"Behind these figures, we see the scale and prosperity of the cross-border e-commerce market. With the emergence of new platform models and the explosion of new overseas traffic, Chinese cross-border e-commerce platforms are expanding their influence, completely disrupting the global e-commerce landscape.

The year 2023 marked the inception of the four Chinese e-commerce dragons going global. According to the latest '2024 Mobile Market Report' released by the authoritative data analysis agency data.ai, the top four shopping app download growth rates in 2023 were dominated by these Chinese e-commerce dragons, namely TEMU, SHEIN, AliExpress, and TIKTOK Shop."

Source: NIQ: "2023 China Cross-border E-commerce Platform Overseas White Paper"

Against the backdrop of globalization, these four major e-commerce platforms originating from China are rapidly expanding their presence globally, transitioning from dominating in Europe and America to competing worldwide. This gradual shift is altering the mainstream narrative from "Made in China, sold on Amazon."

· The four e-commerce dragons going global have their own unique characteristics.

SHEIN, the most mysterious among them, is a fast-fashion unicorn valued at billions of dollars in China, with over a decade of overseas expansion. At its peak, SHEIN's valuation is estimated to reach hundreds of billions of dollars. According to Latepost, its GMV (Gross Merchandise Volume) may exceed $40 billion in 2023. Financial estimates project that by 2025, SHEIN's GMV will reach $80.6 billion, revenue will reach $58.5 billion, and profits will reach $7.5 billion.

Source: NIQ: "2023 China Cross-border E-commerce Platform Overseas White Paper"

As a globally leading cross-border fashion brand, SHEIN primarily adopts a self-operated model through independent websites to enter the cross-border e-commerce arena. It leads the industry by innovating a flexible supply chain model based on on-demand production. With its "small orders, fast response" approach, continuously launching a vast array of products favored by customers, SHEIN has established a strong reputation and a massive user base worldwide.

Source: Guosen Securities

Leveraging its supply chain advantages, in 2023, SHEIN boldly accelerated its global expansion, not only advancing its platform model worldwide but also acquiring multiple fashion brands. The dual-drive development model of "self-owned brands + platform" has become its core differentiator from other platforms.

At the end of 2022, SHEIN initiated platform trial operations, and in April 2023, it piloted the platform model in Brazil. In May, it officially launched the open platform SHEIN Marketplace, introducing third-party sellers. It has been rolled out in Brazil, the United States, Mexico, and other locations, with plans for further expansion globally. Regarding offline brands, after establishing a long-term strategic partnership with Forever21 under the SPARC Group umbrella, SHEIN acquired the UK fast-fashion brand Missguided

Source: Guosen Securities

In terms of logistics network, SHEIN primarily relies on cross-border direct shipping, utilizing a combination of centralized warehousing and overseas transit operational warehouses. It has established a relatively complete logistics and warehousing system.

Currently, SHEIN has set up six major logistics centers and seven customer management centers worldwide, comprising three types of warehouses: domestic central warehouses, overseas transit warehouses, and overseas operational warehouses. The domestic central warehouse is located in Foshan, Guangdong Province, China, with several satellite warehouses in the vicinity, and 95% of the goods are shipped directly from the domestic central warehouse. The layout of overseas transit warehouses spans regions such as Indonesia, Vietnam, and Australia, while overseas operational warehouses are located in Hong Kong (China), Belgium, the United States, and other areas, responsible for shipping in their respective coverage areas.

Source: Guosen Securities

SensorTower data shows that in 2023, SHEIN experienced a 47% increase in downloads, surpassing 250 million downloads and ranking second on both the download and growth charts. Since its inception in 2014, its downloads have grown rapidly for nine consecutive years, with an average annual growth rate of up to 100%.

TEMU: Racing Endlessly for a Year, Reaching New Heights

As a cross-border platform under Pinduoduo, TEMU, despite being established in 2022, has quickly emerged as a dark horse in the cross-border arena by leveraging the "cost-effectiveness + discount" model to bring the extreme cost-effectiveness of China's supply chain advantages overseas.

