Today, if we asked a random person to name which they though the largest online retailer in the world is, they’re likely to say Amazon or eBay. Both are great guesses, too. However, there is actually a company that’s as big as both of those giants combined: Alibaba, on both B2B and B2C.
Together with emerging player Shopify, all these marketplaces or online e-retailers are gradually changing logistics fulfillment landscape from last-mile delivery, first mile to now the international haul.
Since the introduction of online shopping for goods, business model and logistics fulfillment had always been specifically created and built around individual (buyer) needs. That said, on the basis of business to consumer (B2C) or consumer to consumer (C2C).
Self-fulfillment
In the early days of online selling, most of the sellers heavily rely on the service and
the infrastructure of Post office, they stamp the postage, brought over the package to the nearby post office and waited for delivery notice in 14 days for domestic delivery and sometimes up to a month or more for an international mail ( if that notice did arrive).
Moreover, there was limitation through Postal service on package size and weight. Customer experience was terrible back then due to late delivery, misroute, package damage or even missing.
Indeed, there was alternative via internal courier company like DHL/FEDEX/TNT/UPS. However, due to high shipping cost only expensive items were ship through them.
Online selling was not scaling internationally due to a lack of confidence from both seller and buyer simply because order fulfillment cost was so high and the shipping itself was a black box to most
It didn't take long for someone to realize this constraint and eBay took the lead in offering GSP (Global shipping program) in 2012, through platform technology upgrade and partnership with 3PL, global shipping with tracking became reality. Having global shipping cost made available to sellers at the time of listings or items uploaded to the web store, sellers had the option to decide their selling policy to offer free shipping or not.
By integrating A-scan receipt, international package tracking and improved shipping SOP, both sellers and buyers were protected. As soon as online shopping experience was greatly improved for the buyer, online selling started getting on the fast track.
Consolidated fulfillment - Amazon FBA
Meanwhile, it didn't take long for the competition to evolve, apart from FBM (fulfillment by Merchant) Amazon extended FBA (fulfillment by Amazon) to 3rd party seller, through their owned warehouse with granted delivery lead time to buyer.
Nevertheless, When Amazon launched “Dragon Boat operation” in 2016 which specifically eyes on moving inventory of seller from China, they completely changed seller inventory planning and brought such inventory forward-deployed strategy to a new hike. The cost was very high to any seller participated in this program in the begging as shipping was made under DDP term, purchasing cost, duty and tax paid upfront
However, as soon as Amazon adjusted its algorithm and improved traffic to FBA sellers, FBA eventually became the norm in last-mile delivery.
Drop-shipping
Then we have Shopify came under the spotlight, an innovative SaaS which empowered seller to run an independent site without any coding or programming expertise. With multiple free apps available to add into store fulfillment option, the seller had a vast variety of channels for order fulfillment.
Also, the arrival of Oberlo in 2016 (an APP on Shopify store) and the concept of starting an online business without keeping any inventory made a big fuss, as it allowed the seller to easily import drop-shipped products into seller’s eCommerce store and ship them directly to buyers– in only a few clicks.
Not satisfying been a seller empowering tool, Shopify took their steps further into fulfillment operation by introducing Shopify fulfillment network, where they partnered with 3PL for storage and last-mile delivery.
A hybrid of Ebay GSP + Amazon FBA is in the making.
Overseas warehouse
Alibaba logistics arm Cainiao operates on a more comprehensive and structural 3PL network with a large number of logistics service provider including warehouse management, international postal service, air freight and ocean freight, offering fulfillment solution including postal E-packet, courier, air and sea shipping from China to worldwide.
For all listings on the platform, the seller had the choice to send over the inventory to Cainiao network. Network operator consolidated sellers inventory and moved it to respective overseas warehouse, automatically retrieved seller order through platform API and arrange fulfillment accordingly, from one item per order to bulk purchase, they get it all cover.
In June, Alibaba, biggest online B2B marketplace, announced a new round of roadshow to promote and recruit sellers for its Ready to ship program (RTS). The purpose of this program is to further escalate inventory forward-deployed tactics into B2B.
Unlike traditional B2B transaction where Minimum order quantity (MOQ) commonly starts from hundreds of item per SKU for general goods, and shipping cost subject to separated quotation, Alibaba made it clear that sellers participate in RTS program need to meet a few criteria
- Sufficient stock for listed items
- Shipping fee clearly indicated
- Delivered within 15 days for orders on MOQ
In parallel, a pilot run specifically targeting US market is now in place, it is on invitation basis that only RTS sellers matching the following requirement will be short-listed in the initial launch
- Shipping products in bulk to US warehouse for direct fulfillment from there
- USD 5000 or below for each and every sales order
No other B2B online marketplace has done anything like this before, so there is clearly a signal for Alibaba to create and push for the same shopping experience for B2B buyer to match that of B2C buyer.
Going further
After all these years development, B2C online selling has been rather mature and major marketplace are looking at a breakthrough at the B2B sector, where there is much bigger trading volume compared to B2C.
Since Alibaba has been taking the lead in B2B transaction and having its RTS and overseas warehouse delivery push in the pipeline, we have reasons to believe that in 2020, small and medium-size buyer will be making smaller purchase order on a more frequent basis, due to the fact that Alibaba has convinced sellers on its marketplace to lower MOQ level and to ship inventory to warehouse in sales market.
All sellers and buyers need to plan ahead for this change in 2020 as the fine line between B2B and B2C is no longer the same as before.
As purchase order becomes smaller and the transaction gets faster, there will be pressure on the shipping industry that service providers need to constantly optimize shipping cost while maintaining service level. The utilization of sea shipping might not be enjoying the same economy of scale as there will be multiple customers' shipment inside one container instead of one customer shipping a lot of containers.