[photopress:Zhengzhou_shopping_center.jpg,full,alignright]Serious money exists in the middle class which is growing in China year by year. According to McKinsey, 77% of urban Chinese households live on less than RMB25,000 a year, but by 2025 that figure will drop to 10%.
This may well result in a shopping spree which will resemble a tsunami. It should start to hit around 2010 as hundreds of millions of consumers go on a shopping spree seeking the trappings of a middle class lifestyle. In a sense, this will be the biggest Chinese revolution of them all — the move of the working class to middle class, a direct result of the consistently robust growth percentages coming from China’s GDP.
All the big global forwarders and logistics operators are already operating in China through various partnerships or on a solo basis. Several of these operators have bought out their JV partners and are going it alone although those tend to be companies providing services for big international clients, not local companies.
As internal logistics demands increase giant retailers that, earlier, outsourced their manufacturing to China are also opening stores in the mainland at a speed almost beyond comprehension. The same applies to foreign fast food chains like McDonald’s and KFC which bring its own problems. Ignoring whether it is desirable to have these chains bringing fast food and obesity — the two often go hand in hand — to China there is the under-developed cold chain which makes food logistics a separate and far more complex issue.
The situation with big brand retailers is both simpler and more complex. They are both manufacturing and selling in China and thus becoming de facto Chinese companies requiring internal logistics services, including warehousing and nationwide distribution networks.
Despite massive investment, road and rail infrastructure is still inadequate and, unlike demand for retail goods, cannot increase overnight. The trucking industry is in a woefully fragmented state so that logistics operators are forced to rely on a mixed bag of trucking companies operating regionally.
One way around this, which is a natural progression, is to have the big retailers in the major centers which makes delivery easier but not easy. It still has some way to go.
Logistics business in China is predicted to grow at 25% a year for the next five years. The incredible logistics demands of keeping hundreds of millions of people fed, connected, seated or clothed will see huge investment in distribution networks by logistics providers. China at the moment is about speed of growth and we can expect amalgamations and extensions in logistics companies to bring about the efficient system that is desperately needed.
Source: Cargo News Asia
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