11 November, 2014 - The Chinese e-commerce market is expected to grow at an annual rate of 25 percent over the next few years, from $390 billion in 2014 to $718 billion in 2017, according to a study released by top management consulting firm A.T. Kearney. The study, China’s E-Commerce Market 2014: The Logistics Challenges, was carried out by the firm as part of its knowledge partnership with the Last Mile Fulfilment Asia 2015 Conference & Exhibition.

Three factors are driving China’s online evolution:

  • More online shoppers. The number of online shoppers continues to grow. China has 600 million Internet users—after 53 million new users connected in 2013. However, at only 46 percent, Internet penetration is still low compared to 83 percent in the United States.

  • More purchasing power. Personal disposable income per capita reached $3,000 in 2013 and is expected to rise to more than $5,000 in 2018.

  • More online security. When Web 2.0 arrived, e-commerce sites in China began tracking and publishing credibility records of online sellers, reducing the risk of fraud.

  • Smartphone surge: The share of mobile shopping in China’s online shopping market rose from just 1.5% in 2011 to 9.2% in 2013. This is expected to grow at an annual rate of 20% in the near future.

However, success in China’s rapidly growing e-commerce market is not a given. Today’s consumer market is concentrated in regions with the top 10 cities located on the coast, but the number of online shoppers is growing fastest in low-tier cities.

However, the relative scarcity of high-quality logistics providers in China often causes problems for e-commerce firms, including late deliveries, damaged and lost parcels, negative attitudes from delivery people, slow cash-on-delivery processes, poor return procedures, and no special services such as installation or the ability to try on purchases.

“As the overall geographic coverage of the Chinese e-commerce market expands, the ability to offer reliable and consistent services and delivery will be the major source of competitive advantage,” says A.T. Kearney partner and study co-author Mui Fong Goh.

To cope with the logistics challenges, e-commerce companies have three options: build their own logistics networks, outsource to third-party providers, or form partnerships and acquire existing providers. The best option will depend on the logistics volume.

“With fewer than 500 deliveries per day in a city, deploying a company-owned delivery team could cost 15 yuan ($2.20) or more per parcel. This cost could drop to less than two yuan (30¢) with more than 10,000 deliveries per day,” adds A.T. Kearney principal and study co-author Chee Wee Gan.

Long-term solutions are unlikely to come from e-commerce in-house logistics since market growth will soon make these unsustainable. Solutions are more likely to be found in strategic partnerships between e-commerce firms and third-party logistics providers.

  • Please click here to read the full report.

  • Click here to read the 2013 Global Retail E-Commerce Index™, where China holds the top spot.

  • Click here to read the 2014 Global Retail Development Index™, where China holds the number two spot.

About A.T. Kearney
A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world’s foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues.

For more information, please visit www.atkearney.com.

About Last Mile Fulfilment Asia (LMFAsia) 2015
Last Mile Fulfilment Asia (LMFAsia) 2015 is the only Asian business platform bringing together Retailers, eCommerce Companies and the Last Mile Fulfilment Industry across Asia Pacific to achieve seamless cross-border fulfilment within the burgeoning Asian market. LMFAsia was conceptualised with the intent of bridging gaps in cross-border fulfilment capabilities across the region. It is the first-ever pan-regional event for the fulfilment ecosystem, and encompasses both an exhibition and a conference that focus on last mile fulfilment issues and opportunities for the Logistics, Retail, eCommerce, Fufilment, Parcel and CEP industries. This inaugural event brings together key sectors under a single platform to maximise the potential for collaborative business opportunities within eCommerce in Asia.

LMFAsia will be held on 19 and 20 March 2015 at MAX Atria @ Singapore EXPO.

For more information, visit www.lmfasia.com.