Full Fulfillment vs. Semi-Fulfillment

Launched in September 2022, Temu pioneered the full fulfillment model in cross-border e-commerce, redefining the division of labor between platforms and merchants. Under this model, merchants only need to supply goods, while the platform takes care of store operations, warehousing, logistics, after-sales services, and other aspects.

Full fulfillment has not only standardized the service levels of platforms but also significantly lowered the barrier to entry for going global. This allows merchants to focus on product design and manufacturing, thereby enriching the platform's product offerings. Consequently, following its introduction, platforms like AliExpress, SHEIN, TikTok Shop, and Lazada quickly adopted the full fulfillment model, making it the hottest trend in cross-border e-commerce.

However, while merchants enjoy the convenience of this model, they must cede some bargaining power because the platform needs to maintain price competitiveness, which can squeeze the merchants' profit margins. In essence, full fulfillment is more suited to those with strong supply chain capabilities, such as factories or integrated trade and manufacturing merchants who can profit from high volume and low margins. In contrast, merchants that specialize in differentiated products and have already accumulated a certain level of strength prefer to retain more operational autonomy and greater bargaining power.

·1.AliExpress, Alibaba International, Temu: Semi-Fulfillment Under Different Backgrounds

AliExpress and Alibaba International: Amplifying Logistics Advantages

Founded in 2010, AliExpress is the longest-established platform among the "Four Dragons of Going Global." Its collaboration with Cainiao has given AliExpress a competitive edge in logistics. In September last year, AliExpress and Cainiao officially launched the "Global 5-Day Delivery" express service. Consumers who order products marked with the "5-day delivery" label on the AliExpress Choice channel can enjoy this service.

Before the official launch of the 5-day delivery service, AliExpress conducted several months of internal testing. The results showed that the 5-day delivery service significantly boosted order volumes and consumer repurchases for fully managed merchants, creating a positive feedback loop driven by logistics. According to Alibaba's latest quarterly financial report released in February, Cainiao's "Global 5-Day Delivery" service expanded to cover two additional countries, bringing the total to ten, with orders seeing robust triple-digit sequential growth.

It is important to note that only fully managed merchants in the Choice channel can enjoy this express service. As mentioned earlier, AliExpress has over a decade of experience in the global market. Many merchants on the platform have accumulated extensive operational experience over the years, making the all-inclusive full fulfillment model less appealing to some. These merchants prefer to retain self-management, despite the allure of the traffic and convenience that comes with full fulfillment.

AliExpress's semi-fulfillment model aims to empower self-managed merchants with the traffic benefits and logistical advantages of full fulfillment. Under this model, merchants continue to operate, price, and market their products independently while the platform provides warehousing, logistics management (cross-border warehousing/JIT), and specific marketing activities. Semi-fulfillment products are also featured alongside fully managed products in the AliExpress Choice channel, enjoying the platform's traffic support.

Estimates suggest that semi-fulfillment can improve the average cross-border small parcel delivery time for self-managed merchants by nine days without additional costs. This allows merchants to maintain operational autonomy while benefiting from faster logistics and increased traffic, thereby enhancing operational efficiency. AliExpress, in turn, can improve the overall service quality of the platform by reducing the inconsistent and inefficient fulfillment experiences of the past, further driving order growth.

By January this year, Choice orders accounted for half of the platform's total orders. According to Alibaba's Q3 FY2024 financial report, Alibaba International's e-commerce revenue grew by 44%, exceeding market expectations for six consecutive quarters, with AliExpress orders growing by 60% year-on-year. The Choice business, both fully managed and semi-fulfillment, has become a powerful engine driving high growth in orders and revenue for AliExpress and Alibaba International.

Given these impressive figures, AliExpress has increased its investment in semi-fulfillment. According to IT Times, on March 6, AliExpress further upgraded its semi-fulfillment model, mandating that all products in stores weighing under 2kg and popular products over 2kg be included in the semi-fulfillment model to rapidly promote the adoption of the new model.

Similarly, Alibaba International launched its first B2B semi-fulfillment service earlier this year. Unlike the purely sales-driven logic of creating popular products in B2C, Alibaba International focuses on B2B sales, where merchants face more customized demands. Therefore, merchants are better suited for semi-fulfillment, which simplifies the transaction chain while providing some operational autonomy, rather than the all-inclusive full fulfillment.

According to Alibaba International's official introduction, the semi-fulfillment service offers merchants exclusive marketing activities, door-to-door logistics fulfillment, reverse logistics services, and other operational management solutions, allowing merchants to focus on production and sales, thereby lowering the barrier to entry for going global. Both domestic and foreign trade merchants with ready stock capable of shipping within 3-7 days can join Alibaba International's semi-fulfillment.

In summary, the semi-fulfillment models of AliExpress and Alibaba International are broadly similar. Merchants are responsible for operations and pricing, while the platform handles logistics and after-sales services.

