News & Insights Can technology help China’s journey to a better logistics landscape?

Can technology help China’s journey to a better logistics landscape?
Attendees at the 10th Credit Suisse China Investment Conference (CIC) in Shenzhen are used to hearing about the latest cutting-edge technology so it takes a lot to surprise them. But one speaker certainly gave the audience something new to digest when he demonstrated the type and level of information available on his platform. Perhaps even more surprising, the industry that provoked such interest was logistics.

During his presentation at the CIC, Jielong Zhang, Chief Financial Officer at fleet management company G7, showed what it takes to become a cutting-edge technology company with 1.3 million vehicles on its platform.

For instance, with safety a top priority, it helps to know that some 69,000 of your drivers have closed their eyes for over 1.5 seconds over the past 24-hour period or that some 30,000 of your drivers have made phone calls or watched videos while driving. Thankfully, because these insights allow G7 to take appropriate action, there were only 61 accidents over that time. 

“We are described as a fleet management company, but we see ourselves as a company expert in the Internet of Things,” explained Zhang who believes that 2019 marks a turning point for industries driven by the Internet of Things (IOT).

Jielong Zhang, Chief Financial Officer, G7, describes his company as an expert in Internet of Things rather than a fleet management company.

The logistics industry is certainly an area in China that needs improving. China has the world’s largest logistics market with a volume of RMB 283.1 trillion. But it is expensive, with the average costs around five percentage points higher than in the US.

The government is taking steps to improve logistics, announcing earlier this year that it plans to reduce costs by nearly RMB 121 billion. And in October, policymaker makers designated six areas as pilot regions to reduce costs and increase inefficiencies - Shanxi, Jiangsu, Zhejiang, Henan and Sichuan provinces and Chongqing Municipality. For Zhang, any solution to China’s logistics headache must include a technology component. 

“We have reached an economic bottleneck in terms of solutions and that can only be overcome with technology,” he said. 

E-commerce faces new challenges

One industry that would welcome the extra investment in logistics is E-commerce. China is home to the world’s largest E-commerce market with over 50% of global transactions coming from the country.  

On a panel that featured Jie Lin, Founder and CEO of Simple 24 inc, and Zhiyu Chen, Senior Vice President of E-commerce and Marketing at Walmart China, the conversation turned to consumers’ attitude towards prices for the products and services they buy online – something which has seen a shift in recent years.

Jie Lin, Founder and CEO, Simple 24 Inc, and Zhiyu Chen, Senior Vice President of E-commerce and Marketing, Walmart China, listen in on a question from the audience at the 10th Credit Suisse China Investment Conference.

“When we first started to charge for takeaway food delivery it was new and there was some resistance. I think it’s accepted now that there’s an increased charge for services like food delivery, but it will take years before we get to that point for products,” said Lin. 

And while China’s E-commerce champions may have pioneered the personalization of services that have now been adopted by just about every consumer-facing company, they are facing challenges from how to integrate and exploit new forms of technology and entertainment. 

One of those new technologies is live streaming. Yousf Feng, Founder, CEO and Chairman of  Inke, estimates that the live streaming business could grow to a larger scale as a result of more application scenarios and the coming of 5G, potentially reaching RMB 200 billion, equal to the size of the gaming industry. 

Yousf Feng, Founder, CEO and Chairman, Inke, at the 10th Credit Suisse China Investment Conference.

This could represent a huge opportunity for E-commerce platforms if they are able to monetize that audience.

“The use of big data and the personalised recommendations that come with that has meant users have become addicted to apps like TikTok, yet while we are looking at live streaming, it’s too early to say whether we can translate that into a sustainable commercial opportunity,” said Chen.