Looking for the next transnational logistics giant

The following article source / latest words funtalk (ID: ifontalker)



(by Ren Xueyun, editor / Wang Fangjie)







It's too hot to go to sea.




Now, as long as you open any content platform and enter "brand + going to sea", you will see many myths. For example, an independent women's clothing station easily achieved 500 million sales in one year. A start-up company from China spent only five years, with its revenue rising from US $600 million to US $15.7 billion and its valuation exceeding US $100 billion. Yes, they said sheen.





It is undeniable that after the epidemic, Chinese brands have ushered in a historic opportunity to go to sea. According to statistics, in 2021, the scale of China's cross-border e-commerce reached 1.9 trillion yuan, with a year-on-year increase of 18.6%, accounting for 4.9% of the total import and export volume, while the cross-border e-commerce export volume accounted for 77.5% of the total cross-border e-commerce import and export volume.





In the supply chain industry, there is an old saying that logistics follows the business flow. Therefore, a base carrying huge cross-border business flows is increasingly taking shape, that is, cross-border logistics.




According to relevant forecasts, by 2025, the scale of China's cross-border e-commerce B2B market will reach 13.9 trillion, and the scale of cross-border logistics industry is expected to reach 3.6 trillion.





Therefore, in the past two years, Jingdong Logistics, Shunfeng, Cainiao and Jitu have all regarded globalization as the development focus.





At present, SF operates 111 routes and 57800 flights worldwide; The total number of overseas distribution centers operated by Cainiao has reached 10, and the cross-border warehouse covers an area of 3 million square meters; JD logistics has operated 80 overseas warehouses and bonded warehouses in total. The international small package special line service of Jitu has also covered the whole Southeast Asia, East Asia, the Middle East, Latin America and Europe and America.





In addition, thousands of small cross-border logistics start-ups were born during the epidemic, especially in the hot areas of Bantian and Longhua in Shenzhen, where new enterprises are established almost every week. However, soon after, many start-ups showed their vulnerability in the market fluctuations.





Because the cross-border journey is accompanied by wind and waves, especially the current Chinese brand going to sea is not equal to the traditional foreign trade export. With the extension of business flow and logistics links, the uncertainty in the whole process is increasing.





Under the OEM mode, the Chinese factory is only responsible for the initial stage of the whole business flow link. Today, when Chinese brands go out, they need to go through the whole business flow.





This also means that on the logistics link, Chinese brands will have to complete the whole process of warehouse to port, cross-border transportation, overseas customs clearance, overseas warehousing and terminal distribution. Because international logistics has strong volatility, every link is a test.





Indeed, the sea is blue, but it is not a myth.




01





When a commodity is produced locally, what links do we need to go through if we want to sell it to consumers in different countries?

In the early embryonic period, cross-border e-commerce logistics delivery was mainly based on international parcel delivery. At that time, the buyer decided the logistics. Later, with the continuous improvement of made in China, the era of direct logistics led by postal parcels came. At this time, the importance of logistics has become an important reference dimension for cross-border buyers to judge the quality of products.





Now, with the upgrading of China's industry, the brand going to sea has entered the era of coordination of global cross-border network and supply chain, and gradually transitioned from buyer logistics to seller logistics. Among them, the brand needs a more comprehensive and comprehensive cross-border supply chain comprehensive solution instead of simply shipping out.





Therefore, the answer to the above question can be summarized by the word "complex".





Compared with the domestic express logistics chain, based on the transaction entities in different customs areas, buyers and sellers conclude transactions through e-commerce platforms. After e-payment and settlement, cross-border logistics needs to go through seven major links: domestic collection, sorting and transportation, customs clearance, sea, land and air transportation, overseas customs clearance, overseas storage and sorting, and terminal distribution before the final distribution can be completed.





In depth focus on these seven links, and there are many hidden pits for merchants.





For example, the cross-border e-commerce logistics system directly faces regulatory and legal risks from abroad, and will also be affected by changes in the international political and economic situation. For example, the occurrence of severe weather causes damage and loss of goods.





