Introduction

What’s the Story?

In our monthly countdown to Singles’ Day, also known by Alibaba as the 11.11 Global Shopping Festival, we will help brands and retailers to prepare for the event. The largest annual shopping festival in China is now only three months away. 

In this report, we explore how brands can leverage Chinese e-commerce platforms’ domestic and international logistics infrastructure and supply chain services for the shopping festival. We focus on four major platforms: Alibaba, JD.com, Douyin and Kuaishou. 

Why It Matters

Thorough logistics and supply chain plans for Singles’ Day will be crucial to providing a seamless customer experience. Traditional Chinese e-commerce companies Alibaba and JD.com have been investing heavily in their logistics infrastructure to help merchants.

There are three crucial aspects of an e-commerce platform’s logistics and supply chain services to consider:

• Global reach—Global supply chain delays have resulted in challenges, particularly for international companies, so it is a huge advantage to international brands if platforms are able to support them in delivering goods in China. 
• The focus on sustainability—China’s 14th Five-Year Plan called on companies to introduce serious sustainability initiatives. In 2021, logistics and packaging generated 29% and 18%, respectively, of China’s e-commerce industry’s carbon emissions, according to China-based carbon management software provider Carbonstop. It is key for brands to consider how companies are creating greener supply chains.
• Technological capabilities—High-tech infrastructure helps companies provide a smoother customer experience, which is important to Chinese consumers. 

These three factors are especially important because China has one of the highest e-commerce penetration rates globally, and consumers expect timely delivery: as shown in Figure 1, the use of express delivery services has grown massively in recent years. Domestic and international brands should set themselves up to effectively meet these expectations during Singles’ Day 2022 by leveraging the logistics services of Chinese e-commerce platforms to bolster their supply chain capabilities—but they must choose the most appropriate platform. 

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Figure 1. China: Volume of Postal Delivery Services vs. Express Services (Bil. Items) [caption id="attachment_153684" align="aligncenter" width="700"] Source: Ministry of Transport [/caption]  

Three Months to Singles’ Day: Coresight Research Analysis

Alibaba

Cainiao is Alibaba’s logistics arm. It aims to fulfill Chinese domestic orders within 24 hours and international orders within 72 hours through partnerships with local logistics firms, powered by investments in data and technology. Cainiao is continually investing in its supply chain and logistics network to tackle long-term and short-term supply chain challenges, including major disruptions caused by Covid-19 and lockdowns. For example, before 6.18 shopping festival sales commenced, Cainiao successfully moved inventory into domestic warehouses across China in order to decrease the likelihood of supply chain delays for domestic orders. 

International Focus

As demand for international products has continued to increase in China over the past several years, Cainiao has focused its investments on expanding and developing global logistics infrastructure and trading networks. Developments have included organizing direct flights to countries and opening its own local logistics hubs, most recently in Southeast Asia, which can serve international imports and exports.

At the end of July at the 2022 China Logistics Industry Conference in Hangzhou, Cainiao vowed that it would focus on global end-to-end logistics solutions in the coming year in order to provide a more secure and smoother supply chain. In particular, last-mile delivery has proven challenging for the logistics company due to labor shortages and delays caused by Covid-19. As part of its new plan, Cainiao has promised doorstep delivery for orders through Tmall Global and Tmall Supermarket. In addition, Cainiao pledged that it would establish more international logistics centers to serve international merchants. 

Sustainability Focus

In May 2022, Cainiao published its first sustainability report, in which it detailed the recent development of its end-to-end green logistics network. The network includes paperless shipping labels, smart route planning, recycling (packaging materials can be collected for recycling at nearly 100,000 Cainiao Post locations across 315 cities) and solar-power warehouses. Its green logistics network helps consumers through green recycling initiatives and merchants through a green supply chain.

In its sustainability report, Cainiao also discussed its “seven steps” to help merchants achieve green logistics. These include packing algorithms, green packaging, intelligent route planning, green distribution and more.

Cainiao works with international consumer brands including Nestlé, Philips, Procter & Gamble and Unilever to reduce carbon emissions in the supply chain. During Singles’ Day 2021, Cainiao delivered 90 million packages using green packaging.

Investing in green packaging and green technology can double or even triple costs, but Cainiao is well positioned to front these costs. In March 2022, it launched China’s first green logistics online community, which encourages customers to make green purchases and earn redeemable credits. At the same time, Cainiao launched its first warehouse zone powered by a PV (photovoltaic) power generation system in Hangzhou, covering 100,000 square feet. The electricity generated by these warehouses is used to power energy-efficient operating systems, including self-adjusting lighting in the warehouse and energy-saving conveyor belts that automatically adjust power consumption based on parcel volume.

