China’s online retail growth to transform logistics
Print Edition
With online retail sales expected to exceed US$1.2 trillion globally this year, retailers are under pressure to decide where, when and how packages should travel from dock to doorstep.
With Indonesia, China and India set to experience the highest rates of B2C, or business-to-consumer, e-commerce sales growth by 2017, a new report from Jones Lang LaSalle highlights the crucial role that the logistics property sector will play in the Asia Pacific, and how it must adapt to changing consumer demand.
The Asia Pacific area is home to four of the top 10 countries with the highest Internet users globally, yet, developing economies currently lag behind developed markets in terms of their e-commerce “ecosystems.” As this gap closes, they are predicted to see far stronger e-commerce sales growth than the more mature markets, rapidly changing the e-commerce landscape over the next five years and requiring a transformation in the way goods are purchased, stored and delivered.
“The structural changes in the e-commerce landscape will be especially prevalent in the Asia Pacific, and developers in the logistics property sector must keep pace in order to maximize opportunities in the future,” said Michael Fenton, head of industrial, Jones Lang LaSalle Australia. “As more and more retailers establish their own websites while established retailers look to improve distribution beyond main Tier 1 hubs, we are seeing increased demand for warehouses and modern logistics capabilities.”
In emerging markets, e-commerce supply chains are evolving in highly divergent ways, influenced by regulatory, economic and cultural factors.
In China, e-commerce is gathering increasing momentum. By 2017, it will be the second-largest B2C e-commerce market, second only to the United States, while the country’s total e-commerce market value is set to reach US$1 trillion by 2020. The rapid growth of B2C is driving demand for distribution space, both from pure online retailers establishing new warehouse networks and from brick-and-mortar retailers who have expanded online and now must upgrade and expand facilities to accommodate increased demand.
“E-commerce has already been hugely beneficial to the logistics property sector in China,” noted Stuart Ross, head of industrial for China, Jones Lang LaSalle. “The first wave of e-commerce warehouse space was concentrated in Tier 1 cities such as Beijing, Shanghai and Guangzhou, but since 2011, online brands and retailers are looking to expand, setting up distribution centers in emerging inland retail markets as well.”
In India, online retail accounts for less than 1 percent of total retail spending but is estimated to grow by 24 percent by 2017. E-commerce-related warehousing is designed to serve big cities, and the country’s multiple tax structure has led to decentralized warehouse networks with small, state-based facilities rather than larger, more efficient ones. But the soon-to-be implemented Goods and Services Tax will encourage consolidation of distribution networks and will fuel demand for larger distribution centers.
In the more mature markets of Asia Pacific, online retail sales already account for 5 to 15 percent of total retail spending with South Korea boasting one of the highest shares in the world at 13 percent. However, the e-commerce landscape is also changing for these markets, driving major changes in demand for distribution property. Retailers will be required to adopt an omni-channel strategy that integrates sales channels so that consumers can choose the most convenient way to order, receive and return purchases.
“In terms of e-commerce volume, we expect emerging markets to eventually surpass the more mature markets in Asia Pacific and globally, as a result of their rapidly expanding populations. As more and more consumers embrace e-commerce as a safe and convenient way to purchase goods, it will be essential for developers, brands and operators in both developing and more mature markets to stay ahead of trends and invest in logistics models that will expose new products to new populations,” Fenton said.
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