Managing eCommerce

Fulfillment in China

Global E-commerce Summit 8-10 June 2015, Barcelona, Spain

About the Speaker

Long Wong

• COO of UCO.com, the market leader for cosmetics eCommerce in China

• 2004-05 Amazon.com HQ, responsible for World Wide Transportation system projects

• 2006-07 Head of Supply Chain & Transportation at Amazon.cn

• 2009-10 Head of Supply Chain & Logistics at Metersbonwe

• Various eCommerce start-up experience

• Which are the key dimensions to consider for offering eCommerce delivery service?

• What are the different trade-offs and options for each of these dimensions?

• How to execute (best practices) to achieve the desired result?

If you have to set up your consumer delivery solution for your company’s eCommerce outlets in China today, what should you do?

Consideration Factors

Do You Need Payment Collection? • Cash-on-Delivery • Prepaid

How to Define Tiers of Service? • Speed • Service

How to Optimize Cost? • Partnership • Competitive

Other Considerations • Peak management • Air restrictions • White glove / High value / Temperature control

COD Requirement Would Limit Supplier Options

Non-COD: National common carriers (the 四通一达—YTO, STO, ZTO, HTKY, Yunda, TTK, GTO, ZJS, etc) are competing fiercely but customer brand loyalty starts to emerge – Wide coverage

– Carrier coverage and performance (speed and service) could vary greatly by region

– Relatively low price

COD: Regional Carriers (落地配), ZJS (宅急送)/SF Express/EMS (Nationwide), Common Carriers such as YTO is getting into this space – Performance of different regional carriers can vary greatly and would require more

management oversight (service level, cash remittance risk)

– Regional carriers only make sense if COD volume is high, because of line-haul requirement

– Regional carriers have lower COD rate (usually included in delivery rate); COD rate for national carriers vary from 1% to 5%

– Regional carriers usually have better service than common carriers

Carrier Capability Overview

STO/YTO/ ZTO

HTKY/Yunda/ TTK/GTO

ZJS

Normal Day Volume ~2-5MM ~0.5-2MM ~500K

Cost Low Very Low Low

Coverage Very Good Good OK

Peak Management OK ? OK

EMS

China Post (Small

Package)

SF Express / FedEx

QF Express/ Regional Carriers

Cost High Low High Low

Coverage Nationwide Nationwide Good/Limited Limited

Peak Management OK OK Good ?

Achieving Service Differentiation

• Delivery Speed – Warehouse processing speed

(ship time) is more important

– Warehouse location may have bigger impact on Ship-to-Delivery time

– Same Day delivery—is it necessary?

– Managing customer perception and expectation

• Last-Mile Service – Some carriers have the

perception of better service to consumers

– Actual service is greatly dependent on the courier

– In absence of strong consumer preference, speed and meeting delivery time expectation matter more

Key: Trade off between cost and speed/service, and executing on

carrier selection strategy Need to understand factors that would affect speed and service

Collection Sorting Last Mile Delivery

Shipped Late

Processing backlog at

collection point

Traffic control at sorting center

Backlog at delivery station due to last mile

capacity

Adverse weather

Rude/untidy delivery person

Sorting backlog/Mis-

sorting at sorting center

Not enough line haul capacity / No direct route

Line haul delay due to weather

Line Haul

Life of An “Unfortunate” Package

More to Think About

• Peak Management • Will you carrier partners take care of you during peak (e.g. Double-

11)? • What’s your commitment for service (pick up and delivery) during

Chinese New Year? • Air Restrictions

• Different airports, different carriers at different times have different standards for air restrictions

• Greatly affect delivery speed and thus expectation management to consumers

• Special Service Requirements • White glove/Oversized—use LTL and specialized companies, will

limit delivery areas • High value—special handling, shipping insurance • Temperature control—pack better, or be prepared to pay and only

serving in selected metro areas

Strategy

Leave it to God vs. Control Freak

• Outsource – Pick reputable carriers that

can meet your obligation to consumers: • COD—SF Express, ZJS

• Premium service—SF Express, FedEx

• Standard service—STO or YTO, for air restricted products, use ZTO or Yunda which primarily uses ground line-haul

– Promise all your volumes and negotiate for best price; re-bidding regularly

• Pick Best of Breeds – Sign multiple carriers for each

service obligation

– Need to have system in place to select the most appropriate carrier for each package (Ranking Agent)

– Ability to exclude smallest possible region for carrier assignment (as speed/service varies greatly by carrier by region/last-mile delivery person)

– Low price will come to you due to competitive nature of the industry

System Requirements

Jurisdiction Engine

Delivery Data Tracking ＆ Feedback Loop

•Flexible & versatile rule setting (e.g. air restriction) •Filter out non-applicable ship method

•Use tracking data to discover service problem and mitigate proactively

•Solution for delivery area definition (zip code is not commonly used in China) •Solution for parsing Chinese address •Ability to exclude based on key words

•Select carrier based on estimated cost & service performance considerations

•Integrate with CRM & ranking rules

Rule Engine

Ranking Agent

U-TMS Logic

WHO IS UCO?

6,000+ Inquiries Daily

5,000+ Orders Daily

(Peak Day 500K+)

200,000+ UV Daily

3,000,000+ Paid Customers

30+ International Brands

1.2B+ CNY Annual GMV

(2015 estimate)

Institutional shareholders

include Alibaba and China

King King (002094); latest

round of fund raising:

RMB150M

Cosmetics is our ONLY Business

500+ staff

ex-Alibaba

ex-Amazon

UCO by the Numbers…

16

Target Consumer Analysis Go-to-

Market Strategy

Product/ Pricing

Strategy

Pre-Sales Service

Traffic Drive/User Acquisition

Store Positioning & Design

Order Fulfillment & Delivery

Post-Sales Service

Loyalty Program/ CRM/Cust

Sat

Taobao Channel

Management

Overall Brand Mgmt & Ecosystem

+

• We cover the China eCommerce ecosystem, and our channel management includes Taobao/Tmall and major B2C platforms such as Jumei, JD.com, VIPShop/Lefeng, Hitao, etc

One-Stop eCommerce Solution

Brands we Carry

eSkin = Vichy, La Roche-Posay, SkinCeuticals—L’Oreal Derma-brands

Together We Build

Long Term Partnership

and Profit!!

Contact：Long Wong E-mail：long@uco.com