Temu: Firmly Grasping Pricing Power

Launched less than two years ago, Temu began its journey in the United States and rapidly expanded its business to nearly 50 countries and regions worldwide, covering North America, Australia, Europe, Asia, and Africa. With a strong supply chain, extremely low prices, and aggressive advertising spending, Temu's influence has been rising steadily, both in its main market, the United States, and in emerging markets.

In the U.S. market alone, Pinduoduo's advertising expenditure in 2023 exceeded $3 billion, making it one of the largest online advertisers in the country. According to Apple's official data, Temu topped the free app download charts on the U.S. App Store. Earnest Analytics reports that Temu's sales in the U.S. grew by 840% between January 2023 and January 2024.

In other markets, Temu saw its visits in Mexico rise to 18.4 million in December last year, making it the third-largest e-commerce platform in terms of traffic in Mexico. Since its launch in Japan in July 2023, Temu's Japanese site has been gaining 2.2 million users per month, surpassing 15 million users by January. In South Korea, Temu's registered users grew from 520,000 in August last year to 5.7 million by January this year, an almost tenfold increase in six months.

Cost-effectiveness is Temu's most crucial and vital weapon for expanding its reach in these markets. Therefore, even with the introduction of semi-fulfillment, Temu has not relinquished control over pricing, allowing some merchants to adopt more flexible logistics fulfillment solutions.

Compared to other platforms, Temu's semi-fulfillment threshold is relatively high, targeting cross-border merchants who have already partnered with overseas warehouse logistics providers, have overseas entities, and possess mature local fulfillment capabilities.

After joining semi-fulfillment, local overseas merchants have greater autonomy in logistics, being able to choose warehousing and shipping strategies based on their needs without having to use Temu's designated warehouse logistics service providers. However, the platform still handles pricing, sales, operations, and after-sales services.

For Temu, a platform less than two years

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Source: Jiemian News

Overall, both Temu and AliExpress, along with Alibaba International, are focusing their efforts on the logistics aspect of semi-fulfillment. While their approaches differ significantly in form, whether they choose to "let go" or "take control," these strategies will bring new impacts to cross-border logistics companies.
2.Which Logistics Companies Will Benefit from Semi-Fulfillment?

According to Cargo Facts Consulting, SHEIN, Temu, AliExpress, and TikTok collectively ship over 10,000 tons of goods overseas daily. With full fulfillment becoming mainstream, platforms have gained control over order distribution, benefiting only a few logistics service providers partnered with the platforms. Now that semi-fulfillment is being introduced, which logistics companies stand to gain?

Currently, the three platforms that have launched semi-fulfillment modes focus primarily on logistics. One approach involves handling everything from collection to delivery, while the other allows overseas local sellers to use flexible logistics solutions. Like full fulfillment, the ultimate goal of semi-fulfillment is to improve order fulfillment efficiency and service levels. Thus, companies with strong capabilities in core areas such as air freight, international customs clearance, overseas warehousing, and last-mile delivery will be the first choice for platforms and merchants.

However, the increased autonomy given to merchants in semi-fulfillment also presents new opportunities for small and medium-sized enterprises (SMEs). For instance, logistics companies that excel in niche markets, have extensive overseas warehouse resources, and offer regional delivery capabilities, along with diverse services like returns, relabeling, and tracking, can become logistics partners for local overseas merchants and benefit from semi-fulfillment.

According to Huxiu, some platforms that offer logistics fulfillment support an immediate shipping model. After an order is placed, sellers can choose to have goods picked up or sent to the platform's warehouse. For pick-up, there are no logistics fees, but sellers must hand over all goods to the pick-up driver by 24:00 the day after the buyer's payment. Currently, pick-up services are available in limited cities. If sellers opt to send goods to the warehouse themselves, they must cover the shipping costs and deliver the products to the specified warehouse within 48 hours of the buyer's payment.

These stringent logistics requirements pose new challenges for merchants. Companies with deep operations in fulfillment warehouse hubs and major cross-border e-commerce sourcing areas, as well as ample mainline transport and warehousing resources, can capitalize on the traffic overflow brought by semi-fulfillment.

Summary:

As major players continue to intensify their efforts, cross-border e-commerce has moved beyond its rough growth phase and entered an era of refined operations focusing on supply, service, and logistics. The continuous iteration of cross-border e-commerce models, marked by the emergence of semi-fulfillment, indicates that last year's hot trend of full fulfillment was just the beginning.

Each shift in channels reshapes operational logic. Will other platforms follow suit with semi-fulfillment? Will semi-fulfillment become the new industry standard? What deeper changes will it bring to the upstream and downstream supply chain? We will continue to monitor these developments.

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Cross-border E-commerce Logistics Bai Xiaosheng