Shanghai Qin Chou Industrial Company specializes in selling digital floor scales, electronic truck scales, electronic crane scales, electronic balances, and stainless steel electronic scales. By the end of 2010, e-commerce had drawn everyone's attention to the logistics industry in a special way. In an article by Liu Xiangming, the editor-in-chief of a business magazine, there was an apt metaphor: "The fire of domestic e-commerce in 2010 was suddenly put on the brakes just before the New Year." Who did it? Naturally, it was the lagging logistics services.
This unmet need appearing so abruptly means that a turning point for industrial metamorphosis has arrived. At this turning point, China's logistics fast train needs to change its engine – from being driven by manufacturing to being driven by e-commerce.
Within our sight, the earliest and most accurate predictor of this trend wasn't from within the logistics industry, but from Alibaba. Three years ago, when I consulted Zeng Ming, then the Chief Strategist of Alibaba, about their views on logistics, he succinctly replied: "Logistics needs to shift from B2B to C2C."
China's modern logistics industry probably began to take shape at the end of the 90s. At the beginning of the new century, there was already a famous story about 'Baogong Logistics' that everyone in the logistics industry knew well. It told how a private logistics company succeeded by providing full-process logistics services to manufacturing companies like Procter & Gamble. Now, the protagonist of this story, the owner of Baogong, is already a billionaire and a national representative. All legislative issues that need addressing in the global logistics industry are submitted through him as proposals.
In the past decade or so, many logistics enterprises similar to Baogong have grown in similar ways. We can say that over the past dozen years, the manufacturing industry has been the main driving force behind today's logistics industry.
However, by 2010, another company became the first private logistics enterprise in China to surpass the billion-yuan scale, and that was SF Express. Actually, SF's turnover last year alone exceeded the total scale accumulated by Baogong over more than a decade. This growth fundamentally comes from what Zeng Ming referred to as C2C. Not only did it give rise to SF, but it also nurtured a group of courier companies with a total scale exceeding hundreds of billions.
But why does changing from B2B to C2C result in a stronger engine while simultaneously causing logistics to 'hit the brakes'? Because transitioning from B2B to C2C isn't merely a simple shift in demand; it's a tenfold or even hundredfold increase in demand. Take an easy-to-understand example: a typical convenience store sees at least 1,000 purchases per day. Supporting this daily store sale requires just one delivery from the distribution center to the store every morning. However, if 1% of consumer demand shifts to online shopping, it would require 10 deliveries to individual households. The cost of delivering once to a store is roughly 50 yuan, while the cost of delivering once to a household is around 5 yuan, so 10 deliveries would also be exactly 50 yuan. This means that for the logistics industry, every 1% increase in the share of e-commerce in social retail could potentially double the revenue from delivery services. In reality, it’s a bit more complicated. Calculating using Taobao order data shows that the multiplier effect of shifting from B2B to C2C logistics demand is approximately 70 times.
Any vehicle suddenly switching to an engine 70 times more powerful cannot handle it; the transmission, chassis, electrical systems, and all subsystems cannot adapt. Hitting the brakes hard is natural, and perhaps not just once. For the current logistics system, more than 90% of warehouses, facilities, personnel, and even systems, which represent major costs, are still controlled by logistics enterprises that haven't joined the e-commerce bandwagon, and they mainly operate within the demand environment of traditional industries. Whether it's reforming warehouse operations, improving delivery speed, or establishing door-to-door delivery capabilities, the logistics mainstays that currently control major resources have yet to respond promptly. What's moving now are only the new forces – courier companies.
However, this opportunity is incredibly tempting. A rough calculation shows that if e-commerce exceeds 10% of social retail within five years, it will create an additional logistics service market worth two to three hundred billion yuan, which could potentially nurture thirty to fifty listed logistics companies.
So, what kind of logistics companies does e-commerce need?
Courier services led by SF Express and EMS are naturally top priorities, but the logistics services required by e-commerce go far beyond couriers. After all, I don’t just want to buy books and shirts online. That's just the beginning of the online shopping story. I also want to buy flowers, hairy crabs, double beds, refrigerators, air conditioners, and even imported cars online. These aren't services that couriers can provide; they require specialized logistics services such as cold chain logistics, less-than-truckload express, large item logistics, and special transportation, among others. In fact, couriers can only meet the delivery needs of a small portion of products.
From the seller's perspective, it's not just necessary to have someone deliver; it's also essential to have someone integrate order processing, warehouse sorting, labeling, short-distance transportation, and initial nationwide distribution seamlessly to quickly and accurately fulfill consumer needs. This typically isn't a service provided by courier companies because the charm of couriers lies in achieving overnight delivery through standardized rhythms, making it difficult to customize services for each enterprise.
We can consider the former type of service as various kinds of "logistics products" and the latter type as a "logistics platform" integrating various characteristic products. Logistics companies serving e-commerce can be simply divided into "platform-type" and "product-type."
A "product-type" logistics company must have unique capabilities in a certain region or product category, such as the various sizes of "last-mile delivery" companies whose unique ability is handling door-to-door deliveries in a specific city. In fact, even a large courier company like SF Express is a typical "product-type" company, where "overnight delivery" is the standard product.
A "platform-type" logistics company must have the ability to provide comprehensive, integrated services throughout the entire process for e-commerce sellers, enabling them to focus entirely on marketing rather than logistics details.
What does it mean for a logistics company to define itself as a "product" or a "platform"? It helps the company understand its core competencies, who its allies are, and who its enemies are.
