Chinese smart supply chain and logistics services provider BEST Inc. plans to expand its footprint in Southeast Asia with the launch of express delivery services in Malaysia, Cambodia and Singapore.
Backed by Chinese e-commerce giant Alibaba and electronics contract manufacturer Foxconn, New York-listed BEST plans to build 12 sorting centres and about 400 logistics stations in the three new markets over the next three years.
“The outbreak of Covid-19 accelerated and amplified consumers' reliance on e-commerce and created even larger potential opportunities in the region,” said Johnny Chou Shaoning, founder and chief executive of BEST. He added that Southeast Asia was a “key focus area” of the company’s global strategy.
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Despite the company’s net loss widening to 750.8 million yuan (US$106 million) in the first quarter of 2020 from 233.4 million yuan a year earlier, the company’s international revenue was up 182.8 per cent primarily due to strong growth in parcel volumes in Thailand and Vietnam.
Founded in 2007 in China’s e-commerce hub Hangzhou, the capital city of Zhejiang province, BEST now operates in over 20 countries around the world, including the US, Germany and the UK. It entered Southeast Asia by starting operations in Thailand and Vietnam last year. In the first quarter of 2020, the company delivered a total of 8.84 million parcels in the region.
The rapid expansion can partly be attributed to the company’s franchise business model. To date, BEST has 15 sorting centres in Thailand and Vietnam with over 740 logistics stations and can handle 500,000 parcels every day.
“The infrastructure for e-commerce in Southeast Asia is at a stage where China used to be five to six years ago,” Chou said. “The scale of the logistics industry is not very big and the capabilities and quality of existing service providers are not good enough, but it’s developing very fast.”
Southeast Asia is often seen as the next big e-commerce market to crack after China. Home to 360 million internet users – with 90 per cent of them connected through their mobile phones – the region’s internet economy was worth US$100 billion last year and is expected to grow to US$300 billion by 2025, according to the e-Conomy SEA 2019 report compiled by Google, Singapore state investment firm Temasek and Bain and Company.
Chou, who earlier in his career worked as a global vice-president for Google China, came up with the idea to start a logistics business when he was president of telecoms company UTStarcom China.
“In 2004 and 2005, e-commerce just took off in China. I have always believed that the future society should be a digital one and the supply chain would play an important role in that era,” Chou said, adding that technology was needed to transform traditional supply chains.
Chou pointed out that some of the best logistics companies in the world are actually technology companies, including Amazon, Alibaba’s logistics arm Cainiao and SF Express. He considers technology as one of the most important investments BEST has made, including its more than 870 engineers.
Chou said artificial intelligence, big data and 5G will play a more important role in the logistics industry because data from a large volume of parcels cannot effectively be handled manually, especially during peak periods, such as the Singles’ Day shopping festival.
Many Chinese logistics companies are eyeing overseas markets for future growth as the mainland Chinese market has become saturated. By the end of last year, Cainiao was cooperating with Russian Post, Singapore Post, the Royal Mail in the UK, and with French courier firm Relais Colis, while YTO Express launched services in Vietnam last November, according to a report published by China's Ministry of Commerce early this month.
BEST also aims to enter the Philippines and Indonesian markets later this year or early next year.
Chou said there will be uncertainty and challenges over the next decade because of the pandemic and geopolitical issues. However, he is optimistic. “The essence of business is to make everyone live a better life,” he said.
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