Executive Summary: Sustained growth underpinned by new shopping & delivery experiences3 Who The players: The battle between the online giants is set to continue10 How Logistics: Redened by New/Borderless Retail, instant delivery19 What Categories that will drive the next legs of growth29 Implications for express delivery: Lower ticket sizes driving more parcels, bottoming of ASPs39 Implications for supply chain/contract logistics: ‘Smarter’ warehousing to boost demand47 Implications for trucking: Highly fragmented and increasingly competitive51 Unboxing what’s happening over the past few months55 Disclosure Appendix58 11 July 2018 Goldman SachsE+Commerce / Logistics of Things (LoT) in Table of Contents Fo r t heex clu siv e u seofC LA IR E. LU @ GS .C OM Executive Summary: Sustained growth underpinned by new shopping & delivery experiences China’s online giantsAlibaba and Tencentare accelerating their push into combining online and ofine retail by investing alongside their afliates into physical stores and logistics, while also harnessing the latest technologies to provide more efcient shopping experiences. The increasing demands for smarter warehousing and faster delivery times have also seen ongoing collaboration with brick-and-mortar companies for prime real-estate, and investments into warehousing, trucking and last-mile delivery solutions. In this report, we revisit ‘Who’ (are the players),‘How’(will all these deliveries be done via new logistics) and‘What’(categories) will drive the next legs of online growth - seeChina E+Commerce: Shopping Re-Imagined for our rst report in the series. We believe China’s online retail market will grow at 25% CAGR over 2017-20E (vs. prior 22%) driven by fast-moving consumer goods (FMCG) & groceries, new categories like home furnishing and online services, with parcel volumes CAGR of 26%, while competition between the online giants will continue to intensify. Identifying four key trends for E+Commerce: New shopping experiences, competition, category expansion, faster deliveryA push into fresh food delivery is at full throttle,with online giants competing for prime real estate and last-milen delivery infrastructure. Alibaba is making investments into its technologically advanced supermarkets Hema, digital transformation of invested Sunart’s RT-Mart stores and the acquisition of online food delivery service provider Ele.Me. We see theFast Moving Consumer Goods’ (FMCG)online shift continuing, whileappliancesand emerging categoriesn likefurniture and autoscontinuing to drive online growth. We see New Logistics evolving around speed, predictability/reliability and cost, with “Speed” - 30-min deliveriesn becoming a new norm for fresh food, and “Predictability” - pre-booked 1-hour delivery window attractive for FMCG. We believe higher ticket size/orders per delivery ride (for fresh) and warehouse automation (for FMCG) will be key swing factors to protability for retailers. Alibaba vs. Tencent:Newer social ecommerce models targeting value-for-money offerings and still-emerging models via.n mini-programs leveraging Tencent’s over 1bn users on WeChat are attempting to challenge Taobao’s dominance in the lower-end retail segment. Meanwhile, the two giants, together with their afliates Suning and JD respectively, are intensifying competition in branded retail and are expanding their footprint in ofine retail. Also published today:Vipshop Holdings:Down to Neutral on near-term margin pressure; still see long-term potential from new trafc channels;ZTO Express (Cayman) Inc.: Lifting TP on valuation roll-forward, maintain Buy given scale leadership; JD Inc.:Reset of margin expectations behind us; returning to above-industry growth; reiterate Buy;BEST Inc.:Shifting focus towards balanced growth & protability; maintain Buy given its unique full-service logistics offering. 11 July 2018 Goldman SachsE+Commerce / Logistics of Things (LoT) in China 2017-20E CAGR Overall retail sales:10% Online GMV - goods and services:25% Parcel volume:26% 2020E TAM Total retail:Rmb48 trillion Online retail:Rmb14 trillion Related Research Ocado Group (OCDO.L): Assessing the global opportunity post-Kroger announcement; back up to Buy - 9 Jun 2018Supermarket Shift: Expect Measured Disruption - 9 Aug 2017 Fo r t heex clu siv e u seofC LA IR E. LU @ GS .C OM Exhibit 1: We forecast Alibaba and JD to have largely at market shares over 2018E-20E China online retail market by players, based on GMV Exhibit 2: We forecast overall online retail/online goods growth CAGR of 25%/24% over 2017-20E (from 22%/20% previously), on new shopping experiences, category expansions Our GMV growth forecasts for Alibaba, JD and Vipshop 23% 24% 27% 27% 30% 31%37% 34% 32% 32% 29% 28%13% 15% 17% 17% 18% 18%23% 22% 20% 20% 19% 18%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2015201620172018E2019E2020E TmallTaobaoJDVipshopSuningOthers 2017-20ECAGR+30%+18%+25%48.0% 31.6%25.6%28.0% 26.4% 23.7% 20.7%0% 20% 40% 60% 80% 100% 120% 20142015201620172018E2019E2020E AlibabaJDVIPSOverall online goods Source: Company data, NBS, Goldman Sachs Global Investment ResearchSource: Company data, Goldman Sachs Global Investment Research Exhibit 3: We see total parcels delivered within China more than doubling from 2017 to 92bn by 2020, driven by fast growth of O2O + grocery deliveries Breakdown of total parcels delivered in China, including O2O + Grocery deliveries Exhibit 4: We see parcel growth accelerating in 2018 driven by O2O groceries and social ecommerce platforms Year-on-year growth in number of parcels delivered in China13,960 20,66631,90241,71556,20873,30092,027-10,00020,00030,00040,00050,00060,00070,00080,00090,000100,000 20142015201620172018E2019E2020E Cross-borderInter-cityIntra-cityO2O + Groceries mn2017-20E CAGR:O2O + Groceries:97%Intra-city:28%Inter-city:25%Cross-border: 40%51%28%28%27%22%52% 48% 54%31% 35% 30%25%0% 10% 20% 30% 40% 50% 60% 20142015201620172018E2019E2020E Yoy growth in parcels - State Post Bureau Yoy growth in parcels - including O2O/groceries that are not recorded by SPB China overall online goods GMV Source: State Post Bureau, Goldman Sachs Global Investment ResearchSource: State Post Bureau, Goldman Sachs Global Investment Research 11 July 2018 Goldman SachsE+Commerce / Logistics of Things (LoT) in China Fo r t heex clu siv e u seofC LA IR E. LU @ GS .C OM 。。。。。。