In recent years, the development of cross-border e-commerce logistics has attracted a significant influx of capital into upstream, downstream, and ancillary services, with successive financing events occurring. Why has the cross-border logistics industry become a "hot cake" for capital? What aspects of a company does capital investment value the most? And how can companies earn favor from investors?

(The image is from the internet)

1. Cross-border Logistics Financing Atlas in 2021

According to incomplete statistics, there were a total of 30 financing events in the field of cross-border e-commerce logistics in 2021, making it a hot spot for attracting investment. Today's cross-border logistics is replicating the logistics investment boom of the past decade in China, with the amplifying effect of the pandemic-driven demand accelerating the industry's leapfrog upgrade. With the successive influx of capital giants, players from all walks of life are emerging one after another!

Overview of Financing for Cross-border E-commerce Logistics Companies (Incomplete Statistics)

(Information from public sources, compiled by the Xiaosheng Research Institute)

1. The current enthusiasm of capital for cross-border logistics can be attributed to several factors. 

On one hand, it benefits significantly from the boost provided by the pandemic. With the increasing global penetration of e-commerce, diverse export categories, and the recovery of overseas consumption, China's import and export markets have remained robust, providing cross-border logistics with substantial growth impetus, thereby leading to its continuous expansion.

According to data from the General Administration of Customs, from January to November 2021, China's total import and export of goods amounted to approximately 35 trillion yuan, with exports reaching around 15 trillion yuan, representing a year-on-year growth of 21.8%.

The vast market size suggests the fervor of the cross-border logistics arena. According to a report by iResearch Consulting Group, the scale of China's cross-border e-commerce export logistics industry is expected to exceed 3.6 trillion yuan by 2025, with a compound annual growth rate (CAGR) of 22.5% from 2021 to 2025.

On the other hand, global supply chain congestion and imbalances in supply and demand for transportation resources have ushered in the strongest cyclical industry dividend in the history of cross-border logistics. Moreover, the continuous release of policy dividends will further support the development of cross-border enterprises. For instance, the implementation of the RCEP, support for cross-border e-commerce and overseas warehouse development in the 14th Five-Year Plan, and the acceleration of the development of new formats and models in foreign trade.

Under the influence of market favorability and policy preferences, the cross-border e-commerce logistics industry has attracted a large influx of capital, with approximately 80% of enterprises with annual revenues exceeding 1 billion yuan receiving financing.

Amid the financing frenzy, the cross-border logistics sector has witnessed the emergence of leading companies such as ZTO Express, YANWEN Logistics, and SF Express, which have rapidly expanded with the support of capital. Some companies have even embarked on the path to initial public offerings (IPOs), with YANWEN Logistics having submitted its prospectus for listing on the domestic A-share market. Companies like ZTO Express and SF Express are also actively preparing for IPOs. It is believed that in 2022, the cross-border logistics arena will witness the emergence of listed companies!

2. What are the core value points that capital values in cross-border e-commerce logistics enterprises?

From an investment perspective, the core value points that capital values in cross-border e-commerce logistics enterprises can be considered from both macro and enterprise-specific aspects:

From a macro perspective, the value of investment mainly includes three points:

Firstly, changes in traffic. Based on domestic experience, Alibaba's e-commerce has driven the development of express delivery companies in the past. Nowadays, social e-commerce and community group buying also affect the entire warehousing and distribution system. As long as traffic changes, fulfillment ends will also change accordingly.

Secondly, multi-country and multi-item. In the process of China's globalization, there are not only traditional e-commerce markets in Europe and the United States, but also emerging markets such as Southeast Asia, South America, and Africa. The first wave mainly focuses on opportunities in the European and American markets, and the future will focus on emerging markets, especially with the transfer of commercial flows, logistics may create new opportunities locally.

Thirdly, digitalization. Logistics is a relatively heavy asset industry. How to make logistics companies more efficient? The ability to digitalize and build systems are core points. Whether it's small businesses or large enterprises, the key is whether these systems can solve efficiency problems.

At the enterprise level, the main points include:

Volume, capital is more willing to invest in leading companies;

Overseas resource capabilities, if a company is only domestic and lacks any overseas resource capabilities, it is relatively difficult to obtain investment;

Product type, formats such as dedicated lines and overseas warehouses will receive more attention from capital;

Entrepreneurs and teams, the operational capabilities of enterprises and the management capabilities of entrepreneurs are both aspects that capital values.

Finally, capital will also consider future trends, mainly focusing on speed and innovation:

The industry structure is uncertain, and anything is possible. Faced with the huge market growth space opened up by the pandemic, it is still unknown who will become the giants. Even the fastest and largest companies at present are just small and medium-sized enterprises in such a large industry. It is not about which company has a larger scale at the moment, but which company can move faster.

And an innovative enterprise has unlimited possibilities in the future. In the vast industry blue ocean, as long as there is a certain foundation, innovative models, and excellent teams, enterprises have a great opportunity to gain growth space.

China's cross-border e-commerce is a great era opportunity for China's national strength to shift and overflow to the global industry. Combined with the wave of digitalization and intelligentization, as the most basic and important infrastructure, China's cross-border e-commerce logistics will undoubtedly be an opportunity for the adjustment of the global logistics intelligence pattern.

