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Understanding shopping 2.0.

Ever more Chinese nationals are shopping via the Internet. Charles Cao, CEO of ECMS Express, a company providing the logistics behind cross-­border e-commerce, is a strong believer.

Mr Cao, since when has e-commerce been on the agenda for consumers, authorities and logistic companies in China?
People in China only really started to develop an interest in Internet shopping at the start of the decade. In 2013, when I established ECMS, China was still a developing country in terms of e-commerce. This was simply attributable to legal, documentation and customs-related restrictions. However, it had long been clear that it will become a huge growth market. With Apex Logistics Inc. I had already established a forwarding company and turned it into one of the leading providers of freight solutions worldwide. For me, establishing an e-commerce logistics service provider was merely a logical consequence of the signs emerging from the market.

What importance do your countryfolk attach to cross-border e-commerce and how has it developed?
Chinese consumers enjoy the fact that thanks to e-commerce they have access to products which, in respect of quality and design, are not available in Chinese stores. Availability for a sought-after product is key for Chinese customers. In the early days of e-commerce, huge sums were, in part, paid for banal things – the main thing was the goods were delivered. Today, the price structure has become normal. On the one hand, ever more online shops with similar products are tapping the market. On the other, international price transparency also applies in China. Price differences in Europe only arise now because of customs and transport costs. For a transitional period, the price became the primary sales argument. However, that has also changed in the meantime: China’s consumers have quickly grown accustomed to online shopping, and can and want to purchase quality products. It is still often the case that such needs can only be satisfied abroad.

So what is purchased from abroad?
Above all foreign goods that are considered high-quality com­pared to the equivalent Chinese products. For example diapers where trust is placed in the quality, cosmetics but also foreign label clothing. These products are typical of the demands of young, urban and well-educated Chinese nationals who are the key representatives of China’s latest economic success story. This generation has a completely different approach toward consumerism compared to our older countryfolk for whom saving became a way of life for political and social reasons.

China has already overtaken the US and Europe in online shopping. How do industry and the economy cope with the assiciated changes?
Initially, China needed to become acquainted with the topic. The demand in e-commerce increased extremely quickly. An entire economic sector was established from scratch in next to no time. Many other areas were forced to keep up with the pace of e-commerce growth – both on the consumer and the supplier side, not to mention logistics. In the meantime, numerous national requirements, licenses and certificates are required. These apply to data protection and the protection of intellectual property. Considerable progress has been made in online payment and processes involving all aspects of the physical delivery.

What role does your company play in that respect?
We focus on cross-border e-commerce for which smooth logistics are an important if not the most important success factor. Consumers expect to receive their goods within a certain window. Otherwise, consumers loose interest. In this respect we deal with all arising tasks involving customs ­processing and the individual delivery steps, and import goods from Europe and the US to customers in China within a maximum period of six days.

Which routes do consignments purchased online take at ECMS?
We have six locations in the US and Europe. We consolidate our customers’ goods there and fly them to China where the delivery is, in turn, assumed by a courier service. In the meantime, China has a very well developed courier service infrastructure. Deliveries to countries where the consignments originate do not pose problems either. Clearing customs is the only aspect that can be a persistent challenge because ideal processes for shipping B2C parcels have yet to be put in place.

 

 

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Your company Apex Logistics is extremely successful. It is seen as the number one forwarder in China and is the 25th most successful forwarder worldwide. Why didn't you simply set up a product division for e-commerce in the company?
Because the classic forwarding business has precious little in common with the specific e-commerce requirements. That starts with IT. We have created an IT landscape for ECMS that integrates the technology of all our stakeholders: our customers, customs authorities, all destination countries and our airfreight carriers. The customs declaration process for e-commerce consignments has its own requirements, and the IT of the orig­inal senders differs considerably from the IT in place in classic airfreight. Our largest customers are Amazon Europe and Ama­zon USA. Their systems are fully linked with ours. Ultimately, the freight itself is normally made up of much smaller parts and is more heterogeneous. This entails orders of any size from the smallest of packages of face cream to a huge carton containing a bicycle. In all of this, door-to-door deliveries are our daily bread and processes need to run like clockwork. Tracking and tracing are also an absolute must in e-commerce. Each customer wants to know exactly where their order is currently located. You have to have a fundamental understanding of this wholly unique freight segment and its customer requirements – most classic forwarders and cargo airlines don’t.
 

"Young chinese nationals enjoy spending their money on exclusive products. Often, these can only be obtained via the internet."

"Young chinese nationals enjoy spending their money on exclusive products. Often, these can only be obtained via the internet."

Charles Cao, CEO and founder of ECMS Express.

 

Customs, tracking, IT and speed – e-commerce places new demands on all players in the transport chain. In ECMS, the Apex Logistics Head Charles Cao has therefore established a company especially for this segment.

 
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As an e-commerce logistics company, what demands do you place on your airfreight carriers?
First of all they need to be where we are. We have major hubs in several US cities and a European hub in the Netherlands. It makes sense to use the carrier that is on site. We are also in discussion with Lufthansa Cargo because we are planning an additional hub in Germany. Up until then, we will perhaps manage to develop creative and innovative ideas together and design an e-commerce product in line with our requirements. Overall, I am not entirely satisfied with the airfreight airline programs for my industry. Put simply, the e-commerce business has yet to be sufficiently understood. Classic airmail products do not work for us because we have different requirements for our consolidated parcels. Therefore, most of the time we book classic standard freight products which often do not provide the speed that is important for us. However, that may change soon – we are conducting the necessary discussions.

Mr Cao, many thanks for the discussion.

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E-commerce continues to grow.

At USD 672 billion annual sales, China is now by far the largest e-commerce market. By 2019 the volume is set to triple. The growth story could also continue thereafter because just half of all Chinese nationals will probably shop online in three years’ time.

Photos:

Jasper James / iStock, Lara Belova

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