Therefore, when the chain is long, there are many links, the cost is high, there is great uncertainty in the timeliness of express delivery, and the after-sales processing is cumbersome and difficult in front of the enterprise, the brand will be deterred from going to sea.





For those enterprises that have gone overseas, the pressure brought by cross-border logistics will be reflected in the book. Affected by the global outbreak and the impact of international policies, the cross-border logistics cost has become higher and higher since the outbreak.





From the perspective of container prices alone, the import and export freight rates are continuously rising. According to the "world container index" assessed by the international shipping consulting agency drew ry, the price of every 40 foot container was close to US $2000 in early January 2020, and by September 9 this year, the price had exceeded US $10000, an increase of nearly five times.





According to the Baltic air transport index Bai (from Hong Kong to North America), in 2016, it was about 13 yuan / kg, which has increased to 66 yuan / kg in May 2022, a fourfold increase in six years, with an annual average increase of about 68%.





Under the pressure of such costs, the profit space of cross-border sellers is constantly being "nibbled".





But this is not the most difficult thing. Looking back, more difficult things are still happening. As it is difficult to control the terminal distribution and service of local logistics, the shopping experience of consumers is directly affected.

At present, most of the cross-border e-commerce logistics enterprises serving China are located in China, which is more similar to the air force's operation and lacks overseas ground troops. Therefore, when the package is sent out and arrives at the destination country, it will be completed by the local logistics system. However, in fact, a lot of operation work still takes place in China.

Therefore, when the goods leave the Customs at home, their "control" in overseas will often be out of track. Both enterprises and consumers are placed in a black box, without knowing how to ensure the effectiveness of distribution logistics and how to improve the service experience through consumer feedback.





An online shopping enthusiast who once studied in Europe also complained to "the latest", saying that overseas express delivery is not only slow, but also the courier may put forward some requirements for delivery. "Under this kind of experience, the unhappiness accumulated in shopping will be more and more, and you will naturally give up online shopping."





But the core problem that makes the whole logistics chain highly uncertain is that the chain is too long. Li Zhe (not his real name), an executive of a cross-border e-commerce company, told the latest that in the chain of cross-border logistics, each link needs corresponding professional services, such as freight forwarding, ocean transportation or air transportation, customs clearance services, distribution of goods after arrival, overseas storage and terminal distribution. It can be said that the chain is linked one by one. If any link goes wrong or there is no connection between upstream and downstream, it is very easy to make the whole chain fail.





Then, a series of chain reactions came, which eventually led to users losing interest in cross-border shopping, thus affecting the re purchase of goods and the circulation of the whole business flow and logistics chain.





But for brands, the trend of going to sea is unavoidable, especially after the epidemic. The epidemic has made the whole trading mode more online. Online viewing, online trading and online performance are becoming the norm.





This leads to the fragmentation of transactions. Generally speaking, transactions become more frequent, but the amount will be less than before. Therefore, the brand's demand for logistics has changed greatly, and both the buyer and the seller will place great emphasis on certainty.





Therefore, it is a new demand for overseas enterprises to reduce middlemen as much as possible and reach consumers more directly. For logistics service providers, the challenge is coming. They must rebuild a complete supply chain system.




02





Because the whole cross-border logistics market now has a situation of thousands of sails running off, competition is inevitable, and at the same time, competition has a superimposed effect with the fluctuations of the international logistics market.





This kind of fluctuation is very dangerous for Chinese brands that are new to overseas. In fact, what is most needed in doing business is certainty. In particular, for brands, cross-border logistics costs are too big a test for profits. From an end-to-end perspective, although different commodity properties are different, cross-border logistics costs may also account for 10% - 30% of the overall cost.





Once the logistics cost fluctuates violently, it will directly impact the cost and profit of the whole company.





It can be seen that for these Chinese brands, what they need most is predictable prices and deterministic supply chain services to make the road to the sea smooth.





