Logistics solutions to support cross border e-commerce towards China: The case of the apparel industry

Purpose: In the past few years China has experienced a significant growth of both its economy and the adoption of technologies. With 310 billion dollars turnover it has become one of the biggest B2C ecommerce markets in the world (WorldPay 2015). As Chinese consumers are generally leaned towards buying international brands, entering this market while exploiting the rising trend of online and mobile commerce adoption might be an interesting opportunity for western fashion companies. However, the ultimate success of an e-commerce initiative is strictly dependent on the effectiveness of the distribution process. Geographical and cultural distance, expected service level, tariff and non-tariff barriers are some of the elements making this activity more complex in a global environment. The aim of this paper is to provide a quantitative model to compare different logistic solutions underlying a B2C e-commerce initiative in China. The analysis takes the perspective of a European firm operating in the apparel industry. Research Approach: The paper has an empirical approach. It presents an Activity-based model to quantify the logistics costs of three logistics solutions that can be adopted to sell online in an international context. The alternatives have been identified through interviews and context data have been derived from case studies. The model has been eventually validated by industry experts and practitioners. The considered logistics options are (i) distribution from a warehouse located in China, (ii) distribution through a sorting hub located in China, and (iii) distribution from a warehouse in the Country of origin through express couriers. By elaborating some specific data (e.g. weight and volume of the garment) as inputs, the model returns the distributive solution associated to the lowest logistics costs. In addition, a sensitivity analysis is provided to take into account variations in both the annual demand of the item and its value. Originality: This study simultaneously addresses three major subjects which are relevant for a fashion company, i.e. the design of a logistics strategy, the use of e-commerce and the implementation of an internationalisation project. A preliminary literature review has revealed that these themes have largely been debated as stand-alone topics while the “intersection” of these fields has not been adequately investigated yet. Research Impact: The present study contributes to create knowledge in the field of technology-driven internationalisation strategies. At the same time, it paves the way to additional meaningful research that can be originated by addressing some of its limitations. For instance, one of the hints for future research on this topic is to evaluate the impact of product returns which can be complex to manage at an international level. Practical Impact: The main beneficiaries of this study are producers and/or retailers operating in the apparel industry. They can learn some of the logistics alternatives to serve the promising Chinese B2C e-commerce market and identify the most efficient strategy for them.