Courier gi­ant de­liv­ers the goods

China Daily European Weekly - - FRONT PAGE - By CE­CILY LIU in Lon­don ce­cily.liu@mail.chi­nadai­

Tina Zhang still re­mem­bers the strug­gles she had in the af­ter­math of the 2008 fi­nan­cial cri­sis, when many of the ma­jor Bri­tish clients of her small courier com­pany were go­ing out of busi­ness.

Af­ter some ma­jor strate­gic ad­just­ments, in which the com­pany took on new Chi­nese re­tail clients, the busi­ness merged into gi­ant Chi­nese courier STO Ex­press in 2014.

“Be­com­ing STO Ex­press UK was a great boost for our brand,” she says. “Im­me­di­ately af­ter that, our weekly newuser reg­is­tra­tion grew from around 100 to 500.”

Zhang, who is now mar­ket­ing man­ager of STO Ex­press UK, works out of a spa­cious of­fice that is at­tached to a 1,500-square-me­ter lo­gis­tics ware­house near Lon­don’s Heathrow Air­port.

The growth of the com­pany is well demon­strated through num­bers. STO Ex­press UK de­liv­ered be­tween 5,000 and 8,000 parcels a week in 2014, a num­ber that has now grown to be­tween 10,000 and 15,000 a week.

Dur­ing the same pe­riod, the num­ber of em­ploy­ees has grown from six to 20.

STO Ex­press UK has also es­tab­lished five fran­chises, in Ed­in­burgh, Not­ting­ham, Manch­ester, New­cas­tle and Sh­effield, each with its own ware­house and fleet of trucks.

The com­pany’s rapid ex­pan­sion in the UK can be seen as a reflection of China’s cross-bor­der com­merce boom.

Chi­nese re­search com­pany iRe­search says China’s cross-bor­der im­ports grew from 100 bil­lion yuan ($15 bil­lion; 13.8 bil­lion eu­ros; £11.64 bil­lion) in 2014 to 150 bil­lion yuan in 2015.

Even more sig­nif­i­cant is the growth po­ten­tial. The data com­pany Re­search andMar­kets es­ti­mates that China’s cross-bor­der e-com­merce mar­ket will grow to 14 tril­lion yuan by 2020. The size of the cross-bor­der e-com­merce boom fol­lows on from China’s do­mes­tic e-com­merce boom. With $630 bil­lion in sales in 2015, China’s e-com­merce mar­ket dwarfs all others and is al­most 80 per­cent big­ger than that of theUnited States.

E-com­merce now ac­counts for 13.5 per­cent of to­tal Chi­nese re­tail spend­ing, which is the high­est per­cent­age amon­gany largeecon­omy other than the United King­dom.

Amid such do­mes­tic e-com­merce op­por­tu­ni­ties, STO Ex­press was born. Founded in 1993, it ranks among China’s “big four” courier busi­nesses along­side ZTO Ex­press, SF Ex­press, and Yunda Ex­press.

In 2016, STO Ex­press de­liv­ered 3.26 bil­lion parcels, which rep­re­sents a year-on-year in­crease of 27 per­cent. The com­pany made 11 per­cent of China’s do­mes­tic e-com­merce de­liv­er­ies.

Even with such a strong pres­ence in China, STO Ex­press took a very cau­tious step when it ex­panded into its first over­seas des­ti­na­tion — the UK.

That was when the part­ner­ship be­tween STO Ex­press and Zhang’s team be­gan. Her team’s decade­long his­tory in serv­ing China-UK cross­bor­der trade was cru­cial.

Zhang’s com­pany was called Apex and was es­tab­lished in the UK in 2005 by a Chi­nese courier com­pany of the same name. At the time, it was the only Chi­nese de­liv­ery com­pany with a UK op­er­a­tion. Two year later, in 2007, Apex’s UK man­age­ment team bought the sub­sidiary’s shares from its par­ent com­pany. The com­pany con­tin­ued to use the name and con­tin­ued to work with the par­ent Apex com­pany in a part­ner­ship that meant the com­pany in China han­dled de­liv­er­ies of parcels from the UK once they had crossed the bor­der.

At the time, cross-bor­der e-com­merce had not taken off, and couri­ers such as Apex were fo­cus­ing on send­ing time-sen­si­tive doc­u­ments from the UK to China, or send­ing sam­ples of prod­ucts such as clothes and shoes to China so they could be man­u­fac­tured on a large scale. Such de­liv­er­ies were also the ma­jor work of the big four of global de­liv­ery com­pa­nies at the time: DHL, Fedex, TNT and UPS.

Apex’s main ad­van­tage at the time was its cost. A typ­i­cal doc­u­ment that would have cost £35 ($45) to de­liver through one of the big four com­pa­nies would only cost £10 if sent through Apex. But cost alone was not enough. “Our ma­jor chal­lenge was a lack of brand recog­ni­tion. It was hard for us to build up cus­tomer trust in the early days,” Zhang says. Worse still, of­ten, due to var­i­ous prob­lems with the co­or­di­na­tion of the de­liv­er­ies, ship­ments were lost on the way to their des­ti­na­tion.

Be­cause the com­pany was hav­ing dif­fi­culty se­cur­ing re­tail cus­tomers, most of Apex’s cus­tomers at the time were Bri­tish de­liv­ery com­pa­nies that needed help de­liv­er­ing parcels in China.

