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Mainland chinese cross-border ecommerce reached $17.963 billion in 2015 and a turning point, says new research from international management consulting firm Oliver Wyman, reports Retail News Asia.

According to iResearch, this number is expected to grow more than 60% reaching 7% of total Chinese ecommerce value by 2018.

However, the research firm has warned that increasing regulation in China may mean that the industry has reached an inflection point.

“Chinese consumers are probably the most informed and digitalised in the world,” the report detailed. “As Chinese consumers travel abroad, they are increasingly aware of offline prices around the world.”

Cross-border ecommerce provides Chinese consumers with access to the best products at the best prices without leaving home. The report, titled Shopping Without Boundaries found that one in five online Chinese shoppers made a purchase on cross-border ecommerce platforms in 2015, double the proportion in 2014.

chinese cross border ecommerce

Today’s cross-border ecommerce businesses expanded out of the Daigou model “buying on behalf of”, which involved small businesses abroad who brought or sent products back to China. In 2013, the Chinese government established experimental zones of cross-border ecommerce for better regulation.

The most common are platform providers such as Tmall International and self-operated plays such as Jumei – JD Worldwide operates across both models.

What can happen next?

After a strong boom, the report finds that cross-border ecommerce has arrived at a tipping point.

The future now seems unclear to many players due to a series of government regulations. Tax, product safety, manufacturing standards and logistics, these regulations have not been fully defined and leave room for speculation, the report concluded.

While cross-border ecommerce still present various opportunities, companies may want to have a plan B in the works in case the market dynamics changes.

According to aCommerce Chief Marketing Officer, Sheji Ho, cross-border ecommerce in China can be seen as a desperate move to cope with the fact that the domestic market is reaching saturation. Despite the hype, it is still a very small business compared to the domestic ecommerce market. Therefore, it should be said that the surge in cross-border ecommerce is not indicative of China’s overall ecommerce landscape.

A version of this appeared in Retail News Asia on September 17. Read the rest of the story here

4PX Express has grown into China’s biggest cross border ecommerce platform, reports Singapore Straits Times.

The logistics platform helps merchants such as AliExpress, TaoBao, eBay and Newegg to get their goods delivered to customers across the world.

In terms of scale, 4PX is twice the size of the #2 and #3 players in China combined.

As China’s ecommerce boom spreads to other parts of the world, outbound volumes have spiked over the last two years, with 4PX founder Kevin Li predicting that the market will grow at least 80% each year for the next few years.

Approximately 40% of shipments handled by 4PX are bound for shoppers in the United States, Russia and followed by Brazil. Shoppers in the UK, Germany, Spain and France count for another 40-45% of overseas shipments.

As Li puts bluntly, “the world economy is not good, but foreigners like online shopping.”

4PX turns an annual profit of approximately $101.1 million (50 million yuan) and employs 3,500 people across 50 centers in China and 17 overseas.

As the items sold by Chinese sellers grow in value, the company plans to expand its network of overseas warehouses, where sellers’ inventory is sorted, packed, consolidated and shipped out. It also aims to be the biggest Chinese employer in the Czech Republic, with a promise to add 600 jobs over five years as it serves Western Europe with a warehouse there.

4PX’s big name investors 

The company closed its latest investment round last month, with Alibaba’s logistics arm Cainiao injecting an undisclosed sum into the firm for a 15% stake.

SingPost is an early investor, with roughly 30% share in the company. The partnership goes back to 2008, when 4PX first identified opportunities in cross border ecommerce. During that time, online sales were booming, but the parcel service industry lagged behind.

The sellers were new, they didn’t know how to sell and choose a logistics company. DHL and FedEx did professional fulfillment but were focused on the business-to-business segment. – Kevin Li, Founder of 4PX Express

From that, 4PX started to build a complete product line for parcel services, and SingPost became its first postal partner outside of China. Small parcels from China would be routed to Singapore and sent out to various countries across the world from there.

Li expects his company’s margins to fall as the ecommerce sector matures, but this shouldn’t be a cause for concern. “We are an integrator of different firms’ solutions. We exist because of our technology”.

A version of this appeared in The Straits Times on August 14. Read the full version here.

