Carriers react to e-commerce boom

As e-commerce traffic between China and the US heats up, some freight carriers are expanding facilities to handle the growing business from consumers who order products through the internet in both countries.

Last month, Germany’s Deutsche Post AG’s DHL shipping unit unveiled a $137 million expansion in Chicago, partially to support the increasing DHL footprint in China.

DHL e-commerce CEO Charles Brewer also announced plans to expand DHL in China, including the opening of distribution centers in Shanghai, Shenzhen and Hong Kong. The facility in Shenzhen will be able to handle 18 million packages daily.

“From a macro perspective, China accounts for 40 percent of global e-commerce sales,” Brewer told Xinhua.

DHL’s expansion in Chicago includes a new facility north of Midway Airport on Chicago’s South Side that can process more than 2,500 shipments an hour, complementing an existing facility near O’Hare International Airport, and a helicopter delivery service launched in 2015 to deliver urgent documents to financial and legal firms.

Natalie Godwin-Norrington, a spokeswoman for DHL rival United Parcel Service Inc (UPS) wrote in an email that UPS’s international export volume grew 4 percent versus the same period in the prior year, and that increased shipments from China to the US are part of that growth.

Godwin-Norrington said while UPS’ focus when it first went to China was on developing capabilities along the coastal top-tier cities, the company continues to see opportunities in other parts of China.

“According to McKinsey & Company (management consultants), there are 160 million people in China’s lower-tier cities who use online services, but have yet to begin shopping online. This presents tremendous potential for e-commerce growth. Last year, UPS expanded to 21 additional tier-2 and -3 cities in China,” she said.

The cross-border e-commerce market is expected to increase in value from $40 billion in 2014 to more than $240 billion in 2020, according to Joel Backaler, a managing director at Frontier Strategy Group and author of China Goes West, a book about Chinese companies going global.

“Chinese consumers are leveraging e-commerce to buy the best products from the US, especially when it comes to products related to health and beauty, baby care and food. Crossborder e-commerce is enabling Chinese consumers to access the best quality products from the US that they otherwise would have to hire a daigou middleman agent to access,” Backaler said in an email.