Logistics becomes cool

E-commerce giants upgrade cold delivery to drive fresh food sales

Major e-commerce giants have stepped up their efforts to upgrade and build cold chain logistics infrastructure and delivery systems, in order to keep their supplies of fruit fresh as well as boost their sales.

JD.com Inc, China’s second-biggest e-commerce player, said it is moving to improve its logistics chain to deliver fresh cherries from Yantai, Shandong province.

The company said that because of limits of the existing logistics infrastructure, most of the Yantai cherries are currently sold in the northern provinces. However, with growing demand from Guangdong, Hunan and Hubei provinces, cold chain delivery has become a necessity.

“We have a specialized delivery team, which consists of 60,000 people. Moreover, nearly 30,000 people are engaged in after-sales services,” said Xia Meng, the head of fresh food and cold chain deliveries at JD Logistics.

“We have 10 warehouses to store fresh food and about 7,000 distribution sites, covering more than 2,600 districts and counties,” Xia added.

Last year, JD opened a warehouse next to a cherry sorting center in Yantai, to reduce product shipments and cut costs.

Xia said the number of dedicated aviation routes for transporting cherries will be increased to eight this year, with its cold chain system covering more than 200 cities in 20 provinces and regions.

“The key is to reduce the inventory rate and sell the cherries as quickly as possible,” said Sun Dali, a cherry seller in Yantai.

Other e-commerce platforms are also making new moves to speed up their deliveries.

On Thursday, Cainiao Network Technology Co Ltd, a courier aggregator for Alibaba Group Holding Ltd, opened a warehouse in Maoming, Guangdong, a center for lychee production.

Cainiao said it provides a cold chain delivery service that ships fresh lychees to the doorsteps of consumers within 72 hours.

The company said that after pre-cooling, screening and packaging, fresh lychees are transported to refrigerating cabinets, and then shipped to customers’ dining tables in more than 130 cities.

According to marketing research company AC Nielsen, total online sales of fresh food hit 75 billion yuan ($11 billion) last year, and sales this year are expected to reach 100 billion yuan.

Analysts, however, said only 1 percent of 4,000 online retailers of fresh products are profitable.

“Due to high delivery and storage costs, online retailers of fresh products are facing grave challenges,” said Lu Zhenwang, chief executive officer of Shanghai-based Wanqing Consultancy.

Online retailers should try to improve their gross profits, increase sales to affluent middle-class consumers, as well as diversify their delivery channels to lower logistics costs, Lu added.