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Can Smart Lockers Solve Looming Mainland Courier and Logistics Crisis?

With e-commerce growing exponentially, the demand for delivery services across the mainland is rapidly outstripping supply. Intelligent pickup points are seen as one possible solution, though it is unclear just who will pick up the costs.

Photo: Deliverance: An intelligent touch-screen parcel locker.
Deliverance: An intelligent touch-screen parcel locker.
Photo: Deliverance: An intelligent touch-screen parcel locker.
Deliverance: An intelligent touch-screen parcel locker.

The explosive growth in the e-commerce sector has resulted in a huge demand for express delivery services, putting strains both on recruitment and labour costs in the sector. At the same time, deliveries in remote areas and second-attempt deliveries have both proved increasingly challenging for delivery companies. In light of this, a new emphasis has emerged on the use of 'intelligent' high-tech parcel delivery lockers as a self pick-up solution.

Such smart lockers are similar to those found in many supermarkets. The smart element comes into play when the locker automatically generates a collection code after an item has been deposited. This unique code is then texted to the intended parcel recipient. The parcel can then be collected at the recipient's convenience with most lockers accessible on a 24-hour basis.

To date, a number of communities and schools in Beijing have adopted this smart parcel delivery system. At the city's University of Chemical Technology, for instance, the parcel locker manager said: "These self-pickup lockers were introduced in early July. To date, we have found that they are very safe. When picking up the shipment, the collector needs to provide the locker number, password, phone number and name of the recipient. Only then can the doors be opened, avoiding any possibly of misrepresentation or error."

Similar intelligent kiosks were launched in the United States a year ago. It was at this point that Amazon, which has a 30% market of the US e-commerce market, launched the Amazon Locker in convenience stores and drug stores across the country. The lockers have also been introduced in Canada with a considerable degree of success.

The introduction of these lockers has acted to reduce the number of delivery personnel, cut company's distribution cost, while, apparently, improving delivery efficiency by more than 50%. In the Chinese market, the concept is now to be rolled out across the second- and third-tier cities in the near future.

Manufacturers, couriers, e-commerce companies compete

JD.com was the first e-commerce company to introduce the large-scale use of intelligent parcel lockers on the mainland. In August 2012, the e-commerce company's self-pickup service officially went live, allowing users who had paid by credit card to collect their purchase via the facility. Subsequently, JD collaborated with a number of convenience stores in order to establish additional pick-up points. The company now has 600 pickup facilities in place, with the number expected to increase to more than 2,000 by the end of this year.

When a consumer places an order at JD.com, the system then generates data related to order details, logistics and self-pickup arrangements. The whole process is a "closed loop" with every aspect controlled by JD, guaranteeing efficiency and security. This relatively advanced model of operation is said to be one that other industry players should consider adopting.

JD's self-pickup equipment is manufactured by the Hangzhou Dongcheng Electronic Company, a specialist manufacturer of electronic lockers. Commenting on the relationship, Huang Yuanbiao, Dongcheng's Marketing Director said: "We are the largest and longest-established specialised manufacturer of intelligent self-pickup lockers on the mainland. As well as JD, we also supply China Post, having established 45 service points for them in 2013. More are now planned for the near future."

In addition to accepting self-pickup parcels, Dongcheng's intelligent lockers offer a number of other value-added features, including third-party payment, self-service payment (such as mobile phone top-up, water, and electricity and gas bills) and streaming advertising. Assessing the future possibilities, Huang said: "Intelligent self-pickup lockers can add yet more features, including community lifestyle information, storage and forwarding, special deals in the local area, coupon printing, direct dispatch and a range of other value-added services."

Photo: JD.com’s personal pick-up facilities.
JD.com's personal pick-up facilities.
Photo: JD.com’s personal pick-up facilities.
JD.com's personal pick-up facilities.
Photo: Student-friendly lockers in Beijing.
Student-friendly lockers in Beijing.
Photo: Student-friendly lockers in Beijing.
Student-friendly lockers in Beijing.

