SF Express takes on the integrators

Having achieved success in its home country of China, SF Express is now looking to spread its wings even further. Thanks mostly to the boom in China’s e-commerce, the company has witnessed an increase in demand for its services. Now, as interest in cross-border e-commerce picks up, SF Express is using this trend to expand internationally.

Already the transpacific lane is busy for the company after it made agreements with US retailers such as Costco and Ashford. The Costco agreement is interesting as it is one in which SF Express will provide delivery of frozen meat, poultry and fish goods to Chinese customers. Indeed, e-commerce firms have become an important factor driving the development of cold chain logistics. For 2013, the capacity of cold storage in China was 26m tonnes, up by 36% from a year earlier. SF Express also recently opened Heike, an online shopping service community store, which integrates services with SF Express’ cold chain logistics. The company’s SF Best subsidiary further takes advantage of the need for cold chain by offering an online shopping platform that features food and beverages.

For US watch discount store Ashford, SF Express provides transport services through Hong Kong to the Chinese mainland with a delivery period of seven to ten business days. It also offers online track and trace capabilities to its customers. According to SF Express, the company is able to deliver the overseas products in five days. Once the US retailer transfers the products to the Taiwan headquarters of SF Express, the China-based SF Express will process the products’ customs clearance transactions, after which the goods will be delivered to consumers in China. The company cites the complexity of customs clearance and final-mile delivery in China, as its value proposition for US retailers.

And now as trade with the US appears to be taking off, the company is looking at the European market. It recently announced plans to expand its fleet of aircraft from the current 20 to 60 by 2015 and to over 150 by 2021. It has also established a partnership with Lithuania Post to expand into the European market. The partnership extends to cooperation over financial settlements, data information and cross border e-commerce. The companies have also stated an aim to establish the second largest logistics hub in the Baltics. Lithuania represents a potential geographic advantage for SF Express, allowing the company to utilize all modes of transportation – highway, shipping and rail. It will also assist SF Express to target the Central and Eastern European markets.

In an interview with the Journal of Commerce a representative for the company noted that its objective is to assist customers in their international business and trading, specifically in the areas of traditional business-to-business and e-commerce express delivery. Indeed, DHL, FedEx and UPS also assist customers with this objective. Is it time to add SF Express to this elite group of integrators? Perhaps. Despite the fact its annual revenue is far less than the big three, it is growing fast and its offerings for the Chinese market are certainly more diversified. However, while planes may be full from the US or Europe to China, can SF Express be successful in filling up the planes for the opposite direction?

Perhaps more important is the concern that, though SF Express’s revenue may be on the increase, its investments in expansion and additional logistics services may compromise its profitability – a leading indicator of its competitiveness against the major integrators.