What’s Behind China’s 20 Billion Parcel Delivery Industry?
WITHIN 10 YEARS CHINA WILL HAVE OVER ONE BILLION PEOPLE ONLINE, BUYING 24/7 AT A RATE OF 80%+ VIA AN ALWAYS-ON MOBILE DEVICE.
China has over 700M internet users now growing at over 30M+ new users per year. As internet devices and data costs diminish, and mobile phone firms such as Huawei & Xiaomi evolve to focus on building ecosystems to capture and sell big data; millions of Mainland Chinese will gain access to cheap (or free) high quality continually connected devices; for the first time. Coupled by continued growth of the world’s largest and most demanding middle class in history targeted to reach 630M by 2022; the world will turn to sell anything (and everything) to Chinese consumers via e-commerce.
China is the already the world’s largest e-commerce market generating revenue of about 4 trillion renminbi ($615 billion) in 2015, equating to around the same as Europe and the United States combined. Fueling this e-commerce growth is Chinese consumers insatiable hunger for safe high quality packaged foods and other goods directly shipped from overseas to their China doorstep. China Cross-border e-commerce transactions has grown exponentially in recent years and is predicted to reach over $1 trillion by the end of 2016. At this rate, how many courier packages do you think were delivered in 2015?
If you guessed about 20 billion packages; you would have been close. 20.6 billion to be exact; that’s an increase of 48% YoY in 2015 according to the China Express Association. This number will only increase as more Chinese consumers continue to buy more stuff online via mobile devices; and as China’s logistics network & couriers become more sophisticated.
The new consortium under the name Cainiao Network Technology Co., Ltd., is developing a new nationwide logistics platform headed by none other than Alibaba Group, China’s largest e-commerce company. The consortium plans to invest up to RMB 100 billion ($16.3 billion) over the next 5–8 years to develop what it is calling the China Smart Logistics Network to be leveraged in a win-win scenario where all players can benefit. Namely the other firms making up the consortium including Yintai Group, Chinese conglomerate Fosun Group, S.F. Express Co., & four major Chinese courier companies including; Shentong, Yuantong , Zhong Tong & Yunda.
All this sounds great! Except, only for one little problem.. What’s behind China’s 20.6 billion parcels delivered each year is about 20 billion used low grade boxes, plastic box fillers, polystyrene foam & loads of plastic bubble wrap. And a mountain of used sticky tape. And a mountain of used sticky tape. In fact, 16.95 billion meters of sticky tape was used for parcel deliveries in 2015. Online delivery is cheap in China, or even free. China’s major platforms like Alibaba Group’s Tmall.com for example offer free delivery for online orders over renminbi 88 and under 10kg, leveraged by China’s millions of cheap delivery guys. With large Chinese e-commerce platforms having lots of VC money in the bank, they’ve got lots of cash to burn, orders to fill and pressure to to grow so the incentive to invest the time, energy and resource into the recycling all of those cheap boxes and other packaging things is just too much work with very little revenue.
So, what happens to all that parcel delivery waste in China? Unfortunately, most waste just end up in landfills across China, many of them unregulated and illegal.Over 80 percent of waste generated in China is land-filled, in a variety of ways. Where nearly 40 percent do not conform to international standards, and over 50 percent are open dumps. Beijing alone has 75 unofficial landfills where without a proper landfill procedures, buried waste seriously pollutes under-groundwater and soil. Some waste even pollutes air quality. Much of China’s e-commerce produced waste ends up in landfills all across China, where it’s either buried or burnt.
What’s behind China’s 20.6 billion parcels delivered each year is about 20 billion used low grade boxes, plastic box fillers, polystyrene foam & loads of plastic bubble wrap. And a mountain of used sticky tape
When you click twice to buy conveniently online, do you think twice about all the waste and pollution being created with every kuaidi (courier) sent to your office or home everyday? With air pollution in China arguably the countries biggest social problem; what can China based e-commerce firms do to help minimize pollution in China; and at the same time create value for Chinese consumers?
This is a question that we have thought long and hard about here at WoowBow. We had thought about encouraging and facilitating our customer businesses we send our B2B surprise boxes of imported snacks & goodies to every month to recycle our boxes after receiving. But with our experience and knowledge of the difficulties of proactive recycling in China, this option unfortunately simply was not a viable one we could scale. In the end, we asking ourselves questions — what if we didn’t see our kuaidi box as a simple cheap to manufacture tool just to get our products from A to B with our snacks intact — what if we could make an amazingly high quality functional box that no one would even think about throwing away? What if we could make a box that after it’s “first life” ends, could be reused and re-purposed within our customers office to solve another problem every company in China has?
What we found is that many companies in China accumulate a lot of paperwork and other documents that at some point in time are unused; at the same time, can’t be thrown away. Thus the company decided to keep these things inside the office storage space. However, many businesses don’t have quality boxes to store and archive these documents, resulting on many office storage rooms messy and unorganized. Sound familiar? After our clients receive their monthly dose of delight as an added bonus, they get a huge high quality archive box for free that can be re-purposed within their office to store those “top secret” documents that just can’t be thrown away.
Of course, if our customers find other useful usages of our WoowBow box, we are equally ecstatic. Just as long as the box is given a second life, and does not contribute to China’s pollution problem, we are happy! In addition, we also hate bubble wrap, and vie only to use when absolutely necessary. We were fortunate to come across an amazing recycled paper alternative that does the same job, yet is environmentally friendly. Although these initiatives cost us more than market standard practices returning less “value” to our investors, we are compelled to do our part to help alleviate China’s pollution problem, and to help solve our customers solve their other office problems at the same time.
We would love to hear what you think of our packaging solution. If you have any other better ways that we can work together to help the environment and make China a better place for all of us to live, reach out to us; we are all ears!
ABOUT THE AUTHOR: Johnathan Pestano is not an expert or guru of any sort. He is simply an Australian guy that has been living and working in Mainland China for since 2002 whom is willing to share his observations and experiences with the hope that they are of value to his readers. He is also the Founder & CEO of the discover eCommerce startup WoowBow.com and wrote this “about the author” text in third-person. If you enjoyed what you read, “like” the post, “follow” me and feel free to share your thoughts and comments. For any questions about doing business in China, I (I mean he) would love for you to reach out to him directly;)