Alibaba.com distribution costs face blowtorch

Alibaba.com distribution costs are expected to be cut heavily after data shows China fees twice as high as abroad.

Alibaba is teaming up with major logistics and transportation companies to drive down the cost of overseas shipping faced by smaller exporters and expand the choices available to users of the wholesale eCommerce website.

Over the last seven months, Alibaba Group’s international B2B site has announced partnerships with UPS and FedEx for express delivery, Maersk for container shipments, and DHL and Kuehne + Nagel for airfreight, among others, significantly boosting cross-border logistics options available online through Alibaba.com.

Currently there are more than 100 logistics companies and 1700 freight forwarders offering their services through Alibaba.com, which has an international membership base predominantly made up of Chinese manufacturers and suppliers selling globally.

High logistics costs have long been a major barrier to cross-border trade for China SMEs. According to the China Federation of Logistics & Purchasing, shipping expenses account for 30 per cent to 40 per cent of the overall product cost in China, compared with 15 per cent to 25 per cent in developing countries, and 10 per cent to 15 per cent in developed countries.

Alibaba.com is beefing up the platform “to provide optimal, one-stop, door-to-door logistics solutions that connect China and the world,” said Steve Su, Alibaba.com senior logistics expert. “We’re offering digital solutions that streamline and simplify the process, cut costs, and enable small- and medium-sized exporters to enjoy same service and price as big exporters do.”

An example is Alibaba’s partnership with Maersk, one of the world’s leading container shipping and ports operators. In December, Alibaba.com began allowing exporters to reserve space on Maersk container ships through the eCommerce site’s OneTouch service. OneTouch is offering online booking – with cargo space guaranteed – on select routes between five Chinese ports and eight overseas destination ports.

The Maersk tie-up helps to ease several challenges – such as unpredictable costs and booking cancellations – faced by small exporters when shipping on ocean vessels. Container companies typically prefer dealing with high-volume businesses, but Alibaba.com, which has around 150,000 members, effectively consolidates a large number of potential customers, Su said.

“As a platform, Alibaba is able to integrate small exporters and their demands, thus helping them secure more resources when talking with shipping lines.”

By joining Alibaba.com’s platform, which consolidates information and logistics requests of SMEs, global logistics firms can tap into the growing SME market in a more cost-effective and efficient way, he said. Maersk also adopted Alibaba.com’s logistics-information technology to standardize the process and help lower costs.

“Maersk partnered with us because they noticed the disorder of the industry and is willing to transform and standardise the process,” Su said.

Through Alibaba’s growing network of third-party logistics providers, China exporters can shop online and order services such as express delivery, air cargo delivery, rail delivery, and maritime delivery online, and arrange to have cargo delivered direct to buyers’ doors.

By digitising the shipping process, pricing is more transparent, goods can be tracked online, and small exporters have access to data such as routing information. Payments can be settled electronically within the system, and logistics companies also have access to exporters’ payment histories and other information provided by Alibaba to help determine creditworthiness.

“Express companies like FedEx and UPS were reluctant to serve SMEs since they were afraid of potential risk,” Su said. “Alibaba as a platform can control the risk by evaluating the trading data of exporters, and this encourages third-party providers to offer better prices and even customized solutions for particular industries. For instance, wig sellers prefer delivery with sign-off services to avoid customer complaints, and express companies are willing to provide this and charge low sign-off service fees.”

This application of big data shows how Alibaba “can provide SMEs with logistics solutions that are superior to traditional solutions built around offline,” Su said.

While helping to streamline overseas shipping, Alibaba.com is also enhancing its position as a facilitator of logistics services providing members with a greater range of choices.

In January, Alibaba.com announced a cooperation agreement that will integrate members of the world’s largest logistics network, WCA Ltd., with the Alibaba platform. WCA will vet and approve international logistics providers and freight forwarders for Alibaba.com customers.

The WCA network, comprising 6000 offices in 189 countries, helps smaller freight forwarders compete for global business. Approved WCA forwarders now have access to Alibaba’s sellers, opening up business opportunities with exporters that might ordinarily be out of their reach. The collaboration currently offers shipments generated by Alibaba.com’s members to the US, India and the UK.

“Many of our member companies are already heavily involved in many facets of cross-border eCommerce logistics,” said Dan March, WCA’s CEO. “The strict qualification process for our newly-formed WCA eCommerce network will provide reassurance that the services provided by our members can facilitate merchants on Alibaba.com to accelerate their global trading.”

  • Alizila is the independent but Alibaba-founded news service about Alibaba Group affairs.

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