DHL, FedEx and UPS have dominated the global express market for years but recently, China’s express providers (including YTO Express, STO Express and SF Express) have been nipping at the heels of these three global providers. Now, the Chinese express providers are expanding their services beyond China’s borders.
Much of this growth is attributed to the growth of e-commerce. According to iiMedia Research, a Chinese market consultancy, China’s cross-border e-commerce generated RMB 7.6 trillion (US$1.1 trillion) in 2018 sales. By 2020, the market research firm eMarketer projects that one- quarter of the Chinese population will be shopping online for overseas products via cross-border e-commerce websites.
Indeed, in 2018, according to China’s Civil Aviation Administration, 7.38 million tons of cargo and mail were handled, 4.6 percent more than 2017. Alibaba has played a crucial role in this growth by establishing its Cainiao logistics network in partnership with express providers in 2013 and then making it a subsidiary of Alibaba in 2017. Alibaba has also made strategic investments in such logistics and express providers as Best Logistics, YTO Express and STO Express. But China’s largest express and courier provider, SF Express, has gone down its own path by growing its air fleet, partnering not only with Alibaba, but also DHL and UPS and expanding into global markets.
As of March 2019, SF Airlines owns a fleet of 55 freighters, which includes one Boeing 747, eight Boeing 767s, 29 Boeing 757s and 17 Boeing 737s.
In October, 2018, Atlas Air Worldwide Holdings’ Atlas Air subsidiary began operating a 747 on an aircraft, crew, maintenance and insurance (ACMI)-basis for SF Express on the trans-Pacific lane. In addition, SF Express filed with the U.S. Department of Transportation to operate scheduled cargo service three times per week between Hangzhou and New York for at least one year beginning in September 2019 using its own 747 freighter capacity.
How both of these announcements affect its joint venture with UPS remains to be seen. In 2017, SF Express and UPS established an agreement to develop and provide international delivery services initially from China to the U.S., with expansion plans for other destinations. Through this agreement the parties agreed to leverage their networks, service portfolios, technologies and logistics expertise.
Besides partnering with UPS, SF Express also has partnered with DHL’s supply chain group. In late 2018, SF Express acquired DHL’s China supply chain unit. SF will have access to DHL’s supply chain services, management expertise, transport and warehousing technology. However, according to a joint statement, the venture will have no bearing on DHL’s business in global express, freight transport and e-commerce logistics solutions in China. According to SF’s chairman Wang Wei, the agreement will help the company “grow further internationally” and “provide supply chain services to a diverse realm of industries.” It will also help SF diversify into a new income source, because its core express delivery business is coming under intense competition.
Europe has not escaped SF Express’ expansion plans either, particularly as it builds out its ‘Belt and Road’ network by air, road and rail. The firm has established offices throughout many European countries and has established relationships with such postal and parcel groups as Lithuania Post and Chronopost, a part of DPDgroup.
Often described as China’s ‘FedEx,’ SF Express is spreading its wings domestically and globally. According to its annual report, total air cargo volume handled in 2018 was approximately 1.238 million tonnes, and daily average cargo volume handled was 3,391 tonnes, of which domestic cargo volume accounted for approximately 23 percent of the total cargo and mail shipment volume of domestic air routes in China.
To support current and future growth, SF Express is building its Hubei International Logistics hub, which will be the central point for its air network. The hub will include two runways, a 24,000-square meter warehouse, an apron with 124 aircraft parking slots and offices. Operations are expected to begin in 2021 and will target 3.3 million tonnes of cargo by 2030.
DHL, FedEx and UPS are certainly not just standing by as China’s express providers expand their capabilities. They too are investing in their networks and speeding up express delivery times. The ultimate winner will be shippers benefiting from faster delivery times and hopefully better rates.