In February 2023, TEMU gained sudden popularity with a successful marketing campaign during the "Super Bowl" in the North American market. Following this success, it rapidly expanded into other markets, including Australia, New Zealand, Europe, and South America, opening the doors to markets in 48 countries/regions globally in a short period.

According to SensorTower data, in 2023, TEMU's downloads surged by 23 times, exceeding 320 million times, making it the largest and fastest-growing e-commerce application globally.

TEMU's rapid progress in overseas markets has significantly boosted Pinduoduo's performance directly. In Q3 2023, Pinduoduo achieved revenue of 688.4 billion yuan, a year-on-year increase of 94%, far exceeding market expectations of 548.72 billion yuan, and its market value surpassed Alibaba's for the first time. In 2023, TEMU is expected to achieve a GMV of $14 billion, with market sentiment even more optimistic, expecting to exceed the target of $15 billion in GMV.

Source: Guosen Securities

In terms of logistics network, TEMU primarily adopts a three-stage logistics model consisting of domestic first-mile transportation, international trunk line transportation, and overseas last-mile transportation. Sellers send their goods to domestic transfer warehouses in Guangzhou. From there, TEMU utilizes third-party logistics service providers such as JiTu and YunTu to directly ship the goods to overseas transit hubs, and then they are distributed to overseas consumers by local logistics companies such as UPS, USPS, and DHL.

Source: Guosen Securities

In terms of fulfillment efficiency, TEMU offers two logistics solutions: Standard and Express. Standard delivery typically takes 7-10 days, while Express delivery takes approximately 4-6 days. Under the Standard shipping option, all items are shipped free of charge, while items valued above $129 qualify for free shipping under Express delivery; otherwise, a shipping fee of $12.9 applies.

To optimize overall cross-border logistics costs, TEMU continuously adjusts its logistics policies. For instance, in the last-mile transportation segment, TEMU has initiated the construction of overseas warehouses in the United States, planning to establish one in the East and one in the West. As the market size expands, the establishment of overseas warehouses will further enhance TEMU's fulfillment efficiency, improve customer fulfillment experiences, and increase platform order volume and conversion rates.

TIKTOK: Zhang Yiming's Great Journey, Evolving into a Super Cash Cow

TIKTOK SHOP's greatest advantage lies in its massive user base accumulated through short videos, providing unique e-commerce competitiveness. Currently, TIKTOK focuses on expanding globally based on the European, American, and Southeast Asian markets. However, in 2023, TIKTOK faced challenges in both of these major markets.

In the United States, where it ranks first in terms of platform users, TIKTOK encountered regulatory challenges in the first half of the year. It wasn't until August, after a lengthy regulatory wait, that TIKTOK SHOP was fully launched and made available in the United States, marking a milestone event in the global development of TikTok e-commerce. Once traffic was unleashed, TIKTOK completely revitalized the thriving ecosystem of global short video social platforms and interest-based content e-commerce. According to demandsage data, TIKTOK's MAU in the United States reached over 160 million in 2023, close to 45% of the total US population, with 65% of US users visiting TIKTOK every day.

Ranked second in terms of users is Indonesia in Southeast Asia. Within three years of its launch in Indonesia, TIKTOK SHOP's GMV increased 7-8 times from its initial $600 million in the first year, with user numbers reaching 113 million. However, in September 2023, a social e-commerce platform transaction ban in Indonesia dealt a sudden blow, leading to the closure of TIKTOK SHOP Indonesia in October. After various negotiations, TIKTOK SHOP returned to the Indonesian market in December and embarked on a unique path of deep localization in Southeast Asia through cooperation with local internet giant GoTo.

source: NIQ: "2023 China Cross-border E-commerce Platform Overseas White Paper"

In terms of logistics, TIKTOK is planning to invest heavily in logistics, aiming to convert its vast streaming audience into a significant share of the US e-commerce market. It is reported that TIKTOK is attempting to establish a warehouse and fulfillment operations network to undertake specific tasks, such as managing inventory and delivering goods to a series of independent merchants who sell products to TIKTOK's large following. It also outsources logistics operations, reaching agreements with logistics providers such as ShipBob and Newegg to store inventory and handle picking, packaging, and shipping online orders.

