Views: 0 Author: Site Editor Publish Time: 2021-12-08 Origin: Site
preface
The cross-border industry has two evolution paths: one is the Internet model that was popular in the market from 2014 to 2015, and the other is traditional foreign trade, one of the strongest industries since China's reform and opening up.
However, the biggest significance of this wave of models going overseas is not to verify that it is not feasible to simply copy the models, but to allow a group of outstanding engineers in China to open up a global perspective and know that there is a vast world outside China to explore.
The traditional foreign trade industry has been very strong since China joined the WTO. This strength stems from the dividends of China's decades of supply chain infrastructure construction and China's cost-effective labor force.However, with the development of the industry, the requirements for high value-added export products, the requirement to meet the diverse needs of users, and the requirement to establish a more direct and complete user purchasing experience all require an upgrade in the foreign trade industry.
Whether it is the model of going overseas or traditional foreign trade, both of them seem to be difficult to stay on the trend today.The cross-border environment is different. Some things need to change, and some things need to be persisted before it is possible to innovate.
We will use three articles to explain our understanding of the evolution logic and opportunities of cross-border e-commerce from aspects such as logistics, marketing, and payment. Here is the first article.
■ Historical background/traditional foreign trade
On December 11, 2001, China officially joined the WTO and became the 143rd member of the WTO. It began to participate deeply in economic globalization and opened up a high-speed channel for China to become the 'world factory'.
China's massive cheap labor force has become the core driver of the transformation of the global supply chain. Driven by the dual promotion of international business interests and national policy support, China has gradually taken over a large number of mid- to low-end manufacturing industries after the reorganization of the global industrial chain, and has become the global leader in the past 30 years. The biggest beneficiary of the tide of change.
Coastal areas such as Guangdong, Jiangsu, Zhejiang, and Fujian have rapidly integrated into the global supply chain system under the tide of the times, and have created a traditional foreign trade model that is highly adapted to the needs of overseas markets. That is, the B2B model is mainly used to undertake large-scale transactions from overseas brands and distributors. order, a way to carry out large-scale batch production.
The outstanding feature of this model is to reduce production costs to the extreme.On the one hand, it is through cheap labor and on the other hand, it is through industrial agglomeration.Therefore, the most important capabilities of our country in the past 30 years have been, on the one hand, the gradual formation of industrial clusters throughout coastal areas, and, on the other hand, the large reserve of talents, knowledge and experience engaged in international trade.
However, this model also means that in the entire industry chain, the goods-controlling party is downstream, and the factories responsible for manufacturing produce according to contracts and place orders periodically, and they have no understanding of the situation in the middle and lower reaches.Foreign brands/distributors directly face consumer demand and decide product design, production rhythm and contract fulfillment methods.The foreign traders we are familiar with provide docking and coordination services in this chain and earn the price difference.
This is the most convenient way for China to fully integrate into the global trading system in the early stage. However, times are quietly changing.
■ Cross-border e-commerce and its evolutionary logic
If the traditional foreign trade model began its nearly 40 years of development after the implementation of my country's reform and opening up policy, then the cross-border e-commerce model followed the opening of the global e-commerce era and inherited my country's 40 years of foreign trade experience + infrastructure construction dividends. In the past 20 years, especially in the past 10 years, there has been a new trend of rapid development.
From the perspective of cargo rights, the downstream cargo control of traditional foreign trade has become the upstream cargo control of cross-border e-commerce. The transformation of cargo rights has changed the roles of the responsible persons in each industrial chain.All contract fulfillment links, capital flows, quality assurance links, etc. will be handled by the upstream.This is both a challenge and an opportunity for upstream companies that were originally only responsible for manufacturing.
From the perspective of business flow, from the earliest Ebay to Amazon to today’s multi-platform era, we can see such a trend:
The first stage is represented by Amazon's opening of FBA business in 2013 to the epidemic in 2020. The characteristic of this stage is that quantity is king, as long as you have products, you can sell them.The main participants are 90% trade sellers and 10% factory sellers.In an ecosystem where trading sellers are the core, how to sell is particularly important, which also paved the way for Amazon’s crackdown on Chinese sellers this year.Of course, some of the big sellers listed at this stage are also winners based on quantity;
The second phase will start in 2021 and I think it will last about 5-6 years. This phase will be divided into two halves:
The core of the first half is that the supply chain is king, and two types of companies are the main players at this stage: one type is industry and trade integrated companies, and the other type is trading companies with supply chain integration capabilities.The latter needs to have the ability to integrate, and it must have funds or a brand.
Strong control over the supply chain is a characteristic of this stage. The stability of the supply chain brings control over the downstream market.In principle, players in the first stage will be eliminated in large numbers by players in the second stage, but they will not be eliminated. They should be able to find business opportunities in the B2B sector. B2B opportunities will be mentioned later.
