Great Potential of Third-Party Logistics in China
In 2016, China’s total value of social logistics goods was 730.2 Billion CNY, with year-on-year growth of 44%, and a compound annual growth rate of 43.3% from 2012 to 2016. This increase is more than 3 times its original value. China’s logistics market shows great potential and is expected to maintain the high growth rate in the future.
The third-party logistics improves the speed with its professional services. Reductions in both the logistics cost, as well as financing, apply pressure to the enterprises that are comprised of the main trends of the sector’s development in the future. Under the steady growth of China’s logistics market, China’s third-party logistics accounted for only 8% of total logistics expenditures in 2015, with a big gap compared with the average level of 10.7% in developed countries.
According to the development path of the logistics market in developed countries, there will be an irreversible trend that enterprises will then, in turn, outsource logistics demand to the third-party logistics suppliers. With the development of logistics markets and supply chain management, the third-party logistics market is facing huge growth opportunities.
Growing Demand of Logistics Under Consumption Upgrading
The population of China’s middle class given its strong consumption capacity, has increased to 500 million people in 2016. This number is expected to reach 800 million people by the year 2020. The huge population base of the middle class provides support for the consumption escalation.
The number of online shoppers in China doubled from 220 million in 2012 to 423 million in 2016. Shoppers are expected to exceed 900 million by 2020. The leading consumption vehicle is led by e-commerce. Multiple online shopping holidays are hot, like GMV of Alibaba on “Single’s Day” (Nov. 11) increased from 19 Billion CNY in 2012 to 120.7 Billion CNY in 2016.
The sales of China’s retail e-commerce market increased 8 times from 690 Billion CNY in 2012 to 5.6 Trillion CNY in 2016. The e-commerce market share of the overall retail market increased from 3.2% to 19.6%, which is expected to reach 33.6% in 2019.
With the development of e-commerce, including fragmentation and new multi-channel distribution, the demand for e-commerce logistics is also growing. We expect there will be massive potential for e-commerce logistics.
Collaboration Between E-Commerce and Logistics is an Inevitable Trend
Different from the traditional retail sector, e-commerce has a more diverse inventory of products, more information processing, and more orders. On the other hand, there is an increase in the labor costs. Data has shown that in recent years, both logistics and transportation costs are declining year by year. On the other hand, both warehousing and labor costs are growing by 10% year by year. So, issues regarding warehousing and high labor costs are the main barriers to entry of e-commerce.
Based on the speed in which e-commerce adapts to new technologies, the industry is actively seeking solutions. The supply-chain sharing concept, with multi-resource and open platforms, are getting approved by more and more managers every quarter. In recent years, more Chinese logistics companies are connecting with third-party logistics providers with their own warehousing platforms, logistics platforms, as well as big data information suppliers. This encourages the development of logistics service providers to pursue more professional, as well as different bases, with a good competitive environment.