China passed a landmark this year as 83% of its 623m internet users accessed the internet on mobile devices, compared to just 81% on PCs. E-commerce is also surging. In 2013, 190m people shopped online and spent over $300bn. Conservative estimates predict those figures will surge to 520m people and 3.3trn Yuan ($530bn) by the end of next year.
Rural adoption of e-commerce was also a boon for e-tailers. According to data collected through its Tmall and Taobao platforms, Alibaba Group revealed that residents in counties and villages in China received a total of 1.8bn packages in 2013 and sent 1.4bn during the same period.
However, while consumers are relying ever more on the convenience of online shopping, the sheer volume of deliveries is weighing heavily on China’s somewhat inefficient logistics network.
Spending on transporting goods around the nation is roughly equivalent to 18% of GDP, higher than other developing countries such as India and South Africa, which spend between 13-14% annually. The figure is also double that of developed countries.
One of the main issues lies in China’s 700,000 trucking operators (compared to around 7,000 in the US mainly comprised of one-man outfits unable to create economies of scale. Owner-operated trucks are unlikely to weather increasingly stringent fuel standards and industry consolidation for long. Companies like Singaporean Global Logistics Properties and JD.com are both investing heavily in truck fleets in a bid to create economies of scale and improve efficiency.
Shell’s newly opened facility will focus on precisely that. The Dutch major claims low-viscosity synthetic engine oils and drivetrain lubes can improve fuel efficiency by around 2-3%, resulting in savings of around 2,000 litres of fuel for a typical truck. Given that conservative estimates forecast China will account for half of global truck sales by 2020, even marginal savings will have a massive impact.
Meawhile, other producers are taking advantage of the e-commerce boom itself with Great Wall Lubricants proving to be the most popular brand on Alibaba’s Tmall platform in the first half of 2014. The company’s focus on online-to-offline (O2O) marketing contributed in no small way to its recent success.
Great Wall Lubricants has allowed consumers to find and pay for products online, download a barcode and take it to their nearest service centre to pick up their purchase. An impressive exercise in coordination and planning in a country of some 1.3bn people.
As always, OATS is at the forefront of China’s online developments and will continue to develop technology to connect lubes producers with their customers. To find out more about our latest digital products and services, or to comment on anything you read in this Bulletin, simply contact Diana Shen.
Sebastian Crawshaw
Chairman, OATS