Cainiao’s green impact is large, with 5,000 brands from 90 countries entering China through these bonded warehouses, according to the company. Cainiao aims to expand its eco-friendly infrastructure globally, to help merchants and brands reduce their carbon footprint. 

[caption id="attachment_153685" align="aligncenter" width="700"] Bonded warehouses equipped with solar panels in Hangzhou
Source: Alizila [/caption]  

Technology Focus

Cainiao’s warehouses feature intelligent and digital logistics technologies, including OMS (order management system) and WMS (warehouse management system) technologies, which are software and services that help automate and optimize warehouse and fulfillment operations. Cainiao’s technology can help merchants visualize inventory and carry out distribution, and it provides merchants with evidence-based sales forecasts to cut costs.

Recent advances in automation technology include Cainiao’s driverless delivery robots, which had made 10 million deliveries as of March 31, 2022. They serve consumer demand for faster and cheaper deliveries. 

Outlook for Singles’ Day

We think that through its logistics arm Cainiao, Alibaba is well positioned to navigate the supply chain challenges that are likely to accompany this year’s Singles’ Day. Cainiao has invested a lot of money and resources into developing a sophisticated supply chain network both domestically and abroad. Cainiao also invests in the sustainability of its supply chain through green initiatives, which are designed not only to help Cainiao reduce its environmental impact but also that of its merchants and consumers, which is particularly appealing given sustainability is a major public policy initiative and continues to gain attention among consumers. 

However, unlike JD.com, which we discuss next, Alibaba largely operates online marketplaces and does not own its inventory, which can result in less control over overall service quality.

JD.com

Despite the challenging environment in the past year due to the pandemic and supply chain issues, JD.com claims that consumer awareness of its unique and integrated supply chain capabilities has meaningfully increased, which will help further its market expansion and growth, as reported by the company in May 2022. Its logistics services grew 28% year over year in the first quarter of 2022. JD.com believes that customers have realized that its integrated supply chain logistics services are very valuable given the pandemic-impacted environment.

JD Logistics, the in-house logistics arm of JD.com, served a record-high number of external customers in 2021 thanks to its investment in integrated supply chain logistics services, according to the company.

International Focus

JD Worldwide (Import Business) is JD.com’s cross-border e-commerce platform for international merchants to sell products to consumers in China. Like Alibaba’s Tmall Global, brands can set up storefronts on JD Worldwide’s platform.

[caption id="attachment_153686" align="aligncenter" width="700"] International skincare brands on JD Worldwide
Source: JD Worldwide [/caption]  

JD Worldwide uses its vast global network of overseas and bonded warehouses to import international goods to China. Use of its own infrastructure makes distribution more reliable and shortens the average international logistics cycle. In addition, JD Worldwide handles all customs processes, logistics, and warehousing once in China, which is crucial for brands that do not have a physical presence in the country. To date, JD Worldwide has attracted international merchants from over 100 different countries to sell products to Chinese customers.

Sustainability Focus

JD.com filed its most recent ESG (environmental, social and corporate governance) report in May 2022. Through the “Green Stream Initiative” (JD.com’s five-year sustainability plan), JD Logistics reported that it had reduced disposable packaging by 10 billion pieces thus far. By the end of 2021, JD Logistics had put reusable circular packaging boxes into use over 200 million times. JD.com also uses foldable thermal insulation boxes and circular transshipment bags to reduce plastic packaging. 

The company has also launched 20,000 new energy logistics vehicles in over 50 cities; these vehicles can reduce CO2 emissions by 400,000 tons per year, according to JD.com.

Technology Focus

JD.com’s Asian No.1 Logistics Industrial Park provides operational efficiency to execute efficient and customized delivery services including same- and next-day delivery, night delivery, flash delivery, scheduled delivery, luxury express, and cold-chain delivery featuring temperature control.

The smart logistics park features smart technologies such as automated ground vehicles (AGVs), which pick up customer orders three times faster than humans. These technologies enable it to fulfill 90% of customer orders within 24 hours. 

In 2021, JD logistics reported that it had invested ¥5.3 billion ($780 million) in technology over the past three years, revealing how innovation is at the center of its services.

