China’s bargain shopping sites push to build own shipping networks

China’s bargain shopping sites push to build own shipping networks


Shopping sites delivering from China are rushing to build their own global freight networks, as the coronavirus pandemic and new US shipping rules threaten the supply of packages to the west in the run-up to Christmas.

Stung by rising costs after a new postage deal was struck last year between the US and the United Nations’ postal body, bargain sites such as Wish and AliExpress have invested heavily to handle their own flow of goods.

“Logistics has become paramount,” said San Francisco-based Wish, which has merchants based in China, and this month raised $1.1bn in its initial public offering on the Nasdaq exchange.

Until July, a UN international postal agreement required China to be treated as a developing nation and afforded lower global shipping fees that were effectively subsidised by western countries including the US.

This meant Chinese companies could ship millions of low-price items — from fake eyelashes to phone chargers — thousands of miles using state-run postal services, often for less than it would cost to ship them domestically. The US estimated it cost $300m every year to subsidise parcels posted from China.

However, the Trump administration threatened to quit the UN’s postal body over the issue, forcing a compromise that saw the US set its own pricing starting in July, with European countries able to raise prices from January 1. 

Katherine Muth of the US-based International Mailers Advisory Group said the USPS raised its inbound rates on average by about 50 per cent, causing a “huge drop-off in volume on inbound parcels”, especially from China, which had sent about half of all packages.

As a result, “ecommerce sites are finding new ways to ship to the United States,” she said.

Wish has been readying its logistics system since Washington first took aim at the postal treaty. It now handles all shipping arrangements for almost half of its orders, up from zero four years ago, and logistics revenue rose from $6m in 2018 to $152m in the third quarter.

Diane Wang, chief executive of wholesale and retail site DHgate.com, said her company was “working to minimise the impact” by expanding overseas warehouses. 

The model is used by Amazon, whose sellers ship containers of goods to local fulfilment centres, which then dispatch individual packages to shoppers. 

Alibaba is both building out overseas warehouses and its own logistics network. “We have about 40-50 chartered planes every week flying all around the world,” said Li Dawei, AliExpress’ supply chain director. The company works with local partners for so-called “last-mile” delivery.

The company is also booking space on long-distance freight railway routes to Europe, which take about 15 days and can handle products such as perfumes and nail polish which are prohibited on aeroplanes.

AliExpress is increasingly bundling orders containing multiple items into single packages in China before shipping them abroad. Its overseas warehouses are used for bulkier items such as furniture and home appliances, which are then fulfilled locally.

Still, shoppers who flock to the cheap sites have complained of rising shipping prices this year — Mr Li attributed that mostly to the pandemic. “In the long run, the price rise at the [Universal Postal Union] will certainly impact prices,” he added.

Nian Liu contributed reporting from Hangzhou



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