The core of the second half is that brand is king. If there is no supply chain in the first half, the brand cannot go overseas if the quantity is supported. This is a process of quantitative change to qualitative change. Without the support of a stable, continuous and iterative supply chain, There is no way to talk about the brand.
I think that at this stage, China's factory, white label or DTC brands have truly entered the dividend period. Through the supply chain battle in the first half, supply chains with real product iteration and innovation capabilities will be selected, and then they can grow rapidly with the help of brand capabilities.
The third stage of industrialization after 2027 is when the upstream cargo control capabilities of cross-border e-commerce can truly be formed.In the traditional foreign trade period, why downstream goods can be controlled is because importers control the channels, accounts receivable, accounts payable, product quality inspection, etc.Similarly, at this stage, these abilities need to be in the hands of Chinese players.
Several characteristics of this stage:
Stable and continuous supply chain output;
The B2B/B2C boundary is blurred;
It is possible to have independent stations for each vertical category;
Industrialization of cross-border service systems.
B2B, as mentioned earlier, many trade sellers will look for exports in the direction of B2B in the first stage, and the opportunities for B2B will not be smaller than B2C, because the volume of overseas offline is still much higher than online, whether it is distribution channels, Wholesale or large enterprise MRO are gradually shifting from offline to online, and these are opportunities that B2B players may have access to.From an industrial perspective, it also complements B2C very well.
■ Developments and Changes in Logistics Fulfillment
Against this background, let us analyze the various elements.
Whether it is the traditional foreign trade model or the cross-border e-commerce model, the core nodes will cover: manufacturers (MFG), foreign traders and brand/channel dealers.Corresponding service providers include logistics fulfillment service providers, marketing service providers, and financial service providers.
In this article we first focus on logistics fulfillment services, and in subsequent articles we will discuss marketing services and financial services.
Simply divided, logistics services can be roughly divided into four segments, namely:
MFG-FOB, which is the logistics fulfillment process from the factory responsible for production to offshore;
FOB-CIF, that is, the logistics fulfillment process from offshore to shore;
CIF-overseas warehouse, that is, the logistics fulfillment process from landing to overseas warehouse;
Overseas warehouse-B/C, that is, the logistics fulfillment process from overseas warehouse to customer.
Under the background of the traditional foreign trade model, among these four stages, China's local freight forwarders mainly serve the MFG-FOB stage. Once the goods are offshore, the service process is theoretically over; trunk logistics service providers and overseas transportation companies mainly serve FOB. -CIF-overseas warehouse stage; the local distribution service team is responsible for the overseas warehouse-B/C stage.
Therefore, in the era of traditional foreign trade, China's contract fulfillment services would end when the goods were offshore, and the value that could be exerted was extremely limited.
Compared with traditional foreign trade.Cross-border e-commerce is based on B2B + B2C. The upstream of the supply chain begins to control goods. The right to control goods is transferred to MFG and industry and trade integrated enterprises (each accounting for 50% share) (they are also the main owners of Alibaba International Station and MIC). client).
At this time, as the upstream gradually began to directly face the terminal demand, the characteristics of orders became fragmented, high-frequency, and small-amount. It was no longer the previous contract order model of traditional foreign trade, that is, one order was for one or more containers.Correspondingly, an order in the traditional foreign trade era in the past is likely to be composed of orders of 10,000 or more in today's cross-border e-commerce era, so the order cannot be large.
The demand side of fulfillment tasks has become upstream. Coupled with the major changes in order characteristics, the entire logistics service will change:
The FOB link, as the core link of traditional trade, is basically replaced by CIF or DDP services.
The demand for landing services from landing ports to overseas warehouses has increased.
Overseas warehouses and distribution also directly affect the upstream.
The four stages of logistics become: MFG (integration of industry and trade) - FOB (merged with subsequent links) - landing service (CIF) - overseas warehouse (DDP) - B/C.It is conceivable that if there is a Chinese company that can integrate full-link logistics services in principle, it will definitely be the most suitable for cross-border foreign trade.China's upstream needs a service provider who speaks Chinese and understands Chinese business.
We further break down these links for analysis:
MFG (Industrial and Trade Integration)-FOB.This period should be an opportunity for domestic front-end warehousing. Front-end warehousing has the functions of collecting goods, operating in the warehouse, and improving link efficiency. Front-end warehousing is relatively easy in China, because China’s local e-commerce has experienced 20 years of development. The development has been very mature and is at the forefront of the world.
But there is also a key difference here, that is, unlike local e-commerce front warehouses located in the local consumption zone, the two levels of cross-border front warehouses are port front warehouses and industrial zone front warehouses. Only in this way can cross-border e-commerce be brought Actual benefits will also be a necessity for cross-border e-commerce in the future.
