Wal-Mart Chinese online unit flags HK logistics hurdles

November 19, 2014 14:39
Harvey Wang, vice president of operations of Yihaodian, puts Hong Kong ahead of  Shanghai and Guangdong in logistics facilities. Photo: HKEJ

Wal-Mart's Chinese retail arm Yihaodian, the mainland's first online supermarket, is seeing hurdles in setting up a Hong Kong warehouse to store imported goods, a senior executive said.

"Hong Kong lacks warehouses and logistics facilities and rents are climbing," Harvey Wang, Yihaodian vice president of operations, told a conference Tuesday in Hong Kong. 

"If we can't find a place in Hong Kong, we will have to go somewhere else."

Wang ranked Hong Kong ahead of  Shanghai and Guangdong in logistics facilities such as bonded warehouses and parks.

George Li, SF Express Co. Ltd. vice president and chairman of SF Best, said Hong Kong is ideal for storing goods from overseas and distributing them to mainland consumers.

And John Geng, senior vice president of LF Logistics (China) Co. Ltd., said Hong Kong is the best choice after comparing its logistics infrastructure with those of the Shanghai free trade zone and Futian district in Shenzhen.

"Hong Kong is facing challenges in providing logistics infrastructure but it may see better development after its integration with Shenzhen," Geng said.

Logistics challenges

Some other challenges in the logistics industry have been exacerbated  by the explosive growth of e-commerce in the world's second largest economy.

"There is a waste of resources between peak and low seasons," he said.

An incomplete transport system will create inconvenience for consumers and quality control issues pose further challenges as a result of e-commerce, Li said.

For instance, purchases during Singles' Day, China's biggest online shopping festival, could takes weeks before reaching the buyer.

"This is inefficient and inconvenient for them," Li said.

Tight rein

Yihaodian tightly controls its inventory in order to cope with these challenges.

"The average turnover days for all goods including electronics and apparel is two weeks while for fast-moving consumer goods, we only keep them one to three days," Wang said.

"We tend not to build mega warehouses as consumers prefer fresh products instead of goods that have been in storage for months," he said.

Nonetheless, Wang stressed the role of e-commerce in improving efficiency and productivity and in lowering inventory levels.

Li expects e-commerce in food and medical products to post rapid growth.

The B2C (business to consumer) market grew 48 percent to 32.4 billion yuan (US$5.29 billion) last year compared with an 11 percent increase to 21.9 billion yuan in 2012, SF Express said.

Chinese pharmaceutical B2C rose 167 percent to 4.26 billion yuan compared with a 300 percent surge to 1.6 billion yuan in 2012.

SF Best, a unit of SF Express, operates an online food shopping store that sells global quality items and many imported brands.

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Ayishah Ma is a financial reporter on Greater China issues.