UPS’ move to create a joint venture with the Chinese Express company SF Holding, owners of SF Express, is a very significant move if successful.
SF Express, based in Shenzhen and privately-owned, is probably the leading provider in China’s very large, but often slightly chaotic, express sector.
What the initiative betrays is that access to the Chinese consumer is one of the prime objectives of the big three global express companies; DHL, FedEx and UPS. Although Dave Abney, CEO of UPS, commented in the media that the initial focus would be on the movement of products out of China and into the US, he went on to say that serving private customers in China would be an important objective in the near future. Potentially this would be a vast market, with the Chinese consumer already strongly orientated to e-retailing services that offer globally sourced products at better prices than China’s only half-developed conventional retail sector.
Abney also admitted that an important customer would be the Chinese e-commerce company Alibaba. It has a huge appetite for logistics services connecting both their private consumer and their small- and medium-enterprise customers to world markets. At present Alibaba is struggling to create its own logistics capability just in China. A combination of SF Express and UPS offering an effective integrated service would probably be highly attractive and could drive significant volumes onto UPS’ international network.
The problem that all of the big three suffer from is a weak last mile presence in China. UPS, DHL and FedEx all have strong air express services into large hubs in the main regions of China. The difficulty comes in ground transport, with trunking challenging and last-mile operations not an option for non-Chinese companies. Therefore, UPS’ move may be just the first in a series of attempts to extend the presence of the global express operators into China.
Source: Transport Intelligence, May 30, 2017
Author: Thomas Cullen
For more information on how LSPs are developing their strategies to handle the growth of e-commerce in regions like Asia Pacific download Ti’s Global e-commerce Logistics 2017 report.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)