Outlook for Singles’ Day

Like Alibaba, JD.com has invested a great deal in its integrated supply chain both domestically and internationally. The company is also very invested in transforming its supply chain through green initiatives, making its supply chain operations both better for the environment and more attractive to consumers, as sustainability is becoming increasingly important to consumers. JD.com’s technological investments and innovations, particularly in its smart logistics park, reveal how the company is focused on optimizing its supply chain and getting goods to customers efficiently. 

JD.com looks to be a strong option for brands that want to ensure that their consumers receive high-quality service, including speedy deliveries and attentive customer support.

Douyin

Douyin is a popular short-video platform in China among younger generations. According to Statista, as of 2021, almost half of users are under 30 years old. Douyin is increasingly expanding into social commerce and has added new features including a shop directly in its app as well as the ability for users to directly add links to videos to shop products. This year, Douyin participated in the 6.18 festival for the first time.

Douyin reportedly began testing its logistics infrastructure in 2020, hiring former employees from traditional e-commerce giants such as Alibaba’s Cainiao and JD.com. Beijing Business Daily News reported that Douyin was testing a domestic express delivery service in January 2022—possibly working on integrating supply chain services into its e-commerce business. This service, which is supported by external logistics companies, promises same-day delivery in cities and next-day delivery in surrounding areas to address delivery service issues experienced by users. However, according to Tech Planet, it is now unclear if Douyin will move forward with the services provided by the external logistics companies, as the services received multiple user complaints during the testing period.

[caption id="attachment_153687" align="aligncenter" width="700"] Testing of same-day delivery service on Douyin
Source: Douyin/WeChat [/caption]  

Most recently, Douyin tested a food delivery service using group purchasing. Group purchasing involves consumers placing orders together—the consumers elect a “group leader” who places the single order and then distributes the orders offline once delivered—and has become an increasingly popular e-commerce trend in China. Group purchasing provides great discounts for consumers, leading to repeat orders and a stronger customer-merchant relationship.

Outlook for Singles’ Day

We think Douyin will participate in Singles’ Day on a larger scale than in previous years, given its official participation in the 6.18 festival and its investment in its e-commerce and supply chain services. Douyin is an attractive platform for Singles’ Day participation due to its large user base, particularly its share of young shoppers. However, brands should note that it is still relatively new to the e-commerce space, and there may be potential delivery delay risks as it is using external services which have received poor reviews. These obstacles may be particularly challenging for international brands, especially those without a physical presence in China.

Kuaishou

Like Douyin, Kuaishou is a popular short video platform that has recently started expanding into e-commerce, including increased participation in the 6.18 festival this year. Kuaishou attracts a younger audience than Douyin, particularly those from more rural or lower-tier cities. 

Similar to other companies discussed, Kuaishou is expanding its e-commerce and delivery services. In early 2021, Kuaishou established a supply chain management company, Chengdu Express Supply Chain Management Co. Since then, Kuaishou has tested both in-house on-demand delivery services and external express delivery services to meet the increasing demand for quick delivery. Kuaishou has also introduced logistics management tools to better warn consumers about delays or other fulfillment-related issues.

Outlook for Singles’ Day

We think Kuaishou will continue to increase its Singles’ Day participation in 2022. However, given that Chinese social media platforms are still relatively new to the e-commerce space, we think that companies should embrace these platforms with some caution—especially because of ongoing supply chain challenges and the platforms’ use of external logistics companies, which have fewer resources than Alibaba and JD.com. As these new platforms have less infrastructure to tackle potential supply chain issues, we urge brands who wish to work with Kuaishou, Douyin or other social media platforms to exercise some caution and also work with traditional e-commerce platforms to diversify risk.

What We Think

We expect Singles’ Day 2022 participants to face logistics and supply chain challenges given China’s Zero-Covid Policy, which continues to cause temporary lockdowns, resulting in shipping delays and disruptions, despite targeted investments by e-commerce platforms in supply technology and sustainability.

We believe Alibaba and JD.com’s investments in global expansion, new partnerships and increased international infrastructure reveal the importance of international brands to this year’s Singles’ Day event. Given international travel restrictions, Chinese consumers who may normally purchase foreign products abroad will likely welcome Singles’ Day as a new way to make such purchases.

Overall, we believe Alibaba and JD.com will provide better logistics plans and solutions than in previous pandemic-impacted years. Furthermore, we urge brands who plan to utilize new e-commerce platforms such as Douyin and Kuaishou to be weary of the potential lack of control over delivery and supply chain services due to the use of external logistics services.