The Chinese e-commerce market is expected to grow at an annual rate of 25 percent over the next few years, from $390 billion in 2014 to $718 billion in 2017. However, success in China’s rapidly growing e-commerce market is not a given. Today’s consumer market is concentrated in regions with the top 10 cities located on the coast, but the number of online shoppers is growing fastest in low-tier cities. 

China’s E-Commerce Market in 2014: The Logistics Challenges

Amid the rapid growth in China's e-commerce market, three key trends are shaping the near-term landscape:

  • Rise in access channels: the share of mobile shopping in China's online shopping market rose from 1.5 percent in 2011 to 9.2 percent in 2013, and we foresee a 20 percent annual growth rate in the near future.
  • Increase in B2C business: B2C is gaining momentum, driven by the rapid growth of B2C market­places, and is expected to reach 53 percent of the market in 2017. 
  • More geographic spread: the number of online shoppers is growing fastest in lower-tier cities. This trend is expected to continue as wealth in the inland cities increases. 

As overall geographic coverage expands, the ability to offer reliable and consistent services and delivery will be among the biggest challenges—and a major source of competitive advantage. The relative scarcity of high-quality logistics providers in China often means problems for e-commerce firms: late deliveries, damaged and lost parcels, negative attitudes from delivery people, slow collect-on-delivery (COD) processes, poor return procedures, and no special services such as installation or the ability to try on purchases. Such last-mile delivery and customer interface issues inevitably affect the credibility and brand image of e-commerce firms. 

This report examines the key trends in the Chinese e-commerce market and highlights three time-tested and proven strategies for e-commerce firms to address their logistics needs. 

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