FOB-landing service (CIF)-overseas warehouse (DDP).In principle, this is something that Chinese freight forwarding companies can do. The freight forwarding industry will continue to develop. Maintaining hospitality and providing good services is the eternal moat of the freight forwarding industry.
Corresponding changes will also occur in trunk line distribution in the future.Direct mail, air, and sea transportation (FCL/LCL) are the main trunk methods. Due to the timeliness requirements of cross-border e-commerce orders, the volume of direct mail will decrease in the future, while the volume of air transportation will increase.For example, Zongteng, a first-tier company in cross-border logistics, has developed rapidly in its charter business under the catalysis of the epidemic. In the future, if the charter business becomes a class train and becomes volume-capacity intensive, it will inevitably further increase the proportion of air transport capacity in the entire cross-border logistics field.
The volume of shipping LCL will increase, while the volume of FCL will decrease. In the traditional foreign trade era, FCL was the mainstream, but in the context of cross-border e-commerce, LCL is obviously more in line with the industry, but simple LCL is difficult to significantly improve efficiency. , I believe that in the future LCL will upgrade to warehouse-to-warehouse smart LCL and implement it in the form of express lines.
This requires a comprehensive combination of business flow data and logistics data to have a chance to be realized. I believe this is the main solution for cross-border logistics in the future. Not only is the freight price cheap, but the express line can also ensure improved timeliness.
In addition, the reason for warehouse to warehouse is to break it into parts. It is obviously LCL but can be made into FCL. While the link efficiency is improved, it also increases the requirements for players: you need to have front-end warehouses in China and overseas warehouses. Warehouses are distributed over a network.Whoever can reach this point, I think, should be a member of the first echelon of logistics.
Overseas warehouse-B/C.Overseas warehouses are also opportunities. There are nearly 2,000 overseas warehouses in Europe and the United States. The degree of specialization of a large number of overseas warehouses is still very low. In the process of supporting cross-border foreign trade in the future, there will definitely be a large number of shortages, shortages, and delivery delays. Even if the boss runs away.The future trend of overseas warehouses should have three characteristics: precision, specialization, and networking. These three points will be the basic competitiveness of overseas warehouses.Pure price competition seems to be no longer important in the face of big problems such as shortages and shortages.
Basic competitiveness requires systematic support. Domestic WMS + foreign WMS and TMS + FMS should be the solution.In addition, at least 50% of overseas warehouse operations can be forwarded to domestic front-end warehouses for operation. This is one of the reasons why domestic front-end warehouses must be located in ports and industrial belts.As for why, you can understand the difference between Chinese labor force and foreign labor force (it is definitely not a matter of price, diligence, hard work and clean hands and feet are the advantages of Chinese labor force)
■ Summarize
To sum up, logistics should be the industry that has changed the most and has the most rigid demand in the evolution of cross-border foreign trade. It also has many opportunities.The biggest problem that many cross-border sellers encounter is probably the issue of overseas inventory. The biggest problem for sellers who suffered from the Amazon crisis this year is also the issue of safety inventory.
This is a logistics problem. We can look at opportunities from a problem perspective. Generally, companies will have safety stocks. As long as the inventory is maintained within the safety stock, the company's ability to resist risks is very strong.If it takes 15 days from SH to LA, the ideal situation is to have one pallet floating on the sea every day (or a stable quantity), so that the inventory in the overseas warehouse can be maintained.
But to achieve this, we need the close integration of business flow and logistics, which is the smart LCL from warehouse to warehouse mentioned before. The prerequisite is that there must be enough order volume and data volume to meet the needs of smart LCL. Business flow in this model Play a very crucial role.At the same time, the system TMS/WMS of overseas warehouses will be the basis for digitization.Aviation is then supplemented to meet fluctuating inventory needs.I think this should be the best solution for cross-border logistics in the future.There should be Chinese service providers that can do it.
Of course, different countries and regions also have different opportunities, such as opportunities for border warehouses, overseas warehouses, and bonded warehouses in Southeast Asia; opportunities for local distribution in Central and South America; opportunities derived from COD in COD areas, etc.;
From another dimension, if service providers have opportunities, then service providers of service providers also have opportunities. SaaS services related to the entire fulfillment chain will be opportunities that cannot be ignored in this ecosystem.
We will use capital to support the implementation, germination and growth of these opportunities.
Special thanks: Intellectual support provided by Xu Bo, Senior Vice President of Focus Technology.
References
[1]: Yiou Think Tank: Things are going strong - 2021 China Export Cross-Border E-commerce Development Research Report
[2]: iResearch: China’s new cross-border export B2B e-commerce industry research report 2021
[3]: Essence Securities: Drawing a panoramic view of cross-border e-commerce and exploring industry chain opportunities September 6, 2020
[4]: Century Securities: The short-term outbreak is caused by the epidemic, and the long-term development depends on the population - Cross-border e-commerce industry series report (1)
