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900 days of cross-border export logistics

Many once well-ordered international ports have continued to experience operational challenges brought about by labor shortages in the past three years.

In the spring of 2022, an international ocean-going container that left Shanghai Port in February, carrying a batch of air purifiers, floated at sea for three months before being able to unload at the Port of Long Beach on the west coast of the United States. In the past, the same freight journey would take no more than 50 days at most.

The seller of this shipment is Suzhou Beon Technology. This air purifier manufacturer is mainly engaged in foreign trade channels, obtaining orders from enterprise-level customers through Amazon, Alibaba.com and its own independent e-commerce website, with an annual output value of more than 500 million yuan. Baiang’s cross-border trunk logistics has always been shipped by ship. The goods destined for Japan are usually shipped from Taicang Port, and the goods destined for European and American markets are shipped from Shanghai Port.

The delay in the delivery of the container sent to the United States in February was because the Omicron epidemic triggered a surge in the number of new crown infections in the United States. In mid-January, the number of newly confirmed new crown cases in a single day in the United States once reached a record since 2020. The highest value – 330,000. The Pacific Maritime Association (PMA) claimed externally that a large number of employees at the Port of Long Beach were diagnosed with the virus, which coincided with the unprecedented peak of imported goods entering the port since the beginning of this year. The labor shortage caused a large number of containers to unload and transship the rhythm. Slowing down, they had to be put on hold at the marine terminal, and those ships that were queuing to enter the port to unload their cargo had to float on the sea and wait for a long time.

“According to the timeliness requirements of different types of orders, the cargo ships we use to deliver to the United States are divided into ordinary ships, fast ships and overtime ships. The shipping time for ordinary ships to Boracay in the United States is usually 40 days, and the fast ships can be shortened to It will take about 22 days.” Shen Lishuang, the logistics director of Beon Technology, told China Business News that since the beginning of this year, with the spread of the Omicron epidemic around the world, Beon’s cross-border trade has encountered different problems on many shipping routes. Delays of varying degrees, such as containers destined for Europe, also often take two or three months due to the epidemic in different ports.

The negative impact of the new crown epidemic on the global freight and postal routes presents different characteristics every year.

In 2020, when the original strain of the new crown virus was raging around the world, a large area of ​​manufacturing was shut down, order delivery was blocked, and logistics and freight were once in a situation of “no rice”. “From January to March 2020, we basically lay at home. After April, the freight industry slowly recovered and started to operate again.” Zhang Chen, a salesman in a freight forwarding company in Shanghai, recalled to “First Financial” magazine , the earliest “quantities” were foreign trade orders for medical supplies urgently needed to fight the epidemic, such as masks and nucleic acid detection kits.

The epidemic has reduced the efficiency of port operations in many parts of the world, and the recovery of international trade has continued to put pressure on these ports. China is the first country in the world to resume work and production in 2020, and has become a relatively concentrated exporter. Many containers sent from China are backlogged in destination ports such as Europe and the United States, and cannot be returned in time. As a result, the containers required for cross-border trade have gradually become Due to the shortage of resources, the price of international freight has also risen. In the second half of the year, entering the peak season of global consumer goods sales, the freight level of international shipping was further pushed up.

The trend of price increases will continue to intensify in 2021. Faced with the uncertainty of the epidemic, traders from various countries have begun to rush to order shipping containers in the first half of the year in order to smoothly prepare for the consumer goods shopping season in the second half of the year. The Global-Baltic Container Freight Index (Freightos Baltic Index, FBX) launched by the Baltic Exchange and Freightos reached its highest point since its inception in September 2021 – the 12 major global shipping routes between Asia, Europe, North America and South America. The average daily spot freight rate for a 40-foot container reached $11,127, eight times the level at the beginning of 2020.

The new crown epidemic has made Beontech’s air purification products more popular in overseas markets. Especially in 2021, it has experienced a round of “sales boom”, with sales increasing three or four times compared to the previous year. Some dealers can sell more than 10,000 units in one crowdfunding sale, and such shipments require about 25 40-foot containers, which can only be shipped in batches. The demand for orders from the Japanese market “several containers are dispatched every week, and there are about two or three hundred containers throughout the year.”

Around October 2021, the freight paid by Beontech for a container has risen to more than $30,000, 10 times the freight rate in 2019. “The increase in shipping costs will compress our profit margins, and will also weaken our competitiveness in the other party’s market.” Shen Lishuang, head of logistics at Beontech, said.