In recent years, TIKTOK SHOP may not have been the fastest-moving, but it has certainly been the most tortuous. Currently, TIKTOK's overall scope covers markets such as the United States, South Asia, and Southeast Asia, with plans to further expand into Latin America (e.g., Brazil), Europe (e.g., Italy, Spain, France), Australia (Australia, New Zealand), and the Middle East in 2024. Its presence is visible in almost every promising market, indicating the effectiveness of TIKTOK's global expansion strategy.

AliExpress: Alibaba's Global Selling Ambition, with Cainiao's Global Opening

AliExpress is the platform that entered the cross-border e-commerce field earliest among the four e-commerce dragons, and it is also the pioneer of Alibaba's cross-border e-commerce track. According to Alibaba's FY2024 Q2 performance, the rapid growth of retail platforms such as AliExpress, Lazada, and Trendyol has driven a 28% year-on-year increase in overall orders for Alibaba's international retail business.

Among them, AliExpress is making significant strides in global markets such as Brazil, Japan, and Europe, particularly in the Korean market. According to a survey conducted by Wiseapp·Retail-Goods, a South Korean mobile app and retail analysis service provider, AliExpress became the mobile app with the highest number of new users in the Korean market in 2023, with an average of 3.71 million new users per month. In November 2023, the active user base of AliExpress in South Korea surpassed that of the local e-commerce platform Gmarket, making it the third largest e-commerce platform in South Korea. This marks the first appearance of an overseas e-commerce platform among the top three e-commerce platforms in South Korea.

Source: NIQ: "2023 China Cross-border E-commerce Platform Overseas White Paper"

In terms of logistics fulfillment, AliExpress is the only platform among the four e-commerce dragons that has its own logistics infrastructure. In September 2023, AliExpress, in collaboration with Cainiao, officially launched the "Global 5-Day Delivery" international express product, initially rolling out in the UK, Spain, the Netherlands, Belgium, and South Korea. It is the first large-scale cross-border e-commerce express product in the industry. This signifies that AliExpress, while addressing the "information flow," "capital flow," and "business flow" aspects of cross-border e-commerce, is now focusing on solving the most challenging "logistics" issue.

AliExpress is also increasing its investment in logistics. For example, it launched tax payment logistics services in Brazil after tax reform, upgraded "Worry-Free Shipping" to achieve 10-day delivery in the Middle East, and collaborated with Cainiao Network to establish multiple logistics lines, set up numerous overseas warehouses globally, and open domestic preferred warehouses to accelerate the delivery time for overseas consumers. Currently, AliExpress's overseas market covers more than 100 countries worldwide, not only in Europe and the US but also in several emerging markets such as Japan, South Korea, Latin America, and the Middle East.

Overall, each of the four e-commerce dragons has its own expertise, and the industry is beginning to expect them to catch up with Amazon and change the global e-commerce market's competitive landscape.

In a fully managed model, which logistics companies can profit? In 2023, the fully managed model swept the globe. TEMU and AliExpress were the first to launch fully managed services, setting the tone for the industry's adoption of fully managed services. Subsequently, SHEIN rebranded its model as fully managed, and in May 2023, TIKTOK officially announced its fully managed model. With this, all four e-commerce dragons embraced fully managed services in 2023. Following suit, numerous domestic and international e-commerce platforms such as Lazada, Shopee, and Wish also announced the launch of fully managed models.

Source: Guosen Securities

In the early months of 2024, a new trend emerged in the cross-border e-commerce landscape with the introduction of "semi-managed" services by various cross-border e-commerce platforms. After a four-month trial period, AliExpress fully launched its semi-managed service in early January, while TEMU announced its upcoming launch of the "semi-managed" model, scheduled for rollout on March 15th in its US site, followed by expansion to European sites by the end of March. Alibaba's international site also announced the introduction of a "semi-managed" model in the B2B sector.