3. How should enterprises properly deal with the entry of capital?

The counter-trend growth during the pandemic has led many cross-border e-commerce logistics enterprises to consider embracing capital and rapidly achieving scale development. However, the increasing influx of capital, like a double-edged sword, has both positive and negative effects. So, how should enterprises correctly deal with capital?

First and foremost, enterprises need to understand clearly what capital is and what its purpose is. Looking at the development process of logistics companies after their IPOs in China, it can be observed that after capital gains, they tend to exit one after another in the subsequent process, leaving the relay baton to be carried forward by entrepreneurs and their teams, especially in post-listing management, which requires long-term operation by the enterprise.

However, most companies still have many imperfections in management before they can be listed. If there is no clear understanding of capital, there is a high probability of backlash.

Therefore, when facing capital, enterprises must not blindly follow the trend but have a clear understanding of themselves. Based on the current development situation of the enterprise, such as the team, products, services, talent pool, and other internal factors, whether the enterprise is prepared, and whether it can keep pace with the development after capital entry, should be considered before deciding whether to introduce capital, including when to introduce capital and what kind of capital to introduce. Generally, companies that can reach the IPO stage are among the best in the industry.

In addition to independent listing, enterprises can also embrace capital through some strategic investment and financing mergers and acquisitions. Logistics is a scaled industry, and strategic investment and financing mergers and acquisitions belong more to group development, with less utilitarianism, which will promote the development of enterprises and industry ecology.

Investment and financing include financial investment, strategic financing, debt financing, financing leasing, order financing, etc. Enterprises have many choices in the financing sector, but it is important to note that enterprises should not make random choices. When the capacity is not so large, occasionally stopping to think is not a bad thing.

Furthermore, when entrepreneurs embrace capital, they must have very firm beliefs. The future of the company is definitely determined by the founder and the core management team. Most companies are still mainly busy with industrial operations, internal management, etc., and their understanding of capital needs to be improved and perfected. It is beneficial for enterprises to communicate more with investors in normal times, which can give enterprises a more macroscopic business understanding.

4. The impact of capital entry on the industry

The entry of capital will make the industry more standardized, making the market more rational and healthy, compelling companies to make products more refined and generate more benign competition, which is a good thing for practitioners.

As beneficiaries, the entry of capital is very helpful for enterprises in attracting talents and resources and accelerating their development pace. Because customers are more willing to choose companies with capital endorsements.

After capital entry, companies can use heavy assets to enhance the industry's barriers, build their own moats, and domestic JD is a good example.

At the same time, capital will also bring about a competition for efficiency. When companies have capital, they can carry out technological transformation and improvement, such as introducing automation equipment and better talents, to improve efficiency.

In the next few years, the industry's major trend will definitely be the competition between capital scale and cost efficiency, which is also the competition between large companies. In such fierce competition, enterprises must have certain capabilities to win.

Firstly, information technology and resource integration capabilities are very important for enterprises. Cross-border logistics cannot do without improving the tracking and inquiry technology of the entire chain, which requires strong information technology capabilities. Cross-border logistics mainly deal with products. When the end is optimizing and innovating, core logistics companies need stronger capacity for integrating transportation resources and upstream and downstream resources.

At the same time, companies must have their core resources at industry nodes, build their own competitive barriers, and have a link that is core to the enterprise in trunk lines, customs clearance, overseas warehouses, or the last mile.

Secondly, in vertical fields, companies need to be professional and profound. For example, some companies specialize in sea, land, and air transport in one country, aiming to be the first in the country or the world. This is not only a very valuable thing but also makes companies favored by capital.

Finally, if companies want to have long-term competitiveness in rapidly changing tracks, they need to keep their teams young. Each era will create a group of people, and the preferences of these people will affect the industry and the industry.

As one of the emerging industries in recent years, the future of cross-border e-commerce logistics is full of uncertainty. Young teams can quickly learn and iterate to improve themselves, which helps enterprises adapt quickly and align with the industry. In this way, regardless of how the industry changes and what competitors do, enterprises will have a place in the future.

Although the integration of capital is of great help to the industry, it may also lead to excessive exaggeration of the industry. If one straw falls, it may cause a series of chain reactions. The crazy exodus of capital will only leave behind a mess.

In summary, comparing with the development of domestic e-commerce, looking ahead, there will definitely be several particularly large and strong leading enterprises in the cross-border e-commerce logistics industry, especially in segmented markets, there are still many opportunities. However, the industry still needs a few years of precipitation and development before it can reach the situation of the domestic e-commerce logistics pattern.

After experiencing about ten years of brutal growth, China's cross-border e-commerce logistics is now standing at an industry opportunity, and more and more outstanding enterprises are using the help of capital to export China's mature e-commerce logistics model and advanced technology globally.

In this process, enterprises need to continuously improve their core competitiveness so that even if there is no dividend of the times, they can still get sufficient returns. If there is no core competitive barrier constructed, it is easy to fall behind in the fierce competition and reshuffle of the industry.

End

Cross-border e-commerce logistics Bai xiaosheng