“In the past, we didn’t have to worry about (the cabinet). We have the goods shipped, and whichever freight forwarder has the cheapest price will use the sea freight. But last year, our mentality of looking for a freight forwarder has changed. Jiang Chaoxiang, founder of Shandong Haituo Machinery Group, commented that cross-border logistics has now almost become a seller’s market.

Haituo is an enterprise mainly engaged in the production and sales of agricultural excavators. It has a considerable number of overseas distributors who need to bear the freight of cross-border logistics by themselves. Soaring prices forced them to come up with their own tricks. Last year, an overseas customer who purchased small excavators put forward a new packing suggestion-a 40-foot container can only hold 15 excavators in the past; if the robotic arm is removed, the main body of the excavator should be removed first. Put it in a special iron frame, and then insert it into the robotic arm. With this new packing method, 30 units can be stuffed into it.

However, the disadvantages of such packing are also obvious. Both Haituo and the customer will increase the labor cost of dismantling, inventorying parts, reinstalling and debugging machinery. Even so, more and more customers are proposing to use this new packing solution, which is time-consuming but generally more cost-effective.

“Now, we pack 15 to 20 containers every month, and about half of our customers request this.” Jiang Chaoxiang told China Business News magazine.

When the price rose to a very extreme level, in order to avoid a bigger industry crisis, in the end, even the international container shipping companies had to stand up and take tough measures to control the price increase.

In September 2021, CMA CGM, the world’s third largest container shipping company, announced measures to control the rise in shipping prices: from September 9 to February this year, the freight rates in the spot market of all its subsidiaries will be frozen. In a statement, CMA CGM said that in the face of the unprecedented situation in the shipping industry, the group puts the long-term relationship with its customers first. Subsequently, another shipping giant, German container shipping company Hapag-Lloyd, also said it would not increase freight rates further.

Jiang Chao was impressed by the incident of CMA CGM restricting the increase in freight rates, “I remember that when a container reached 18,000 US dollars, they said that they would not increase the price. After another two months, freight charges began to go up. fell.”

As of mid-June this year, FBX has fallen back to $7,089.

Air freight is the main mode of transportation for cross-border e-commerce small parcels, but international air freight has played a different story than sea freight in the past three years. In general, air freight rates will rise significantly during the peak season of the consumer goods market from September to January of the following year. However, under the influence of the epidemic, the reduction of air transport capacity and the congestion in the shipping market led many companies to switch to aviation, and the market freight rate of air transport once rose to the point where many cross-border e-commerce companies could hardly make any money.

Although Zhang Chen, who works in an air freight forwarding company, has an intuitive feeling about the freight before and after the epidemic. Before the epidemic, the air freight from Shanghai to the United States was 50 yuan/kg. This figure gradually increased after April 2020, and the highest rose to about 150 yuan/kg.

At this point in time, the spread of the global new crown epidemic is going through the first peak stage, and Yuntu’s order volume has increased by 197.01% year-on-year. Quoting Peng Guodong, CEO of Yuntu Logistics, in a public speech, the epidemic has “brought favorable development opportunities” for the cross-border e-commerce logistics industry.

The epidemic has led to the introduction of anti-epidemic measures in various countries to close the country and the city, which first catalyzed the e-commerce market in Europe and the United States. According to data from the Ministry of Commerce, in the first half of 2020, China’s cross-border e-commerce exports increased by 28.7% year-on-year. According to data from AliExpress, in the first quarter of 2021, domestic cross-border e-commerce completed exports of 280.8 billion yuan, a year-on-year increase of 69.3%.

“The craziest time is from the end of 2020 to the beginning of 2021. I feel that everyone around me is looking at cross-border (venture investment opportunities), the market at that time was very good, and everyone believed that China’s industry was mature and would If there are good products, overseas will also accept these good products.” Zhang Chenfan, founder and CEO of Wujiang Cross-border E-commerce, told China Business News.

In Zhang Chenfan’s view, the prosperity of cross-border e-commerce projects requires three basic conditions: the improvement of cross-border logistics, good payment channels, and the maturity of website building tools. However, this round of opportunities at the end of 2020 is actually directly driven by the “home economy” with extremely strong market demand. Even venture capitalists have not seen such a lively entrepreneurial outlet for a long time. They began to look around excitedly for the next investment target that might become SHEIN.

As a serial entrepreneur, and with experience in building e-commerce brands in the United States, Zhang Chenfan received an initial capital of 10 million yuan from investors in March 2021, established Wujiang cross-border e-commerce in Shenzhen, and established three DTC (Direct to Costumer) is an independent station that sells fast fashion products of designer brands. The markets it has entered include Europe, North America and Latin America.

