Logistics upgrade needed to support China's e-commerce boom

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In the wake of Alibaba's US listing plan, companies see huge potential in helping the mainland's weak warehouses reach world-class standards

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A shadow-boxing performance during an open day at Alibaba Group's office in Hangzhou. The firm is leading the way to improving China's logistics infrastructure. Photo: AP

Reuters

Published: 11:45am, 12 May 2014Updated: 8:35pm, 13 May 2014

Alibaba's plans for a giant initial public offering in New York highlight vast potential for e-commerce in China - and the weak link the logistics industry must fix if explosive growth projections are to be reached.

The ageing warehouses that supply goods to customers across the world's second-largest economy are already creaking under the strain, lacking the automation and state-of-the-art technology that has fuelled the rise in the United States and Europe of Amazon.com

By 2020, China's e-commerce sector will be larger than those of the US, Britain, Japan, Germany and France combined, consultancy KPMG said in a recent report.

To cope with the China surge, as much as US$2.5 trillion may need to be invested in buying land and constructing warehouses alone over the next decade and a half, according to one builder.

That is drawing the attention of global private equity firms such as Blackstone and Carlyle as they seek to benefit from an anticipated investment boom.

"Over the next 15 to 20 years, the real cost of building warehouses is going to be staggering," said Jeff Schwarz, co-founder of Global Logistic Properties, the biggest foreign builder of logistics facilities in China.

With each new facility the size of several large sports stadiums, that translates to about 2.4 billion square metres of new warehouses - an area close to two-thirds of the total land mass of Taiwan.