After all, the market is volatile. When freight forwarders are unable to accept the rise of upstream prices, many freight forwarders have been unable to provide deterministic logistics, so customers continue to lose. Some freight forwarders even continue to receive goods at low prices because they can not bear the huge losses. The vicious circle is aggravated, and finally leads to bankruptcy. Some small and medium-sized sellers suffered heavy losses.





It is understood that as the dividend of the epidemic subsides, many small cross-border logistics enterprises begin to collect goods at extremely low prices or even at a loss. For example, the price of FBA's ordinary ship and Shanghai style has dropped to 3-4 yuan / kg, and the price of Meisen fast wear has dropped from the highest 30 yuan / kg during the epidemic period to about 10 yuan / kg.





The fierce downstream market fluctuations will only aggravate the uncertain risks for these enterprises. For example, at the beginning of 2022, a daily logistics company was investigated in 91 cabinets, 640 customers were involved, and the loss was as high as 11 million yuan, because it concealed the declaration of commercial parts for customs clearance, and found that there were "wrong goods and different certificates" when the goods were cleared in Japan.





The same is true for overseas warehouses.





Mr. Lin, a cross-border furniture e-commerce merchant in Ningbo, told the latest news that some overseas warehouse companies raised their prices as soon as they said they would. Because the company's overseas warehouse lost money in Europe, it asked the American overseas warehouse to make up for it by raising the price. "The risk and price are borne by the merchants. It's really unbearable."





Of course, with the globalization of China's logistics giants, the above links have more stable choices.





For example, SF focuses on the construction of cross-border transport capacity. In September last year, SF acquired 51.8% of the shares of Kerry Logistics, thereby exploring overseas markets. At present, SF International's products and services include international express business and cross-border e-commerce business. It mainly aims at the needs of cross-border e-commerce business through encrypted airline network, mainly covering international e-commerce express delivery and international small packages under 2kg.

JD logistics's focus on defense line is also obviously in line with its consistent strategy of "store + warehouse" to build a global supply chain network.





However, according to the operation experience of cross-border e-commerce for many years, Li Zhe believes that the most scarce capability in the market is the ability to connect and integrate the whole logistics chain, so that every link in the whole logistics chain can be smoothly connected, not only the transportation capacity can be connected, but also the data can be connected. For example, in fact, there are independent air transport service providers in the market, as well as "air + delivery" service providers. However, if the brand chooses to enter the overseas warehouse, it needs to solve the warehouse problem separately.





It is more complicated to choose shipping. How to find those goods with similar tax rates, how to distribute them after arriving at the port, how to warehouse them, and how to find local logistics distribution, the link will be longer.





And since the brand goes to sea, after-sales is a necessary link. How will reverse logistics based on return be realized? These are the things that Chinese brands that are first involved in the complete global business flow must think clearly.





At present, it seems that the novice's going to sea is to make efforts in the direction of "door-to-door of the whole chain", which may also be related to the company's solid globalization strategy.





It is understood that at present, Cainiao can provide logistics solutions for cross-border B2B business of small and medium-sized enterprises in sea, air, land and multimodal transport, reaching more than 100 countries and regions around the world.





In terms of cross-border logistics network, Zhao Jian, general manager of Cainiao international supply chain, told the latest that Cainiao's thinking is "point, line and surface". Among them, ehub, bonded warehouse, central warehouse, transit warehouse, overseas warehouse, self delivery point of overseas countries and other cross-border e-commerce infrastructure are "points"; Covering more than 200 countries and regions in the world, the trunk network that can provide the one-stop service of "arrival + transportation + declaration" is "line"; The truck network covering Germany, France and other European countries and used for European import and export business is "wide".





Under such network coverage, on the one hand, it can provide brand merchants with better transportation and delivery plans. Based on the establishment of overseas warehouses, the mode of "goods first before orders are placed" can greatly reduce the logistics chain and increase the certainty of performance. Especially in the special period of large promotion and hot single products, when the demand is guaranteed, there is not only inventory but also delivery. On the other hand, through self-contained terminal facilities such as express cabinets, the end-to-end performance efficiency will be improved, and consumers will also gain a better shopping experience.