These cross-border products of Wujiang start from the warehouse in the suburbs of Shenzhen, and are sent to Europe and the United States by air freight, and then the cooperative logistics service provider is responsible for the first journey to the destination and the last journey to the consumer’s receiving address. . It takes less than 10 days from ordering to receiving.

In the early years, China’s cross-border e-commerce merchants could only send air parcels overseas through China Post. This mode is only suitable for goods with a weight of less than 2 kilograms and low value, and the timeliness is also poor. Around 2013, an air parcel to Germany took 3 weeks to deliver to the customer.

It is the rise of cross-border e-commerce that drives the development of cross-border air logistics that emphasizes timeliness. At present, the recognized leading enterprise in this field in China is Yuntu Logistics, which was established in 2014, with an average daily order volume of more than 1 million parcels.

Data source: Freightos Note: Global-Baltic Container Freight Index (Freightos Baltic Index, referred to as FBX), jointly compiled by the online freight platform Freightos and the Baltic Exchange (Baltic Exchange), reflects 12 Spot freight rates for 40-foot containers on major global shipping routes.

Data source: Civil Aviation Administration of China

Data source: Civil Aviation Administration of China, Shanghai Airport Group

The story of the company’s founding is to help domestic e-commerce sellers to complete air transshipment through Shenzhen and Hong Kong to save logistics costs. Now, “cross-border B2C business line” is still its core business segment, focusing on serving Chinese sellers who have opened stores on overseas e-commerce platforms such as Amazon, Wish, and Shopify. Yuntu has created a “dedicated line” model in China, which relies on mass shipments from one place to reduce costs. At the beginning of its establishment, the dedicated line was not the service model and charging standard of international express delivery, but the package to domestic e-commerce. The courier standard is in line, and it is charged directly by kilograms.

This time-effective and cost-effective international small package service is very popular with Chinese sellers who are developing business on overseas e-commerce platforms.

In the past three years, cross-border e-commerce has prospered due to the epidemic, but it has also further exacerbated the rise in logistics costs. Peng Guodong, CEO of Yuntu, commented that the epidemic is good for cross-border logistics, but for its service object – cross-border e-commerce, the experience is just the opposite.

While the order volume is rising, they are also always aware of the huge pressure on the company’s cash flow from rising logistics costs. The order scale of a cross-border children’s clothing brand has increased by about 7 times compared with that before the epidemic, but the logistics cost has also increased by the same multiple during the same period, offsetting each other.

The freight quotation of Yuntu Logistics to the United States has risen from 100 yuan and 120 yuan per kilogram to 150 yuan. In the winter of 2021, that is, during the e-commerce golden promotion season from “Black Friday” to Christmas and New Years, the US and Canada shipping fee will rise to a maximum of 170 yuan/kg, plus a processing fee of 20 yuan per order. In the same period, Wujiang ushered in a good sales performance, but at the same time, it also encountered difficulties in booking cargo spaces and soaring air freight prices, and its cash flow was under heavy pressure.

“It has improved now, and the freight rate for the US line has dropped back to 75 yuan/kg. If it continues to rise like this, our cross-border model will basically be unable to do it, and the advantages of cross-border will be lost in a short period of time. If it continues for two to three years, Maybe you need to find a way to find other ways to cross the border. Do you want to charter a plane yourself?” Zhang Chenfan said.

In 2022, the biggest uncertainty for domestic cross-border e-commerce and cross-border export logistics is the strict domestic closure and control policy in response to the Omikron epidemic.

The board warehouse area of ​​the air cargo warehouse. (Photo courtesy of Zhang Chen)

The city-wide lockdown in Shenzhen at the beginning of the year made Wujiang Cross-border unable to complete the delivery of overseas orders on time, and this delay in delivery will also affect the company’s PayPal account withdrawal. “We have a large amount of cash on the Paypal account, which is very important to our company. At that time, the order backlog was as high as several thousand orders a day. Once the delay in delivery was too long, customers would complain, and our PayPal account had It may not be able to keep it.” Zhang Chenfan said.

Although freight forwarding companies are the beneficiaries of the rise in logistics prices during the epidemic, they also encountered a lot of cash flow crisis during the lockdown in Shanghai.

The entry threshold for freight forwarders is not high. The cost of a first-class air freight forwarder mainly depends on the amount of boards it signs, commonly known as “package boards” in the industry, that is, spending money to contract the container boards in the freighter. The cost of the second-level agent does not involve the package board, and the main cost of resale of the position in the hands of the first-level agent is manpower.