For e-commerce platforms, the most straightforward way to capture incremental growth is to expand the scope of value acquisition, acquiring more monetization nodes and control points in terms of breadth and depth. The fully managed model aligns with the core demands of e-commerce platforms to acquire incremental cross-border business, allowing platforms to control various aspects and firmly grasp pricing power. It can be said that the core of fully managed services lies in the spillover effect of platform traffic hegemony. Wherever the traffic goes, orders are generated, and the holder of the traffic determines the allocation of orders.

Source: Guosen Securities

After the emergence of the fully managed model, different e-commerce platforms are competing to secure key resources. For example, at the core nodes of the logistics supply chain, platforms need to control more airplane capacity; at overseas core nodes, platforms need to grasp more customs clearance port resources; and for last-mile delivery, platforms need to find delivery service providers with higher cost-effectiveness.

In this context, many logistics service providers in 2023 faced strict assessment policies from e-commerce platforms, leading many logistics companies to believe that it is difficult to make money from fully managed platforms.

However, in any industry, there is always a Pareto principle at play, where facing the same customers and terms, 70%-80% of companies feel that it is difficult to do business with fully managed platforms, while 20%-30% of companies can make money and even thrive.

This raises a question: Under the backdrop of fully managed models implemented by cross-border e-commerce platforms and the stringent assessment policies imposed on logistics service providers, which type of enterprise can survive and make money?

The first category includes companies that own resources and capacity at the core nodes of cross-border logistics. For example, on the mainline, companies have their own airplanes; in a foreign country or region, companies have their own customs clearance licenses and regulated warehouses; in the last mile, companies either have regional delivery capabilities or possess a formidable account. These companies can generally make money under the fully managed model.

The second category comprises companies with strong information technology capabilities and refined operational capabilities, both of which are indispensable. Since e-commerce platforms need to achieve visualization of the entire chain and have specific time-effectiveness assessment requirements for updating order trajectories, logistics companies need end-to-end digitization and strong information technology capabilities. Additionally, cross-border logistics companies need seamless integration at every stage such as signing and delivery, requiring refined operational capabilities.

The third category includes companies with deep layouts in segmented markets or individual countries. For example, in a segmented market or a single country, companies conduct heavy asset layouts and capacity investments across the entire chain, exerting strong control over resources such as mainlines, customs clearance, warehousing, and distribution, and have a certain market share, thereby establishing pricing power in that market. These companies can also make money under the fully managed model and have the ability and leverage to negotiate with platforms to some extent.

The fourth category consists of builders of core capabilities in overseas customs clearance, transshipment, and delivery processes. Currently, many postal and logistics companies in overseas countries provide subpar services during peak seasons, prompting many companies to opt for their own overseas delivery services, which is also a trend in 2024.

In summary:

 2023 was marked by an absolute buzzword: "going global". In this wave of international expansion, the most noticeable performers were the "Four Dragons of Going Global", accelerating their global footprint. Behind the surge of Chinese e-commerce platforms going global lies the overflow of China's industrial advantages, including Chinese manufacturing and high-quality supply chains, combined with new global strategies, colliding with new game rules - the concentrated eruption after the introduction of the fully managed mode.

Amidst the shifting dynamics of the market, the battleground of cross-border e-commerce is shifting towards the global supply chain. Globalization has become the focal point of competition in the second half, opening up a new era of consumption overseas, and becoming the ambition and journey of the Four Dragons of Chinese e-commerce going global.

As Chinese e-commerce accelerates globalization, the accompanying demand for logistics and distribution is also rapidly surging overseas. Especially after the rapid progress in 2023, cross-border e-commerce will inevitably shift from price to service. Logistics efficiency is a key factor determining service experience, and properly addressing the current constraints of cross-border logistics efficiency will accelerate the growth of cross-border orders.

In 2024, the exploration of globalizing Chinese e-commerce logistics overseas has just begun. In the great maritime era of Chinese e-commerce logistics, what additional opportunities will the Four Dragons of e-commerce going global find? What changes will they encounter? The possibilities for the future are still hidden in the overseas journeys of these four giants. And as Chinese e-commerce gallops globally, new global logistics giants will inevitably emerge from China.

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Cross-border E-commerce Logistics Bai Xiaosheng