Although these lockers are largely new to the mainland, fierce competition has already begun in the sector. The Zhongtuan Yihao [Terminal No.1] service, for instance, has been launched by Beijing-based Angel (www.ourangel.cn) and currently offers some 3,000 service points in Beijing, Shanghai and Shenzhen. Currently, this community-focussed e-commerce company is hoping to replace all of its manual service points with intelligent lockers.

Other entrants to the sector include ExBox, a Shanghai-based express delivery company, (www.exbox.cn), M6 Fresh of Ningbo, a Ningbo-based fresh food distributor, and Yixinorth Digital Tech, a northwest-based manufacturer. At the same time, a number of general electronics firms have also identified the opportunities offered by intelligent kiosks and are actively looking at entering the market.

Last year, Saitai Electronic Industrial launched its 24-hour self-service network. It now has facilities operating in 1,000 large residential areas, commercial districts, school campuses and office districts in six major cities, including Beijing, Guangzhou and Shanghai. By the end of June 2015, the company hopes to have 12,000 service points in 15 major cities. Currently its service is free for the first 48 hours, with a late pick-up fee – of around Rmb1 a day – payable by tardy customers.

In light of the rapid development of the sector, the government has been swift to introduce appropriate legislation. The State Post Bureau recently published its Draft Regulations on Express Delivery. Broadly supportive, the proposals says: "The State encourages the introduction of smart express delivery kiosks in accordance with national standards, seeing them as suitable for government agencies, enterprises, institutions, colleges and universities, major transport stations, airports, hotels, residential areas and commercial districts."

Segmentation: Future profit potential

The express delivery industry is expanding rapidly, even as labour costs continue to rise – a major factor in the rapid uptake of intelligent parcel lockers. In light of this escalating demand, Huang sees the widespread adoption of the intelligent kiosk as almost inevitable, with concurrent benefits for courier companies, e-commerce players and consumers.

Emphasising the secure nature of the system, Huang said: "Cameras are installed at every self-service point. They record the whole delivery process, streamlining any future claim process and facilitating any necessary liaison." He also sees the requirement for official receipts to be dropped in the near future, believing such system is not suitable or necessary in China where C.O.D. (Cash on Delivery) is a comparative rarity.

Photo: Value-added: A multi-function locker.
Value-added: A multi-function locker.
Photo: Value-added: A multi-function locker.
Value-added: A multi-function locker.
Photo: Picking-up in person.
Picking-up in person.
Photo: Picking-up in person.
Picking-up in person.

Despite Huang's optimism, not everyone sees the introduction of smart lockers as a panacea for the mainland logistic sector. Xu Yong, Chief Consultant for cecss.com, an express and logistics website said: "The key constraint for the development of intelligent express delivery is that charging for them can be very difficult." He believes that the problem is that both the individual receiving the delivery and the courier company are unwilling to pay any fees, with the latter particularly disinclined due to their already narrow margins.

While some see the way forward as the e-commerce companies actually owning the lockers outright, other have different ideas. Wu Fangzheng, the Chief Executive of Angel, favours collaboration with e-commerce companies via rental arrangements. He also sees profits stemming from selling advertising space on the side of the lockers, with any such profits shared with the property owners.

Qin Minggang, Marketing Manager of Sposter.net, a Chengdu-based logistics company and locker provider is another to favour more innovative solutions. He says: "We only charge courier companies a fraction of one yuan for access to our lockers. This is just as a means of regulating their use. With continuous improvements to the delivery solutions, a number of value-added services – including public transportation, mobile phone top-up, advertising opportunities and community finance – can become profitable areas."

For Huang, though, it is the continued segmentation of the sector that is likely to prove ultimately profitable. He says: "We have developed multi-purpose lockers including those suitable for fresh food distribution, hot food distribution, frozen food storage and self-service washing, but these are just scratching the surface of what is possible. We can do a lot more and we will continue to explore the possibilities."

Jia Nan, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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