For many years, numerous industries have been turning their attention to the Middle Kingdom. And material handling companies are no exception. Which trends shape the Chinese market? What are the features of competition in the Far East? moving asked an expert. A conversation with Ben Xia, Phd, Executive Vice President of Interroll in Asia.
Ben, how is economic development in China at present?
Extremely dynamic. The growth forecasts for the Chinese gross domestic product in 2017 predict just under seven percent, alongside a percentage increase in industrial production. The medium and long-term perspectives for this national economy, which includes almost 1.4 billion people, are extremely favorable. China is even expected to replace the US as the largest economic powerhouse on the planet within around ten years. This growth market continues to provide great opportunities for powerful companies.
Does this also apply to the logistics industry?
Absolutely. An impressive example is our own company in China. Since we decided 15 years ago to start working in Suzhou, we have been able to continually increase the contribution China and Asia (where Interroll has been operational since 1988) make to Interroll’s business success. Over the past four years, we have grown by almost 23 percent in China—much faster than the market.
E-commerce drives the Chinese economy
What is the key driver of the Chinese material flow sector?
Like in many other countries, it is the flourishing area of e-commerce. However, in China this has taken on immense dimensions, both in terms of scope and dynamism. In 2016, earnings in this sector totaled the equivalent of USD $366 billion - as much as in the US and Great Britain combined. The Chinese love online shopping. In the major cities, around 80 percent of adults have already made a purchase online. So, it is no wonder that the Chinese online retail platform Alibaba alone is likely to invest around USD $15 billion in its logistics within the next five years.
Will this boom continue?
Yes, we can assume it will. The dynamism is simply unbelievably high. For example, in 2017, in the course of the Alibaba Double Eleven festival - a 24-hour, countrywide discount campaign - the order revenues from the previous year’s campaign had already been exceeded by shortly after 1 p.m. A total of almost 1.4 billion parcels were sent in China as a result of this campaign. And the logistic processing speed was astonishing: Orders received shortly after midnight were dispatched at 5:30 a.m. and had already reached the consumer at 4 p.m.
Intralogistics has become a strategically important market
And what is competition like in the industry?
The fact that groups like Toyota and Honeywell have become involved in the material flow business demonstrates above all that intralogistics has become a key market, which companies outside the industry are now discovering. In China, all the key providers are represented, and the competition for major projects is correspondingly fierce. This provides excellent opportunities for globally active partners like Interroll which produces quality products on a platform basis and can network with its customers via SAP. At the same time, we should not overlook the fact that around 80 percent of the market volume is served by small or medium-sized system integrators. These customers are vital for Interroll, and it is important that we provide them with expertise and competent support.
How are users responding to the increasing significance of intralogistics for their organizations?
They are doing the same thing as with other business-critical infrastructures: by is to say increasing internal expertise in order to be able to communicate at eye level with external providers. This is a very exciting development that places new demands on the system integrators as well as manufacturers. As we all know, anything is possible on the Chinese market (laughing). It really is the land of unlimited opportunities. Encouraging news for all pessimists. However, in China nothing is really easy, which can of course quickly bring those who are too optimistic back down to Earth with a bump.