It is worth noting that the establishment of the above global logistics system, Cainiao adopts the mode of "self construction + cooperation". It has its own charter plane and regional truck network, and has Cainiao's digital hub ehub in key countries. However, there are still some infrastructures that are jointly built with local partners, and the logistics is fully localized. After all, it is not realistic to build a complete "cross-border transportation + warehouse distribution" system from zero to one in terms of globalization.





Insiders tell us that Cainiao may be the only logistics enterprise that has completely opened up the whole chain from domestic factories to overseas terminal distribution.





Objectively speaking, many cross-border e-commerce platforms are also carrying out logistics full link business. However, because their business scale is not so large, the construction of the domestic section is relatively weak, and it is difficult to achieve efficient order consolidation. They can only make orders and deliver goods in stages, such as once a week.

However, it is very important to solve the starting point efficiency of cross-border logistics. Because the characteristics of cross-border e-commerce are "small batch", "high frequency" and "fragmentation". If these trades follow the traditional mode and go alone, the logistics cost will remain high.





In view of this phenomenon, the solution given by Cainiao is to combine the characteristics of China's industrial belt, start from the starting point of the supply chain, predict the cargo volume and freight demand of different manufacturers in advance, and arrange containers uniformly by Cainiao for intensive processing.





For example, when a consumer places an order at different merchants, Cainiao's centralized warehouse and preferred warehouse are often used on e-commerce platforms to place goods packaged through "smart order combination" matching.





The so-called "intelligent order combining" refers to the intelligent order combining using the same overseas receiving address through big data algorithm, and the multiple orders purchased by customers in different domestic platform stores are collectively packed into a package in the centralized warehouse to complete the subsequent trunk and terminal distribution.





If the daily average number of packages is about 800000, two or three million packages may have to be processed in case of non-compliance. Therefore, it is obvious that single order can indeed reduce logistics pressure and cost to the greatest extent, and improve timeliness and shopping experience.

03





It is worth noting that there are three giants in the international express market, namely UPS, FedEx and DHL. In 2018, these three companies also accounted for 90% of the international express market. However, it is obvious that they did not enjoy the dividends of Chinese brands going abroad.





Because the commercial flow determines the logistics, the commercial flow of the times also creates the logistics enterprises of the times.





That was the 1.0 era of the express industry. Looking back at the history of the rise of these international express giants, accompanied by the rise of the two major economies of virtue and the globalization of local enterprises. It was the 1980s in the United States. Some high value-added manufacturing industries such as electronics, medicine, biotechnology and automobile industry developed rapidly, which brought huge demand for express service.





However, the penetration rate of foreign e-commerce business is still at a low level compared with that of domestic e-commerce business. Therefore, when the demand for business flows is insufficient, the overseas express enterprises lack relevant logistics experience.





In the 1980s, China began its reform and opening up. At that time, the three international express giants UPS, FedEx and DHL targeted the Chinese market and carried out business in the form of Sino foreign joint ventures, but it was not warm.





Although the restrictions on the ownership of foreign-invested logistics enterprises were lifted in 2010, the three international giants still lost their share because they did not understand the Chinese market. During the same period, domestic private express enterprises seized a large number of orders brought by e-commerce, rose rapidly and listed one after another.





Later, UPS also introduced such service measures as "my choice" (flexible adjustment of the time and place of delivery of goods) and "leading logistics" (customized scheme for high-tech industry, which can arrive the next day), but the final effect was achieved.





Therefore, at present, UPS, FedEx and DHL give many Chinese brands only the impression of international express. Of course, they have developed global networks, but their use scenarios are basically limited to expensive small direct delivery.





Because these international logistics giants are independent of business flow for a long time, they can not deeply understand the needs of Chinese enterprises, especially those Chinese brands that have grown up in Chinese soil.





