**1. What are Fully Managed and Semi-Managed Models?**

In September 2022, TEMU, the international version of Pinduoduo's cross-border e-commerce platform, was the first to introduce the fully managed model. The main aim was to enable manufacturers or traders with products but without foreign trade or cross-border e-commerce experience to engage in cross-border e-commerce with lower barriers to entry. Following this, platforms such as AliExpress, SHEIN, TIKTOK, Lazada, and Shopee also launched fully managed models.

The so-called fully managed model refers to merchants preparing their goods at the domestic warehouses of the cross-border e-commerce platform. Merchants only need to supply the goods, while the platform handles pricing, overseas promotion and sales, order processing, logistics fulfillment, and after-sales services. The process of merchants stocking their goods in the platform's domestic warehouse is known as managed warehousing.

Currently, these managed warehouses are primarily located in the Guangdong-Hong Kong-Macao Greater Bay Area, with significant distributions in places like Zhaoqing, Panyu, Foshan, Dongguan, and Zhongshan. It is estimated that in the past year alone, TEMU has established over 1 million square meters of fully managed warehouse space in the Pearl River Delta region.

The rapid development of the fully managed model has significantly impacted the industry. On one hand, the increasing number of fully managed warehouses has boosted the logistics real estate market in the Pearl River Delta, causing a certain level of tightness in logistics land availability. On the other hand, the fully managed model's high efficiency requirements necessitate that many goods be transported overseas via air logistics, adding pressure on air freight capacity.

Following the fully managed model, in August 2023, AliExpress began trialing the semi-managed model and opened it to all merchants by January. TEMU introduced the semi-managed model in March, and SHEIN followed in May. The semi-managed model can be simply understood as merchants shipping their inventory to overseas warehouses via sea freight. When the e-commerce platform generates orders, the logistics company helps fulfill and ship the orders from the third-party overseas warehouses.

Why have cross-border e-commerce platforms introduced the semi-managed model? This is partly related to the tight air freight capacity. Currently, the scarcity of all-cargo aircraft capacity limits the increase in order volumes and target achievement for e-commerce platforms. To further expand market share, these platforms had to reduce the promotion of the fully managed model and introduce the semi-managed model.

In essence, both the fully managed and semi-managed models are iterations and innovations of business models as the cross-border e-commerce industry reaches certain stages of development.

**2. The Impact of the Fully Managed Model on Logistics Companies**

In the early stages of the fully managed model, many cross-border e-commerce platforms selected their official logistics service providers through a bidding process. During this process, platforms set a series of assessment requirements, detailing parameters and indicators for each logistics node. Only those logistics service providers meeting the service standards could continue their business with the platform, otherwise, they faced rating downgrades or even disqualification as official service providers. Although the fully managed model attracted many logistics service providers to offer end-to-end direct parcel services, the management and assessment of these providers by the platforms were quite stringent.

After some time, cross-border e-commerce platforms began segmenting their procurement. Given the many and lengthy logistics nodes in cross-border e-commerce, platforms divided the process into segments: segment a-b-c-d. Segment a is the domestic segment, covering steps before the goods are loaded onto aircraft; segment b is the international trunk transport via sea or air, achieving port-to-port delivery; segment c involves customs clearance and terminal operations after the goods reach the overseas port; and segment d is the last-mile delivery.

With this segmentation, cross-border e-commerce platforms adopted a bidding system for each segment, bringing in core logistics service providers for each stage. This had a significant impact on the cross-border logistics industry. Previously, to support the fully managed model, many logistics companies rented short-term warehouses near the platform’s managed warehouses for sorting, packing, and shipping parcels. Now, with segmented procurement, the initial investments in manpower, resources, and capacity by logistics companies have resulted in wastage, causing a sharp decline in overall shipment volumes under the segmented procurement background.

Thus, cross-border logistics companies are in a very passive position when cooperating with e-commerce platforms. It is challenging to control their own pace and make long-term plans. All planning must follow the platform’s needs, and any changes in platform demands and policies necessitate corresponding adjustments in logistics products and services.

**3. The Impact of the Semi-Managed Model on Overseas Warehouse Companies**

In the short term, the semi-managed model mainly has two impacts:

First, the semi-managed model drives an increase in sea freight volumes, pushing up some sea freight rates.

Second, the semi-managed model boosts the demand for one-piece shipping from overseas warehouses, especially those operated by third-party logistics companies. This short-term surge in demand has led to increased order volumes for overseas warehouse companies.

Over the past three years of the pandemic, as countries in Europe and the United States were in a phase of destocking, many overseas warehouse companies reduced their warehouse space and slowed down expansion. The supply side of the overseas warehouse industry not only saw no significant growth but also experienced a phased reduction.

Now, with cross-border e-commerce platforms launching the semi-managed model and encouraging merchants and factories to stock goods overseas, the demand for one-piece shipping from overseas warehouses has seen explosive growth. This has created an illusion for many companies, prompting those who had not previously engaged in overseas warehousing to enter the market by renting small warehouses to handle the semi-managed business, or existing overseas warehouse companies to expand their warehouses.

Establishing an overseas warehouse requires a period of six months to a year for preliminary research, site selection, decoration, system setup, and operational commencement, involving significant capital investment. Once a warehouse is built, it cannot be frequently relocated, and many warehouse lease terms span several years. Therefore, the investment, management, and operation of overseas warehouses have high barriers to entry, limiting the number of new players.

In the short term, companies expanding based on market demand growth may not face issues. However, from a long-term perspective, the semi-managed model carries certain risks. Currently, as cross-border e-commerce platforms have just introduced the semi-managed model, there is a high demand for overseas warehouses, allowing many companies to benefit.

But as platforms gradually refine the semi-managed system rules and the supply of overseas warehouses increases with more new entrants, e-commerce platforms will have more options. This will likely lead to the introduction of competitive bidding and assessment mechanisms, continually driving down profit margins in the overseas warehousing industry. When the costs and profits of overseas warehouses reach a critical point, some companies may struggle to sustain their operations.

Thus, within the next two years, the overseas warehousing industry may experience turmoil or a shakeout due to the semi-managed model. Given the industry changes, we must recognize both opportunities and risks. Cross-border e-commerce platforms hold the traffic dominance, enabling them to set service provider rules and selection criteria. These platforms will always seek more cost-effective logistics service providers.

In this context, logistics companies have weak bargaining power compared to the platforms. Therefore, during periods of significant changes in platform rules, cross-border logistics companies need to focus on risk management. They should avoid being overly influenced by platform strategies and not rely entirely on a single platform. If a company places all its bets on one platform and later loses the partnership, it will face substantial operational pressure.

Hence, the customer structure of cross-border logistics companies is crucial. They should avoid having a single large customer accounting for a significant portion of their revenue and profit, preventing over-dependence on one customer group. Only with a reasonable customer structure can companies mitigate risks during their development.

Additionally, having stable, profitable business operations is vital for companies. While fully managed and semi-managed businesses may initially be profitable, increasing demands and price pressures from platforms can gradually erode profit margins, turning these businesses into low-margin ventures. Therefore, while meeting the needs of e-commerce platforms, companies should not neglect their longstanding customer partnerships.

Overall, cross-border logistics companies cooperating with e-commerce platforms need to ensure a reasonable customer structure, business continuity, and sustainable development that provides positive accumulation. Short-term increases in volume or revenue should be carefully evaluated for their sustainability and positive impact on long-term growth.

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Cross-border e-commerce logistics Bai xiaosheng