Chinese cross-border e-commerce platforms TEMU and SHEIN are rapidly occupying air cargo capacity with their direct shipping business model, which ships products directly from Chinese factories to consumers in Europe and the United States. This phenomenon has raised concerns about potential capacity shortages and skyrocketing freight rates during this year's peak shipping season.

Source: Internet

In 2023, SHEIN and TEMU gained immense popularity in the US market, attracting a large number of consumers with extremely low-priced goods.

A survey conducted by email and SMS marketing platform Omnisend among 1000 Americans revealed that 70% of US consumers made purchases on global and Chinese online platforms in 2023. Among them, more than half (57%) shopped on TEMU, 43% on SHEIN, and 33% on TIKTOK. Additionally, 20% made purchases on AliExpress. More than half (51%) of US consumers stated they bought adult clothing from SHEIN, while 37% purchased home goods from TEMU. Furthermore, one-fifth of US consumers indicated they shop at least once a week on TEMU, SHEIN, AliExpress, Amazon, and Etsy.

Source: GlobalData

E-commerce platforms such as SHEIN and TEMU have accelerated their performance growth, aiming to deliver goods to European and American consumers more quickly by directly shipping products from Chinese factories via air freight overseas. This cross-border direct shipping model has led to a significant increase in shipping volumes from South China, intensifying competition in the air cargo market. It has not only caused increased air freight costs at major Asian air cargo hubs and capacity shortages but also eliminated the traditional distinction between peak and off-peak seasons.

For example, June is typically a low season before the holiday shopping peak at the end of the year. However, influenced by platforms like SHEIN and TEMU, air freight rates have risen by about 40% compared to the same period last year. According to Xeneta, a benchmarking and market intelligence service for sea and air freight rates, the average spot air freight price from southern China to the US was $5.27 per kilogram in late June, more than double the amount in 2019. Niall van de Wouw, Head of Air Freight at Xeneta, stated that the rapid rise of Chinese e-commerce has completely reshaped the air cargo market within a very short time.

According to the International Air Transport Association (IATA), driven by trade growth, booming e-commerce, and constraints in maritime transport capacity, air freight demand in all regions saw a substantial increase. Global air freight demand measured in freight tonne kilometers (FTKs*) grew by 14.7% year-on-year in May 2023, marking six consecutive months of double-digit growth. Particularly strong demand was observed in the Asia-Pacific region, where air freight demand increased by 17.8% in May, and the Africa-Asia trade route saw a 40.6% year-on-year increase. Similarly, the Europe-Asia, intra-Asia, and Middle East-Asia trade routes grew by 20.4%, 19.2%, and 18.6% respectively, while capacity increased by 8.4% year-on-year.

Simultaneously, cargo transported from Asia to Europe and the Americas typically consists of high-value small items like smartphones and laptops, as well as perishable goods such as fish and flowers. However, the low-cost clothing and home goods from SHEIN and TEMU are now occupying air freight capacities.

According to a report from the US Congress in June 2023, TEMU and SHEIN alone send nearly 600,000 parcels to the US daily. Cargo Facts Consulting's February research data indicates that TEMU and SHEIN transport approximately 9,000 tons of goods globally daily, requiring approximately 88 Boeing 777 freighters to fully load.

Specifically, TEMU transports 4,000 tons daily, SHEIN transports 5,000 tons daily, Alibaba transports 1,000 tons daily, and TIKTOK transports 800 tons daily.

Yngve Ruud, Vice President of Air Freight Operations at Swiss freight giant Dexion, noted that TEMU and SHEIN were not participants in the air freight market in 2022 but had become two of the world's largest air freight shippers by the end of 2023.

Tim Scharwath, CEO of DHL Global Forwarding, also commented that within less than two years, Chinese e-commerce platforms had expanded rapidly, occupying over 30% of cargo space on flights exporting from Asia. Now, DHL Global Air Freight is urging retailers and manufacturers to sign air freight contracts early to avoid missing out on opportunities due to tight capacity during the year-end shopping season. Waiting until October to request increased air freight shipments may result in unmet demands.

To alleviate pressure on air cargo, especially from China, many international airlines are increasing new flights and capacity. For example, Atlas Air partnered with Yunto Logistics to launch a second air freighter between China and the US; Korean Air announced it would strengthen customer partnerships and allocate capacity on key routes to meet growing e-commerce demands from China.

However, these capacities seem to be just a drop in the bucket, far from meeting the demands of e-commerce platforms. Even if cross-border e-commerce develops at a normal pace over the next 5-10 years, global wide-body freighter capacity will remain tight.

It's also worth noting that Amazon has launched a similar direct shipping service from China. On July 1st, Amazon announced the launch of a new dedicated section on its main website offering unbranded products priced below $20, shipped directly from China to US consumers. Many view this critical move as Amazon's response to increasing competition from Chinese e-commerce platforms like TEMU and SHEIN. If Amazon's direct shipping service also joins the competition, the competition for air freight space during the year-end shopping season in the US may be even more intense than imagined.

In conclusion, Chinese e-commerce platforms such as TEMU, SHEIN, TIKTOK, and AliExpress have developed into an unstoppable force globally. The China direct shipping model, where products are shipped directly from Chinese factories to global consumers via air freight, is overturning traditional markets and reshaping the global e-commerce ecosystem, as well as the global air cargo market. The air cargo industry must strive to adapt to this new situation. As Basile Ricard, Managing Director of Air Freight Operations for Bolloré Logistics Greater China, pointed out, the biggest factor affecting air cargo transport today is not the ongoing conflicts in the Red Sea but rather the rise of Chinese e-commerce platforms like SHEIN and TEMU.

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WeChat Official Account: Cross-Border E-commerce Logistics Baixiaosheng