SingPost ecommerce delivered positive sales growth in the last quarter by 30.9% to $248 million (S333.4 million), but saw a decrease in net profit by 23%.

The increase reflects expansion in cross border ecommerce activities, as well as the integration of new US subsidiaries TradeGlobal and Jagged Peak. Both of these companies run ecommerce fulfillment and logistics operations, acquired in November 2015 and March 2016, respectively. The company recently won Japanese fashion brand UNIQLO’s ecommerce business in Thailand.

Ecommerce related revenues more than doubled from $54.3 million to $122 million. They now make up 49.3 % of Group revenue, up from 28.7% last year. 

Ecommerce related revenues now make up 49.3% of the total Group revenue, up from 28.7% last year. 

Logistics revenue rose 11.9% to $116.7 million, with steady organic growth at Quantium Solutions and CouriersPlease, as well as the inclusion of a new subsidiary under Famous Holdings. Increased cross border ecommerce related activities led postal revenues to a 1.5% rise, indicating an increased demand of cross border services. 

Increased cross border ecommerce related activities led postal revenues to a 1.5% rise, indicating an increased demand of cross border services. 

Total expenses increased 33.6%, driven largely by growth in international mail traffic and ecommerce logistics volumes that reflect the change in the Group’s business mix.

Net profit attributable to equity holders declined 23.0% to S$35.9 million, due largely to one-off gains from the divestments of Novation Solutions and DataPost HK in the corresponding period last year.

From the SingPost Press Release:

Underlying net profit, which excludes one-off items, was down 11.2%, due to investments in business transformation. Rental income declined as the Singapore Post Centre (“SPC”) retail mall is being redeveloped, while depreciation charges were incurred for the Regional ecommerce Logistics Hub, which obtained a Temporary Occupation Permit in April 2016.

SingPost also continued to invest in ecommerce IT and operational capabilities. Mr Mervyn Lim, Covering Group Chief Executive Officer, said, “We are investing in our business transformation and that will take time to contribute materially to earnings. We are focused on executing our strategy to create value from our acquisitions and build an integrated global ecommerce logistics ecosystem. SingPost’s strategy to protect the postal core and grow its ecommerce logistics network remains on track.”

The good news will be welcomed by SingPost, following the company’s spell of negative headlines regarding internal investigation over board members, and the stepping down of Director Keith Tay in May.

Access the press release here

By Anutra Chatikavanij & Felicia Moursalien

 

United Parcel Service (UPS) reported a 3.2% increase in profit fuelled in part by ecommerce growth, writes Wall Street Journal.

However, the delivery giant warned that a weaker industrial environment will continue to drag on.

Revenue increased 3.8% to $14.62 billion for Q2, while profit rose to $1.27 billion.

UPS predicts that its ecommerce business will grow faster than expected through the end of the year as US consumers continue to show strength.

The company has expanded its margins on the domestic side, despite the slow economy. However, as Chief Executive David Abney said, “We have realized that the key to us is not what the economy may hand to us or may blow against us, but its more about staying focused on our strategies.”

The results show that the company’s efforts to improve profitability in the higher cost ecommerce delivery segment are starting to pay off. But the strength in ecommerce and consumer spending was countered by slowing exports due to an inventory overhang among industrial customers, which is negatively impacting B2B shipments, a traditional stronghold for UPS.

Delivering ecommerce packages tend to be more expensive, due to the scattered nature of the residential deliveries. UPS raised prices across the board, with specific increase targeted at bigger packages that take longer to deliver.

UPS has also been working to pool more consumer deliveries, adding retail locations and lockers for self-service pickup.

Cross border and export shipment growth in Europe helped boost the company’s international results. Shipments from Europe to the US alone grew at a double digit pace in the quarter. UPS has been expanding their operations in Europe and other international markets, executives in the company have also said that they would be keeping an eye out for potential acquisitions in emerging markets.

UPS is a solid example of how companies, whether a global giant or a smaller operation, can focus on strategy which will protect them from a volatile market. It also hints at the logistics giant’s global expansion aspirations.

A version of this appeared in The Wall Street Journal on July 29. Read the full version here.