China’s logistics market has seen phenomenal growth in the past decade, driven by the exponential growth of its $1.94 trillion eCommerce sector, currently the largest in the world and three times that of the number two US market.
According to the State Post Bureau, in the area of last mile, 63 billion parcels were delivered in 2019, a 24% YoY increase while total business revenue grew 23% YoY to RMB 745 billion.
Per capita, the parcel volume has exceeded 45 in 2019.
Despite the presence of large and smaller players within the market, the courier industry is inherently highly fragmented, comprising over 20,000 courier delivery companies and more than 3 million employees. The industry still faces challenges associated with laborious backend work to facilitate the movement of parcels which can result in inefficiencies.
Herein lies four key opportunities to standardize and unify the diverse pool of players and deliver more predictable services based on a fixed set of industry standards and practices.
1) Creating a System to Unify Three Million Courier Personnel
Courier personnel are the boots on-the-ground who facilitate the first and last mile deliveries, from picking up the parcels to delivering them for merchants and consumers.
Every day, as many as 3 million courier personnel handle hundreds to thousands of parcels each, so it might seem inevitable that delays and inefficiencies happen as a result of human error or just unforeseen circumstances.
The above reasons serve as compelling arguments for the digitalization and unification of last mile logistics. Here, couriers should linked via a common platform that manages all the courier deliveries. The fundamental use of technology can also help to more accurately capture delivery or pick up locations and provide consumers and merchants with real-time delivery status to enhance customer experience. Beyond that, the use of smart routing can help couriers to adopt the shortest, most efficient routes to save time and fuel, and dynamic forecasting to better predict parcel volume which aids in logistics planning.
These go a long way in instilling greater stability and reliability in service standards, while empowering courier personnel and courier companies with better technology to improve business performance and service quality.
2) Forging Relationships with the Local Communities
While couriers can drop off parcels at the consumers’ doorsteps, the hectic lifestyles of working professionals might make that infeasible. This often leads to failed deliveries and the hassle of rearranging deliveries, as well as wasted effort on the courier’s part.
This gave rise to the concept of community post stations. Unlike the larger post stations located mainly in central areas, these community post stations are characterized by its hyper-localized location, operation and even size. Managed by members of the community, these post stations are often located within a small community such as within a school campus, outside a residential block cluster etc., effectively supporting the last 100 meters in a delivery chain.
Adopting a franchise-like model, entrepreneurs can apply to open a post station, branded by a more prominent logistics player such as Cainiao, which currently has about 60,000 Cainiao Post stations across the nation.
This will allow for rapid scaling and hyper-localization while nurturing brand recognition and allowing budding entrepreneurs to tap on the resources of a larger organization.
These highly localized post stations provide a warm touch and ease the digitalization of the last mile. Consumers can also visit these post stations to mail out items and conduct other daily essential activities as outlined in the next segment below.
3) Delivering Value-Added Services to Increase Stickiness
To diversify offerings and increase human traffic at these post stations, managers can offer value-added services such as laundry, group buys, parcel storage and returns for online purchases.
These additional services will open up new revenue streams for managers while creating greater convenience for consumers, who now have a multitude of services available to them at their nearest community post stations.
4) Leveraging Technology to Deliver Personalization, Convenience and Security
With a customer-centric approach to digitalization, businesses can leverage technology to enhance customer experience by offering more customized services, greater convenience and security.
In the case of Cainiao, the Guoguo app aggregates over 400,000 courier personnel to service 2,800 districts in China. This has brought about greater convenience for consumers as they can now arrange for their parcels to be collected within 2 hours, with one-click shipping, automatic pricing calculation and free goods returns and exchange. Mailing services are also available 24/7 via the newly launched IoT-automated mailing machines located at the post stations.
Consumers can also visit their nearest community post stations i.e. Cainiao Post, to pick up their parcels at the intelligent lockers. These lockers facilitate contactless pickup via facial recognition technology, making the service available 24/7. Autonomous vehicles can also deliver the parcels to consumers directly, which saves them the trip to their neighborhood post stations.
Digitalization to Foster Greater Resilience and Flexibility
Digitalization in the logistics industry has been ongoing for years now. But the digitalization of last mile still has some way to go. This represents a range of opportunities for merchants and logistics firms to tap on technology to enhance experience and efficiencies, while building resilience and flexibility into their business operations.
Together with the rapid growth of the eCommerce industry, we will only witness a further increase in demand and pressures for the logistics sector to establish a stronger infrastructure that is nimble and efficient, in order to cope with the changing needs of a global digital economy.