An event recently happening in the industry can provoke every ambitious logistics entrepreneur to understand the importance of aligning themselves. That is, Alibaba Group's high-profile announcement of its logistics strategy. Alibaba announced that it won't do logistics itself but will focus on three things that no one else can do: creating "Logistics Treasure" to connect various logistics links with data; building warehousing bases to consolidate and integrate regional transfer and product processing; and investing to assist the growth of logistics enterprises. Together, these three things form a complete logistics platform. A platform-type logistics company particularly needs these three cores: information is the nerve, warehouses are the heart, and the service partner system is the limbs—no more, no less.
That day, Jack Ma said on stage while hundreds of logistics enterprise bosses made choices below: join the Alibaba ecosystem or leave, meaning choose between being a product or a platform.
For some people, this decision isn't just easy but a resounding yes, especially for those last-mile delivery companies. Since they are originally regional or specialized "product-type" logistics companies, as long as their "product" is good, aligning with Taobao means scaling up.
But not everyone has it so easy. Companies like the four major courier franchises (STO, YTO, ZTO, and韵达) are bound to feel conflicted. Ma is forcing them to choose sides, standing with Alibaba means they must solidify as "product-type" companies and transition from franchise models to direct operation models. Wanting to become "platform-type" logistics providers while relying on Alibaba is completely unreliable because franchisees will eventually bypass them to directly connect with "Logistics Treasure." They must expedite the development of an information platform and warehousing hub to soon possess a one-stop platform capability and provide comprehensive services to other independent e-commerce users.
And for those logistics companies serving the manufacturing industry, they were initially "platform-type" logistics enterprises. Alibaba's declaration is like a bugle call from across the field. A friend, the boss of one of the top third-party logistics companies in the country, told me after the meeting that upon returning home, he would immediately mobilize his global marketing efforts, targeting all major and medium-sized e-commerce companies nationwide!
Besides the high-profile Alibaba, e-commerce companies like JD.com and Dangdang have already invested heavily in building logistics capabilities, blurring the boundaries between the e-commerce and logistics industries. Directly speaking, they will all become platform-type logistics companies. And they will redefine the content, information, and standards of logistics services with an internet spirit, with the successful ones possibly becoming benchmarks for platform-type logistics companies in the Chinese market.
The current situation is somewhat chaotic, with many e-commerce companies busy building logistics platforms while doing their own delivery work; many logistics companies overwhelmed with deliveries but still wanting to build integrated platforms. Everyone seems to be juggling multiple roles.
However, it won't be long before both e-commerce companies and logistics companies make clear strategic decisions for the future. For e-commerce companies, the decision is whether to build their own platform-type logistics company or find a platform-type logistics company as a strategic partner. For logistics companies, the decision is whether to become a platform-type company or a product-type company.
Jack Ma said, logistics needs outsiders to stir things up. Regardless of how Alibaba ultimately performs, raising the banner of a "logistics platform" has prompted all logistics CEOs to immediately decide: platform or product?
The current logistics industry is like the mobile internet landscape today. You either become an iPhone, a platform everyone uses to make calls, surf the web, and play games, or you become an "Angry Birds," a game everyone loves regardless of the platform they use. The worst option is to become China Mobile, thinking that having resources in hand allows you to act like a king and control everyone's fate, trying to do everything yourself—the phone, the birds, everything. Eventually, each user will abandon you at the first opportunity, leaving only lazy parasites around you. This analogy may seem funny, but for large logistics enterprises in China, following inertia might lead them down this path.
Therefore, the key is to embrace the internet spirit. Whether platform or product, you need to immediately become part of the logistics internet and achieve internetization.
What does the internetization of a logistics company look like?
First, the business scope must be internetized. A sampling statistic conducted at the end of 2010 showed that more than 90% of logistics companies hadn't yet entered the e-commerce service domain. The remaining 10%, however, provided related services without hesitation when their clients developed e-commerce businesses, quickly grasping the characteristics of new demands. These 10% may not necessarily be the largest now, but they are clearly the ones who will ultimately succeed.
Second, marketing must be internetized. The nature of online shopping business will make the internet the primary channel for product-type logistics service companies. This means that rapid growth will no longer depend on the direct sales teams of logistics companies but on electronic orders delivered by various platform-type companies.
Finally, operations and services must be internetized. Traditional logistics business only requires a business system driven by key processes, but e-commerce necessitates allowing consumers to track the real-time status and location of their orders. Every truck, every delivery person, and every piece of cargo must be on the internet, enabling upstream and downstream users, management, and operators to share information and collaborate anytime, anywhere.
The process of internetizing from business to marketing to operations is the journey each excellent logistics company takes to seize the opportunities of e-commerce. Logistics companies that deeply understand the internet spirit and quickly transform, whether platform-type or product-type, regardless of their current size, have the potential to become industry leaders in the next five years.
The internetization of logistics will give rise to a new cluster of industries. In this new landscape, becoming an iPhone-like platform is undoubtedly great, but being an "Angry Birds"-like product is also very good. China's logistics industry needs platforms like iPhones—not just one—but also products like "Angry Birds"—thousands upon thousands of them.
Shanghai Qin Chou Industrial Company specializes in selling digital floor scales, electronic truck scales, electronic crane scales, electronic balances, and stainless steel electronic scales.
Company Address: No. 1588 Qixing Road, Minhang District, Shanghai
TEL: +86-021-34092770-8007
Mobile: +86-15121053817
Fax: +86-021-61927269
Postal Code: 201101
Website: http://www.qinchoush.com
E-mail: [email protected]