A Snapshot From Meredith Sun
China Ecommerce - Cainiao Improves Logistics Efficiency, Consumer Experience for Singles' Day

November 21, 2016     View full Note online  »

BABA, JD, VIPS
002352 CH, 002468 CH, 700 HK, AMZN, Ant Financial Services Group, BEST Logistics Technology (China) Co. Ltd., E-Commerce China Dangdang Inc., NTES, Shanghai YTO Express Logistics Co. Ltd., Shanghai Yunda Express Co. Ltd., TCEHY, ZTO

40 sources in China, comprising 5 ecommerce vendors, 3 regional logistics managers and 32 consumers
Cainiao and its partners’ order processing and delivery efficiency improved significantly for this year’s Singles’ Day shopping event, reducing order cancellations and greatly improving the experience for consumers and vendors.

Consumers Surprised by Tmall Products’ Fast Delivery on Singles’ Day

Delivery Speed YY During Singles’ Day 2016 (number of mentions)
 TmallJDVIPS
Faster2141
Same1082
Slower141
Not Applicable*-1528
Don’t know-1-

*Source did not make any purchases on that platform on Singles’ Day

Tmall: Fast Delivery Reduced Order Cancellation Rate
Two-thirds of consumers said they received Singles’ Day products from Alibaba Group Holding Ltd.’s Tmall faster than last year’s Singles’ Day. Many said they were surprised by how fast they received products. This year, it took one or two days for delivery of products shipped and delivered within the same city and three to five days between cities, according to most consumers. Consumers also mentioned their order cancellation rates were reduced significantly because of better logistics. In previous years, many consumers canceled their orders for products that took too long to deliver. Those who returned products on Tmall this year found it to be easier and faster, with the entire process handled online including ordering the courier to retrieve the product at the appointed time, paying the return delivery fee and the e-shipping label automatically generated in Cainiao’s GuoGuo app. Twelve of 32 said Tmall provided the best and fastest logistics service this Singles’ Day, highest among all platforms.

“It took about one to five days [to get most packages]. It is faster than last year, especially the order processing timing. Last year, some orders weren’t even processed until after Nov.15. But this year, of the 10 orders I bought, seven of them were processed on Nov. 11, the other three before Nov. 13. And the delivery of these orders was also faster than last year.”

“I still have two orders from Nov. 11 not received yet [as of Nov. 16], but deliveries have been much faster than last year. Last year, I even canceled several orders because the orders were very late. This year, all the orders have been shipped; some I’ve received already, and a few are on the way now and should arrive in one to two days.”

“I started receiving product the next day. I'm very impressed. I live in the suburbs of Tianjing, not even the city center.”

JD: Still Strong in Delivery, Yet Lacks Improvement
Four of 16 consumers said JD.com Inc.’s deliveries were faster this Singles’ Day than last year, and eight said it was the same since JD’s self-owned delivery was already the fastest. But four said it was slower than last year, including one who used JD’s delivery team for cash on delivery and three who were using third-party delivery companies. Eleven of 32 said JD’s delivery was the fastest and the best during this year’s Singles’ Day (compared with 12 for Tmall). Two consumers, one from the Southwest and one from the South, said Vipshop Holdings Ltd.'s Vip.com provided the fastest delivery, especially in tier-3 and -4 cities in the Tehri region.    

SF Express [Group Co. Ltd.] and JD’s self-owned delivery should be the fastest and best. Some goods on Tmall were delivered by SF; generally we received them one to two days later. And all JD’s direct sales’ goods were delivered by its own express, and generally it can reach main cities within one to two days.”

“It took about two to seven days to receive most of my orders. All the orders from JD’s direct sales were received in two to three days. Orders from JD’s third-party sellers were much slower. I still have one order that has not arrived yet [as of Nov. 16]. I feel JD’s delivery speed is similar to last year.”

“Vip.com started its Singles’ Day promotion on Nov. 1, and on Nov. 5, I chose a good on Vip.com and asked the vendor if it would be 50% off if I waited until Nov. 11. She told me the price was the Singles’ Day price, suggesting I finish the order early to avoid a possible delivery issue. It took four days, and I feel that is faster than last year. Many people know that JD has its own logistics, but in fact, Vip.com also has its own logistics and the delivery speed is very good.”

Other Observations: 

  • None of the 32 consumers made Singles’ Day purchases on Amazon.com Inc.'s Amazon.cn this year. None has trialed or purchased Amazon Prime.
  • Eight of 32 consumers used Ant Financial Services Group’s Ma Yi Hua Bei to purchase on this Singles’ Day, two used JD Baitiao, and none used Vip.com’s Wei Pin Hua.
  • On Singles’ Day, three consumers also purchased through Tencent Holdings Ltd.’s (700 HK) WeChat, two purchased through NetEase Inc.’s Kaola.com, and one each purchased through JD’s Yihaodian and Ecommerce China Dangdang Inc.
  • Consumers said SF Express was the fastest for Tmall delivery and BEST Logistics Technology (China) Co. Ltd. was the slowest this Singles’ Day.

