Retail in Asia

In Telligence

Behind the scenes of e-commerce in China

The 618 mid-year shopping festival is now in full swing and is breaking more records, which seems to happen with every subsequent online shopping festival these days in China. Yet one of the traditionally least-sexy components of e-commerce – delivery – has come to the fore this festival and captured our imagination.

SEE ALSO : L Catterton invests in beauty and personal care e-commerce Social Bella International

Cheap delivery has been foundational to the success of online shopping in China. Parcels dispatched have proliferated from consumer goods to lunches in the office, chilled wines to parks, to one-hour dispatch of “sexual wellness products” in the middle of the night. Free to US$1.40 delivery is why Chinese consumers are comfortable ordering a coffee to the desk from the cafe downstairs. It is how the effortless 30 minute delivery from new retail, has altered consumption behaviour.

Delivery has been kept cheap in China largely due to the mostly unskilled domestic migrant labour, prepared to work hard for a fraction of their white collars peers having $6 cups of coffee delivered. AI-algorithms are also squeezing efficiencies out of the deliverers, optimising their routes and pickups and allowing them to maximise their earnings. Yet the joyous land of cheap delivery is facing some headwinds.

Since late last year, China’s overburdened delivery workers have been getting more airtime. Their gruelling routines: 12-hour days, six days a week, delivering hundreds of packages a day under the automated and watchful eye of mobile apps, give “light” rewards and “heavy” punishments. One delivery worker even set himself on fire in protest. Beijing has taken notice and has pledged to improve conditions for delivery workers.

Regulations are set to improve conditions for delivery workers. This, coupled with rising wages and a shrinking working population will all push delivery costs northwards, challenging the core structure of a lot of commerce in China. That takes us back to our opening paragraph of the exciting innovations in delivery that have been in the spotlight this 618 festival.

Source: Shutterstock

The original founder of the 618 festival, JD, has been at the forefront of delivery innovation globally. In 2016 it launched its first autonomous delivery vehicle and drone delivery. Then in 2019 it became the world’s first company to apply Level-4 autonomous driving technology on public roads without any human interaction. These came into their own during the lockdown in Wuhan last year delivering 13,000 packages to hospitals and residential compounds where contactless delivery was imperative. But it was in April this year that JD really started to move the dial, putting its autonomous delivery vehicles into daily use in over 20 cities in China for the last-mile delivery of e-commerce parcels.

The user experience is quite simple. A customer will automatically receive a call and a message with a pick-up code once the vehicle arrives at the pick-up point. They enter the code on the vehicle screen and can collect their parcel.

At 12:04am on 1st June – the start of JD’s 618 Festival, just four minutes after paying the remaining balance on her pre-sale order, a customer in Changshu, Jiangsu province received the skin care set she ordered. The cosmetics were delivered by JD’s autonomous delivery robot, part of JD’s 618 “delivery-in-minutes” service covering over 200 cities.

SEE ALSO : partners with Chinese e-sports operating company TJ Sport

It is unlikely the autonomous vehicles will be replacing China’s 3 million delivery workers any time soon, but as their costs come down and labour costs increase, expect to see a shift. In the meantime, the robots will also work in with delivery workers, allowing them to deliver 50% more orders during peak sales periods like 618. For most brands selling in China, delivery is an increasingly important part of the puzzle. Stay tuned for the innovation that is happening as it may help in optimising your strategy for the market.

(Source: China Skinny)