The amount of capital required to sign a board ranges from 80,000 to 100,000 yuan. The closure and control of Shanghai has caused logistics vehicles from other places to be stuck outside the city, and the only business the freight forwarder can do is to clear the inventory – to complete the delivery of the goods that have been delivered to Shanghai in March. “Once the company’s employees are locked up in the community, there is no way to complete the customs declaration from the warehouse and then transfer the goods to the cargo station for delivery. The already signed space cannot be put in the goods, and the plane will take off as planned, in fact, it is empty. , there is no cargo in the cabin.” Zhang Chen told China Business News magazine.

Since March 28 this year, CMA CGM China has also released 9 rounds of operation update announcements for the Shanghai area. To a certain extent, these announcements can let the outside world feel the impact of the Shanghai epidemic on the cross-border logistics industry.

In its first announcement in late March, CMA CGM said terminals and barges were still operating normally, with the exception of some trucks entering/leaving Shanghai with delays. However, on April 11, CMA CGM mentioned in the third update announcement that the resources of imported cold boxes and special cargo yard are tight, “Waigaoqiao Wharf is expected to prolong the waiting time due to the increase in staffing pressure.”

Only 4 days after the announcement, CMA CGM announced that the exemption period for Shanghai’s export demurrage fee has been temporarily extended from the 7th to the 10th. At the end of April, CMA CGM commented on the business situation at that time in its announcement that “the recently implemented epidemic prevention and control measures have had a great impact on the speed of the supply chain in Shanghai and its surrounding areas”, so it decided to suspend the business from March 28. Billing time for import demurrage charges until May 8.

It was not until the end of May that CMA CGM stated in its ninth update announcement that “the staffing of the terminal has increased in an orderly manner, and the overall situation has continued to improve”, reminding customers that due to the increase in ships arriving at the port, there will be certain congestion at the terminal in the future. At the same time, CMA CGM promised to continue to waive late payment fees from March 23, 2022 until June 5.

Many Chinese companies that do OEM business for the global trade industry chain mainly use the FOB (Free on Board) model for export, which means that the goods are pulled from the factory to the port, and the export customs clearance procedures are handled through the freight forwarder, and the shipment is completed on the cargo ship. delivery. The logistics of cross-border export e-commerce can be said to be upgraded from the logistics channels required by traditional B2B cross-border trade. The difference is that it provides a longer chain of end-to-end services and has more detailed service requirements.

CICC pointed out in a research report that compared with traditional foreign trade, the value of Chinese brands still has nearly 8% room for improvement in the cross-border e-commerce value chain.

Cross-border e-commerce and traditional trade have little difference in the final selling price of the same goods. However, under the traditional export trade model, the value obtained by overseas dealers accounts for about 36%, and according to CICC analysis, the direct mail model of cross-border e-commerce, even if it has to pay high trunk transportation, transit distribution, terminal distribution Costs, as well as platform commission rates, these expenses combined are still lower than the proportion of value that is split by overseas distributors in traditional B2B export business.

The overseas warehouse model is a cross-border logistics model that has been respected from the perspective of localized customer experience in recent years. Amazon warehouse is also one of the options for cross-border e-commerce in overseas warehouses. Merchants send their products to Amazon’s warehouses, and subsequent orders on the Amazon platform are shipped by Fulfillment by Amazon (FBA). Supporting Amazon’s global marketplace network is also its Amazon logistics. On the one hand, Amazon encourages merchants distributed all over the world to access this service as much as possible, but also proposes restrictive policies such as “charging fines for items that are in stock for more than 90 days”.

01Cainiao Logistics’ overseas transport trucks, overseas warehouses, distribution centers and direct delivery cabinets.

02Cainiao Logistics’ overseas transport trucks, overseas warehouses, distribution centers and direct delivery cabinets.

Source: Based on public information

03Cainiao Logistics’ overseas transport trucks, overseas warehouses, distribution centers and direct delivery cabinets.

04Cainiao Logistics’ overseas transport trucks, overseas warehouses, distribution centers and direct delivery cabinets.

In addition to B2B traditional foreign trade, Haituo has also developed B2C cross-border e-commerce business in recent years. Jiang Chaoxiang told China Business News that in 2019, Shandong Haituo Machinery Group also used Amazon’s logistics service when it began to try to sell products such as sprayers and vacuum suction cups through cross-border e-commerce. Due to the inability to keep up with the speed of sales, the goods were out of stock.

“The overseas warehouse model requires you to keep some of your products in overseas warehouses for local sales, and at the same time, some of the goods are floating at sea, and some of the products are being produced on the production line. Jiang Chaoxiang said. He is familiar with excavator-type cross-border traders rarely try this kind of overseas warehouse.

