Day of the disrupters

There is a good argument for saying that the most dramatic developments in logistics are not taking place in Europe, or even America, but in China. Last month Chinese retail giant JD.com raised $2.5 billion to finance the expansion of its logistics subsidiary, JD Logistics.

And that comes just a few months after Alibaba, that other Chinese online giant, earmarked $15.2 billion to develop its global logistics network.

JD.com is notable for the fact that is has chosen to do all its logistics itself. Chairman and chief executive Richard Liu highlighted the fact when he announced the funding deal.

“Our decision early on to build out our own logistics network has paved the way for JD Logistics to become the industry leader it is today. The shift throughout global e-commerce towards our model is vindication of the path we chose.

“This current funding round sets the stage for us to further invest in expanding our lead in the sector in areas like automation, drones and robotics. JD Logistics will continue to support both JD.com’s e-commerce business and the logistical needs for a wide range of industries for years to come,” said Liu.

JD.com reckons it currently has the largest fulfilment infrastructure of any e-commerce organisation in China. It operates seven fulfilment centres and 405 warehouses covering 2,830 counties and districts across China, staffed by its own employees.

In September last year, Alibaba set out plans to invest RMB100 billion ($15.2 billion) over the next five years to strengthen its global logistics network so that it can fulfil orders in China within 24 hours and worldwide within 72 hours.

“Our goal with this investment is to provide comprehensive, first-class experience for consumers globally,” said Alibaba’s chief executive Daniel Zhang.

This might only be of academic interest if both these organisations did not have global ambitions. Alibaba already has an office in the UK, while JD.com is reportedly planning to take on Amazon in the UK, France and Germany with a €1 billion investment in its logistics network over the next two years. Following Theresa May’s visit to China in January the “Financial Times” reported that JD.com is to open an office in London in April, as well as opening an AI research centre in Cambridge in 2019.

And it is not just other online retailers that are feeling the heat. Increasingly, these organisations are seeking to use their resources to pick up business from existing logistics players.

Not surprisingly, Amazon has also seen the opportunity. Last month, Reuters reported that Amazon is planning to launch a delivery service for businesses to compete directly with United Parcel Service and FedEx.

It said the service, named “Shipping with Amazon” would launch first in Los Angeles and involve picking up packages from businesses and either feeding them through its network of fulfilment centres, or delivering them directly to courier companies.

The idea is that it could offer lower prices by adding these deliveries to trucks handling Amazon’s own orders.

There has been lots of talk about market disrupters in recent times, but we are increasingly seeing how disruption is taking shape in the wider logistics market. Are you sure your business is not about to be disrupted?

Malory Davies FCILT

Editor