Cross-border logistics ends period of irrational exuberance

"The volume of cross-border logistics shipments this year, compared to last year, has roughly dropped by 30 per cent, and profits have fallen by about 50 per cent." Recently, Shao Yifeng, founder of Ningbo Tieda Supply Chain Management Co. Ltd, said to a reporter from China Logistics & Purchasing magazine.

Over the past three years, changes in consumption habits superimposed on the epidemic factor, China's rapid development of cross-border trade, driving cross-border logistics into an irrationally prosperous outbreak. But this year, the situation seems to have changed.

Recently, the China Federation of Logistics and Purchasing released data showing that since the second quarter of this year, the momentum of economic growth has slowed down, and in May China's manufacturing purchasing managers' index (PMI) was 48.8 per cent, for two consecutive months in the Rongkou line below. Enterprise surveys show that the proportion of enterprises reflecting insufficient market demand is at a historically high level. Among them, the downward growth of exports is an important reason for enterprises to feel the lack of demand. Closely related to exports of China's export container freight index, the end of March this year fell to less than 1000, compared with the highest point during the epidemic slipped more than 70%.

So, for domestic cross-border logistics enterprises, how to alleviate the test of declining cargo volume brought about by the weakness of overseas markets? And how should they adjust to cope with the new foreign trade pattern?

"So far this year, our cross-border e-commerce business is still showing a growth trend." On 8 June, Deng Xiaobo, general manager of Shenzhen Mantianxing International Supply Chain Co., Ltd (hereinafter referred to as "Mantianxing"), disclosed to China Logistics & Purchasing Magazine that up to now, Mantianxing's cross-border e-commerce business volume has doubled year-on-year this year. And its traditional foreign trade logistics decline is still relatively obvious, for example, last year, the amount of orders received in February will be scheduled to July and August in order to complete the fulfilment, but now the amount of orders in February is basically scheduled to April and May is gone.

Zongteng Group cross-border e-commerce business performance is also better than last year. Li Cong, vice president of Zongteng Group, told China Logistics & Purchasing magazine on 8 June, "In terms of Zongteng's two main businesses, cross-border e-commerce parcels and overseas warehouses, we are in a steady growth this year, and our business development is better than that of last year. Among them, the growth rate of online retail is slightly better than that of the offline market and achieved double-digit growth."

"Although the cargo volume has grown significantly, the revenue did not get synchronised growth, mainly due to the sharp drop in shipping prices this year." Deng Xiaobo believes that global cross-border logistics service freight rates came out of a peak from 2020 to 2021. However, starting from the second half of 2022, with the relief of congested ports and the continuous release of capacity to the cross-border logistics industry, it is also an inevitable trend that the global cross-border logistics service tariffs show a decline at this stage.

To be more precise, in 2020, the industry's capacity, operation and labour supply will be disturbed by the epidemic, and the market demand for cross-border logistics services will surge, resulting in an increase in the average price of TEUs. Taking cross-border logistics service provider Le Cabin Logistics as an example, the revenue growth rate of Le Cabin Logistics reached a peak in 2021, and the revenue growth rate plummeted in 2022, from 426% to 9.82%.

Li Cong's point of view is that the decline in freight rates is mainly due to the supply chain fluctuations caused by the epidemic "bullwhip effect", resulting in many markets, including the United States, high inventory.

"The market suffered a Fed rate hike, Russia-Ukraine war, inflation, resulting in a slowdown in consumption growth, 2022 generally into the de-inventorying cycle, resulting in a decline in exports." Li Cong further said that the United States, Europe, the situation is similar, the United States imports bottomed out in February 2023, began to slowly rebound, but much lower than the scale of imports from 2021 to 2022.

As the air and sea transport markets are in the doldrums, the price competition seems to be stalemate, but also basically stabilised. However, at this stage, China's economy is in a period of transition from restorative growth to a full recovery, the entire cross-border logistics industry is bound to make adjustments.

From the perspective of the current competitive situation in the cross-border logistics industry, the differentiated competitive situation is still relatively obvious. For example, some are doing business contraction, some are bucking the trend of subsidising the market, taking the package train and then below the market price to maintain the volume of goods, in order to wait for the peak season to fight a turnaround.

"Whenever there is a price war in the market, it means the industry has entered a new round of reshuffle." Deng Xiaobo said, taking Guangzhou as an example, that there are tens of thousands of local cross-border logistics companies of all sizes, which are highly dispersed and dominated by small specialised lines, and basically have not formed any obvious brand advantages. Therefore, once there is a price war, some small cross-border logistics enterprises will be in their own costs can not come down, the scale of the embarrassing situation, and then there is a risk of being eliminated from the game.