“Fo­cus­ing on Bri­tish couri­ers as clients meant we be­came too re­liant on them, so when the 2008 fi­nan­cial cri­sis hit them hard, we suf­fered a lot too,” Zhang says.

“When we re­al­ized this, we in­creas­ingly fo­cused on the re­tail cus­tomer mar­ket.”

In the years since the fi­nan­cial cri­sis, a wave of Chi­nese com­pa­nies has ex­panded into the UK, and de­mand for courier ser­vices has grown as they have needed to com­mu­ni­cate with head­quar­ters.

Big Chi­nese com­pa­nies, in­clud­ing Bank of China, ICBC, Taip­ing In­sur­ance and China Na­tional Pub­li­ca­tions Im­port and Ex­port Corp, all be­came cus­tomers.

“They ap­pre­ci­ated our ser­vice in the Chi­nese lan­guage, and they trust us to sort out what­ever is­sues they may en­counter at the first op­por­tu­nity,” Zhang says.

It was not long be­fore Apex part­nered with STO Ex­press.

As STO Ex­press UK, Zhang and her team found it much eas­ier to re­cruit new cor­po­rate and re­tail clients, in­clud­ing many peo­ple who owned on­line shops on the Chi­nese plat­form Taobao.

Taobao, which is a part of China’s Alibaba e-com­merce plat­form, hosts many on­line shops es­tab­lished by over­seas Chi­nese who make pur­chases and send prod­ucts to buy­ers in China — a prac­tice known as daigou.

STO Ex­press be­came a de­liv­ery part­ner for many such shop own­ers, mean­ing the range of prod­ucts it de­liv­ered also ex­panded to in­clude food items and lux­ury prod­ucts, among others.

Mean­while, be­ing part of the STO Ex­press group meant parcels were de­liv­ered in China more quickly and ef­fi­ciently.

Apex used to get most of its parcels to China cus­toms-cleared in ei­ther Bei­jing, Shang­hai or Hong Kong, be­cause those were the lo­ca­tions where the com­pany’s Chi­nese part­ners were con­cen­trated. Now, the com­pany can ship through any Chi­nese cus­toms clear­ance point and reg­u­larly uses Guang­dong, Chang­sha, Tian­jin, Hangzhou and many other places.

“We are able to op­ti­mize the lo­gis­tics ar­range­ments of our parcels, so they will travel shorter dis­tances and be de­liv­ered to cus­tomers much quicker,” Zhang says.

De­spite STO Ex­press’ es­tab­lished in­fra­struc­ture and its huge scale, it faces stiff com­pe­ti­tion, and prof­its are in­creas­ingly un­der pres­sure. In fact, the UK-China cross-bor­der e-com­merce mar­ket has been sat­u­rated with courier com­pa­nies, in­clud­ing many star­tups that grew quickly on the back of spe­cial tech­nol­ogy.

One such com­pany is the Hangzhou-based Dol­phin Sup­ply Chain, which was founded in 2003. It has in­vested in large-scale ware­houses, a truck fleet and cargo planes in the UK, all in a bid to build an all-in­one in­fra­struc­ture chain that mas­sively cuts costs.

The com­pany has even de­vel­oped a real-time mon­i­tor­ing sys­tem to track the where­abouts of large e-com­merce cargo in or­der to op­ti­mize the process.

An­other big player is Par­cel 51, which started in 2012 in Lon­don as a lo­gis­tics provider serv­ing UK-China e-com­merce. In more re­cent years, it has been of­fer­ing con­sul­tancy ser­vices to Bri­tish re­tail­ers, ad­vis­ing how to sell in China’s e-com­merce mar­ket through a sis­ter com­pany set up by the same own­ers.

Par­cel 51 also has in­vested in its own ware­house in Lon­don where Bri­tish re­tail­ers can de­posit their pack­ages be­fore they are sent to China by air. The com­pany’s own lo­gis­tics ca­pac­ity cur­rently han­dles be­tween 25 and 30 met­ric tons of prod­ucts shipped from the UK to China each day, a sig­nif­i­cant vol­ume for a new­player in the sec­tor.

With in­creas­ing com­pe­ti­tion from a wide range of new play­ers in the mar­ket, STO Ex­press has also at­tempted to rein­vent it­self, choos­ing to ex­pand into main­land Europe in an at­tempt to grab more mar­ket share. Within three years of mak­ing the de­ci­sion, STO Ex­press has al­ready es­tab­lished lo­gis­tics cen­ters in many Euro­pean coun­tries, in­clud­ing France, Hun­gary, Spain, the Czech Repub­lic, Rus­sia and Spain. Last year, it be­came the first Chi­nese de­liv­ery com­pany to launch cargo flights from Europe to China.

The flights, which shut­tle be­tween Prague and Hong Kong three times each week, con­nect to STO Ex­press’ fleet of trucks and con­nect with all coun­tries in Europe, in­clud­ing the UK.

“Our strat­egy is to in­creas­ingly build our own lo­gis­tics in­fra­struc­ture across Europe and in­creas­ingly take on cross-bor­der ac­tiv­i­ties be­tween Euro­pean coun­tries. We hope to be­come the fifth-largest courier busi­ness glob­ally,” Zhang says.

De­liv­ery com­pany sees mas­sive ex­pan­sion as global e-com­merce con­tin­ues to boom


Em­ploy­ees of STO Ex­press sort parcels at a dis­tri­bu­tion cen­ter in Guizhou prov­ince. STO Ex­press UK has es­tab­lished five fran­chises since 2014, each with its own ware­house and fleet of trucks.


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