One case is the old Chinese brand pioneer electric appliance. The sales volume of the two major brands in the global market, which mainly produce heaters and electric fans, broke out overseas. By December 2021, Pioneer Electric Appliance had produced 5 million heating equipment, an increase of about 30-50% compared with 2020.





Problems also followed. At that time, it was difficult to obtain one container of global freight, which led to the soaring sea freight prices in North America. However, pioneer appliance is a seasonal household appliance. Once you miss the time, you may lose the sales opportunity. This makes them feel extremely difficult.





Later, Cainiao provided a customized solution. According to the production and marketing plan of Pioneer Electric, it locked the self operated ship's cabin in advance, communicated with the US port of destination in advance for pre customs clearance, connected with the port, the fleet avoided the problem that the dock was short of frames and could not pick up the goods, and helped pioneer complete the warehousing on the same day in Cainiao's overseas warehouse in the United States, so that customers could pick up the goods according to their needs.





"It greatly improves the timeliness of post port delivery in the United States." Said Qi Hong, senior manager of Pioneer Electric Group.





Chinese brands such as Pioneer Electric developed in the era of China's digital dividend. They have long been used to relying on development and leaving things to their partners. For example, supply chain management based on one inventory, as long as the business needs, there are platforms willing to help it.





Of course, it is precisely because of this digital division of labor that a number of high-energy supply chain service providers have been created. Moreover, the development of China's logistics enterprises cannot be separated from the construction and changes of the current domestic industrial belt. According to the observation of the latest edition, there is an obvious trend that China's industrial belt needs more than income, but to balance the supply chain through the supply and demand of the global market.





For example, clothing, as a seasonal category, on the one hand, the factory must ensure the production of goods. For example, an enterprise may produce goods in China two months in advance, and supply goods to the United States four or five months in advance. On the other hand, the goods should be delivered to the local place in the right season, so as to realize sales.





In addition, in the past, the commodities in China's industrial belt were sold to overseas major customers. However, under the demand of China's industrial upgrading, a large part of the brands going to sea are to directly reach consumers.





Among them, what logistics needs to solve at present is certainty, which requires an accurate grasp of China's business flow.





This also proves once again that business flow and logistics cannot be separated. In the era of digital division of labor, what enterprises need is not a pure logistics company, but a digital supply chain service provider that can understand both business flow and logistics.





Recognizing this, we have helped enterprises such as Alibaba and jd.com become the business base of the whole society in China. Today, this base is also going to sea with the cross-border development of Chinese brands.





During the nearly 25 years of Alibaba's deep cultivation in e-commerce, in the field of cross-border business flows, tmall overseas and lazada are the B2C providers. The volume of parcels has reached four to five million, and the volume of imports is also quite large. Alibaba.com is the largest B2B trading market in China. Moreover, in June this year, the transaction volume of small and medium-sized enterprises on the alibaba.com platform increased by 16% year on year.





It is undeniable that the trading of its own e-commerce platform has benefited enterprises such as Cainiao a lot, but it not only brings basic customers, but more importantly, it can better understand the real needs of these cross-border e-commerce through the whole supply chain intervention of business flow + logistics. For example, when is the time for overseas promotion, when should the warehouse be cleared, and how to realize the reverse logistics based on the seven day unreasonable return and exchange of goods.





Of course, these capabilities are not only the needs of customers of aliexpress, but also a common demand of Chinese overseas brands.





It is worth noting that in Cainiao, the proportion of external customers is gradually increasing. According to Alibaba's financial report in the first quarter of fiscal year 2023, the proportion of Cainiao's external revenue has also reached 70%.





It is precisely because logistics follows the business flow that the growth history of international logistics giants is actually a history of globalization. In the past 100 years, UPS, founded in 1907, DHL in 1969, and FedEx in 1971 have become the top three in the world with the globalization of the western economy. However, with Chinese brands going to sea, a number of Chinese logistics enterprises are rapidly becoming the head of the international sequence.





At present, the rookie flies ahead.





Source / latest funtalk (ID: ifontalker)



(by Ren Xueyun, editor / Wang Fangjie)