Vendors and Courier Companies
Cainiao and Partners Improved Efficiency

All three courier sources and all but one vendor said overall order processing, delivery speed and experience was better than last year’s Singles’ Day because of strong technology support from Cainiao, upgraded and digitized equipment and good preparation by all players (couriers, vendors, etc.), based on the accumulated experience on the Tmall platform. The one vendor whose delivery was slower than last year was the only source who did not use Cainiao or its partner services. Vendors and consumers praised Cainiao GuoGuo’s easy operations, transparent and simultaneously updating on the order process and improved delivery tracking information that greatly improved the user experience. Cainiao’s e-shipping label greatly improved efficiency on package sorting in warehouse. Traditional sorting, mainly done manually, takes much longer compared with a half-second scan of the e-shipping label. Among three courier companies, one said they adopted the e-shipping label for 100% of deliveries, one adopted it for 80% and the other for 20%. All but two of the vendor and courier sources said the gap between JD’s self-owned delivery and Cainiao and its partners became smaller compared to last year Singles’ Day. Vendors were impressed by how smooth every aspect of Singles’ Day went on Tmall, including payment, order processing and delivery.

“Overall logistic speed was faster than last year because we used Cainiao and they have a very good management system to ensure high efficiency of order processing speed and delivery. We are also more experienced than previous years. For the pre-sell and best-selling products, we sent them to Cainiao warehouses before Nov. 11 based on estimates. Those products were delivered first and very fast.”

“This Singles’ Day, Cainiao launched some new functions to improve order processing and delivery efficiency. For example, orders to the same delivery area can be processed and arranged at the same time, which allows the delivery company to regroup the packages and improve the delivery speed a lot. Our store has used the e-shipping label for several months because it helps to improve operational efficiency.”

Delivery Costs
Courier companies’ price of delivery per order of Tmall product remained the same as last year, although courier companies’ cost increased, mainly because of upgrading technology, equipment (in order to better meet Cainiao’s requirements) or buying service from Cainiao. Vendors’ cost on logistics mostly remained unchanged except those who began to use Cainiao which was 20% more than other third parties. Price was one of the major obstacles for vendors to use Cainiao.

“Logistics cost increased compared with last year because we chose to use Cainiao this year, which is about 20% higher [yy]," said one vendor. "But it helped to improve the efficiency of logistics and decreased the order cancellation rate. Last year, we had some orders that were canceled because we can’t process them in time and the consumer chooses to cancel at the end. This year, order processing and delivery speeds improved a lot, and order cancellations decreased significantly. Also, for using Cainiao logistics, we got traffic support from Tmall.”

A small vendor expressed displeasure with Cainiao. “As a small vendor, we don’t like Cainiao logistics for two reasons: One, Cainiao’s cost is much higher than others. Two, Cainiao’s information is very transparent and clear," the vendor said. "It is good for consumers to track the real status of their order, but it is not good for vendors because we deal with hundreds of orders every day and there will always be some issue, like if we don’t arrange the delivery in time. In this situation, the customer can claim 30% of the order amount as punishment for delay on delivery. If we use Cainiao logistics, we will have to pay that. But with our current logistics, we can fake the tracking info to show that the product has been delivered, so that which we don’t have to pay for the punishment.”

One source said SF Express did not meet plan on the number of packages handled on Singles’ Day. One station expected package orders would increase more than 10% yy in this Singles’ Day so they hired more part-time staff and built up more transit depots but the package number was the same yy. OTR Global believes the rising of Cainiao partners (Shanghai YTO Express Logistics Co. Ltd., ZTO Express Cayman Inc., STO Express Co. Ltd., Shanghai Yunda Express Co. Ltd., and Best Logistics) could take some share away from SF Express.

JD Lowered Prices for Merchants Using JD Delivery Service
Vendors generally believe JD’s proprietary delivery was still the best in terms of speed and service quality, and one believes Cainiao won’t be able to catch up with JD’s logistics within two years because of JD’s warehouse deployment exceeding Cainiao's. But others, especially courier companies, don’t think JD’s delivery was the best — now that SF Express, Cainiao and its partners are all improving quickly.

JD has been encouraging vendors on its marketplace to use its proprietary logistics by giving a 50% discount. “Costs have decreased compared with last year. JD launched a promotion to attract third-party vendors this year: during Oct. 21 to Nov. 4 and Nov. 21 to Dec. 31, delivery fee is 50% off and also during Nov. 5 to Nov. 20, the delivery fee is free. But vendors have to use JD warehouse service as well. There was also a warehouse service discount of 50% off during Oct. 1 to Nov. 4,” one said.
 
Contributors: Yaqin Chen, Connie Fan, Joyce Hong, Butch Lee, Bruce Li and Eileen Li
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