters that re-define today’s notions of “last mile” delivery, service and payment options within large metropolitan cities.

Online sales are indeed the preference for today’s modern consumer, and in evolving but explosive markets such as China, the leaders of tomorrow are positioning to solve rather difficult logistical problems.

Bob Ferrari

 

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