- China's third-largest e-commerce player, Pinduoduo, is developing its own logistics data network to better stand up to top competitors Alibaba and JD.com, CEO Zheng Huang announced on the company's second quarter earnings call last week.
- The four-year-old firm will build the data infrastructure for this network in-house including route-planning, automated warehousing, parcel sorting and more tools dedicated to agricultural products.
- Pinduoduo's Vice President of Strategy David Liu told South China Morning Post the company received complaints from customers when the third-parties providing delivery service and tech support did not provide accurate or adequate visibility regarding shipment status. The main third-party in question is Alibaba's Cainiao network, according to Bloomberg.
Alibaba's Cainiao is a proprietary software platform that orchestrates deliveries through a network of contractors for the top e-commerce player in China. Cainiao and now Pinduoduo have chosen the data-heavy, asset-light version of e-commerce delivery operations, contrasted by JD.com and Amazon, which both have chosen to own assets and fully employ some delivery staff while also building the tech end of last-mile operations.
"The efficiency in the current logistics industry has been driven largely by economy of scale. And we realized that there is significant room to improve using technology. So our initiative will be as asset light as possible. We do not plan to invest in warehousing assets or build delivery fleet," Liu said on the call, according to a Seeking Alpha transcript.
JD.com's logistics arm, which has drawn skepticism for its cost, reached breakeven in the most recent quarter, which executives trumpeted as proof that the massive undertaking of physical assets was worth the five-year investment. Now the company can fulfill six and half times more daily orders than it could five years ago, said JD.com CFO Sidney Xuande Huang on an earnings call earlier this month.
All of China's e-commerce powerhouses tout their proprietary tech as the keys to their success. And Pinduoduo already has somewhat of a start on delivery data and shipment visibility. In January, the company debuted an electronic document that travels with packages containing origin, destination and content data. The "electronic waybill" system is the "first pillar" of the coming logistics platform, said Huang. Cainiao launched a similar system in 2014.
"The rapid adoption of our ecosystem partners, including all the major 3PL providers coupled with positive user feedback, has propelled our e-waybill system to become the second largest in China within a few months," said Huang, who added the system is now in use for nearly all orders.