In B2C cross-border e-commerce business, Haituo mainly connects freight forwarders around the world through the air express module of Alibaba International Station, and uses multiple intermodal shipments to collect 400 to 500 kilograms of goods in Ningbo or Yiwu, and then use shipping containers. Ship to Los Angeles, USA, then transfer to UPS, and finally enter Amazon’s warehouse by express.

Alibaba International Station, which is mainly engaged in the To B cross-border wholesale business, acquired Yidatong, a comprehensive foreign trade service company in Shenzhen in 2010. Based on this, it has sufficient reserves in logistics capacity. One Touch is responsible for providing merchants with fulfillment service solutions for orders. In fiscal 2021, the international station has completed the logistics transportation volume of almost 200,000 international standard boxes (TEU). “Our goal is to achieve 1 million tons and 1 million TEU of transport capacity that can be achieved through the platform of Alibaba International Station in three years,” said Wang Tiantian, general manager of Chinese suppliers and cross-border supply chains in the international station.

Cainiao Logistics, a subsidiary of Alibaba, has also set up overseas warehouses in more than a dozen European countries, covering 24 EU countries and the whole of the United Kingdom, and can handle 100,000 orders per day. In terms of speed, the country where the “official warehouse” is located can achieve 3-day delivery, and Pan-European can achieve 7-day delivery. In addition, Cainiao has recently opened a special shipping line between China and the United States, focusing on space guarantee, berthing window, port pickup and other links, and promises to ship from domestic factories to overseas warehouses in the United States within 30 days. Cainiao said to the public that this shipping line can improve the timeliness of full-link logistics by more than 30%, and save an average of 20% of logistics costs for merchants.

In fact, Cainiao Logistics has now become the main competitor of Yuntu Logistics in China. Although Cainiao was established in 2013, AliExpress (aliexpress.com) really used Cainiao’s logistics services to provide cross-border air parcel delivery for merchants until around 2020.

Alibaba International Station and AliExpress, as Alibaba’s two major cross-border export e-commerce platforms for 2B and 2C respectively, were established as the company’s new business growth points around 2019, and they need to cooperate with them in the logistics link. Cainiao has also further accelerated the construction of cross-border logistics infrastructure. In 2020, the international air passenger transport industry has been greatly impacted. Many passenger aircraft have undergone “passenger-to-cargo” conversions, removing seats and putting integrated boards to serve freight. This is also a good time for Cainiao to integrate logistics resources at a lower price.

Source: CICC Research Note: The above data is based on shipments from China to the United States.

At present, Cainiaowu has rapidly deployed 6 smart logistics hub eHubs around the world, 9 international express distribution centers built in Europe, South America, Southeast Asia and other places, operating more than 3 million square meters of cross-border warehouses, and opened up There are a large number of charter flights for international trunk line transportation. Currently, there are more than 240 cargo charter flights departing from the Hangzhou hub every month.

In the past, an important impression left by platform-level cross-border e-commerce to consumers was its extremely unreliable logistics and distribution services that lasted 50 to 60 days. Therefore, in order to improve the brand image of the platform, we must first start with improving the logistics timeliness. In July 2020, AliExpress and Cainiao launched a service project called “Cross-border X-Day Delivery”. For example, “5 USD 10-day delivery” is one of the special line logistics services, which shortens the logistics delivery time to 10 working days. , the first stop landed in Spain and France, and in March of the following year, it expanded to the 8 most important countries in Europe.

AliExpress’s cross-border parcels are directly flown to overseas destination countries by air or transshipped through Cainiao’s overseas logistics hub. For example, the goods are boarded from Hangzhou to the Cainiao charter flight to Liege eHub, Belgium, and then distributed from Liege to various European countries. At present, the “10-day delivery of 5 dollars” logistics products have covered 20 countries around the world, including Spain, France, the Netherlands, Belgium, the United Kingdom, Germany, and Portugal.

Some companies with large cross-border business shipments will try to build their own warehouses directly overseas. Lege Co., Ltd., which is mainly engaged in cross-border furniture trade, started to build its own overseas warehouse in 2013, and began to attract foreign investment in June 2020, implementing the business model of “sharing overseas warehouses”. This year, Lege even “cross-border” invested in the production of container shipping. Lege shares and Huanghai Shipbuilding Co., Ltd. signed a construction contract for a 1800TEU container ship in January this year. The cargo ship has a total construction cost of $32.6 million and is expected to be delivered in March 2023.

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