In addition, the domestic emerging e-commerce platform SHEIN, TEMU to form the industry's structural incremental, the use of centralised procurement of logistics services, and the commodity operation to take full custody of the model, so that it will be small and medium-sized sellers and other platforms in the cost of commodities, logistics costs, logistics experience to play a facilitating role, and the formation of the crowding out effect, and in the platform of centralised procurement of logistics in the majority of medium and large-scale logistics enterprises to win, or in the logistics enterprises with advantages in a certain country region will then promote the concentration of the industry in the region.

"At this stage, the cross-border e-commerce industry is in a period of transition, with new kinetic energy poised to develop and old kinetic energy adjusting and transforming." Li Cong said that enterprises with more professional service capabilities, as well as service resource investment and management advantages are more likely to gain development. The poor information construction, relying on the demand side of the cross-border logistics enterprises, has been unable to meet market demand.

Shao Yifeng believes that at this stage, cross-border logistics enterprises need to have the following conditions if they want to win greater development:

First, service quality will become the key to the success of cross-border logistics enterprises. With the intensification of market competition, enterprises need to provide better quality, safe, reliable and fast services. For example, providing faster logistics speed, more accurate tracking system, better customer service, etc.;

Second, technological innovation to increase efficiency and reduce costs. For example, the use of Internet of Things (IoT) technology to achieve intelligent digital logistics, automated operations, etc., to improve logistics efficiency and accuracy;

Third, improving supply chain management to increase logistics efficiency and reduce costs and risks. For example, improving the sustainability and competitiveness of the supply chain by optimising the supply chain structure, expanding the supply chain network and improving inventory management;

Fourth, to comply with international trade laws and regulations, including customs clearance, tax compliance, security checks, etc. Enterprises need to establish a perfect compliance system and improve their compliance capabilities.

On the contrary, cross-border logistics enterprises that fail to keep pace with changes in market demand and technological development will gradually be eliminated by the market. "In such a state of affairs, we can only take a steady approach, improve our services, enhance our digitalisation capabilities, hold on to our old customers and preserve our strength." Shao Yifeng added.

Cross-border logistics inevitably goes hand in hand with a series of risks and challenges in its development. For example, the uncertainty of international trade policies, rising logistics costs, malicious competition, and the complexity of supply chain management. Therefore, cross-border logistics enterprises need to continuously improve their service quality, supply chain management capability and innovation ability, as well as actively respond to the various challenges faced by the industry, in order to be invincible in the fierce market competition.

"Enterprises should increase their import inventory according to policies and regulations, analyse their target markets in-depth, and, in response to the problems revealed, adopt technological means to improve efficiency and security, and establish an effective management and risk prevention and control system, in order to improve the competitiveness of cross-border logistics products and services." Shao Yifeng emphasised.

However, Deng Xiaobo said that at this stage, traditional trade is indeed affected by the outward migration of the manufacturing industry, but with the overall rapid development of the cross-border e-commerce industry both at home and abroad, the prospects of the cross-border logistics industry are still unlimited. "China's light industrial products have a very obvious advantage of good quality and low price globally. Therefore, the advantage of volume scale exists for a long time, both in traditional trade exports and through global e-commerce platforms." He emphasised that we are confident in the future development of cross-border logistics business with the support of national policies such as tariff reduction and support for cross-border e-commerce enterprises.

Recently, the relevant person in charge of Cainiao's international business told China Logistics and Purchasing magazine that Cainiao has been solidly investing in building a global international express network, and will continue to ramp up its overseas logistics infrastructure, including domestic preferred warehouses, international trunk lines, overseas warehouses, end-to-end distribution and other nodes.

"Deploying sufficient cross-border transport infrastructure capacity and transport network is an important prerequisite for the development of cross-border logistics enterprises." The above-mentioned person in charge of Cainiao's international business further said that at present, Cainiao International has laid out 6 major intelligent logistics hubs around the world, the number of overseas distribution centres constructed and operated has increased to 15, there are more than 240 chartered planes used for trunk line transport every month, and it has cooperated with more than 60 ports around the world to establish an intelligent clearance system, which builds a high-quality global logistics network.

Li Cong said, to cope with the impact of international trade and other external conditions, first of all, to practice internal refinement of the operation, cost control, through the industry downturn growth period; secondly, for the future development potential of customers to provide logistics solutions based on the needs of category specialisation; thirdly, to appropriately increase the investment in the construction of fixed assets, to solve the key bottlenecks in the suppression of the not only to do the whole chain, but also to do the decoupling, coupling, refinement of the Operation decoupling of various links, do a good job in the coupling of various links, to provide multi-scene services