1. Direct Shipping vs. Overseas Warehousing under the Managed Model

Currently, many feel that the domestic cross-border logistics industry is highly competitive, but the situation overseas is even more intense. With the Port of Los Angeles handling about 40% of U.S. imports, there are more than 3,000 overseas warehouse businesses in its vicinity alone, over 500 trucking companies with Chinese backgrounds, and more than 200 customs brokerage firms. Tens of thousands of people are engaged in e-commerce logistics-related services, second only to the restaurant industry.

Despite this intense competition, cross-border e-commerce logistics remains a booming industry, experiencing significant growth each year. For example, both shipping companies and overseas warehouse businesses have seen remarkable growth this year. Shipping volumes have increased, and leading overseas warehouse and dropshipping fulfillment companies are expanding at a rapid pace. Most of the top players are opening new warehouses monthly, with warehouse areas typically starting at 500,000 square feet—an astounding figure.

Some might argue that the expansion of overseas warehousing has slowed in recent years, with certain reductions occurring. This is indeed true for overseas warehouses focused on container deconsolidation and distribution. The pandemic prompted a flood of new entrants into the cross-border logistics space, leading to an oversupply in container-related services in the U.S. Many companies have resorted to price wars, with no end in sight.

However, fulfillment warehouses, particularly for dropshipping, are likely to remain in demand for the long term. Firstly, air freight capacity has already peaked, and air freight prices are expected to stay high for the next 5-10 years. Orders for new cargo planes are booked until after 2030, making it difficult for airlines to expand their capacity. These factors restrict the growth of fully managed models.

The peak in fully managed logistics is also causing difficulties for small package shipping companies this year. Many are seeing declines in full-chain orders. As e-commerce platforms shift toward segmented procurement, some small package companies may seek growth opportunities in independent platforms, direct shipping sellers, or non-platform businesses.

While these may offer viable avenues, it’s important to recognize that major players like SHEIN and TEMU have already consumed the air freight capacity growth for the next 5-10 years. With no additional air freight capacity available, smaller platforms won’t see significant growth, and small package companies will struggle without access to air freight space.

With direct shipping capacity peaking, cross-border e-commerce platforms are pushing for a managed model, encouraging merchants to store goods in overseas warehouses. Since the launch of the managed model in mid-March, dropshipping fulfillment warehouses in the U.S. have been in high demand, with most warehouses becoming fully occupied the same month they open. Leading companies are racing to rent large warehouses, signaling that dropshipping fulfillment warehouses will continue to grow in the near future.

However, it’s essential to note that the shortage isn’t just in warehouse space but in facilities that meet the needs of e-commerce logistics. While there are many warehouses previously serving manufacturing in the U.S. and Europe, their location, functionality, and infrastructure often don’t meet the current demands of e-commerce logistics, leading to a mismatch of resources. Companies should be mindful of this when selecting overseas warehouses.

2. The Logic Behind Overseas Asset Deployment

Under the segmented procurement model of e-commerce platforms, pure freight forwarding companies find it increasingly difficult to grow. Many are now focusing on overseas assets, but what assets to invest in is crucial. Based on the logic of cross-border logistics, I believe the following points are worth considering:

- First, invest in customs clearance hubs. Some companies have already set up bonded or supervised warehouses at ports. However, ports are subject to changes in e-commerce platform policies and customs regulations, making them prone to disruption. If a company invests in a single port, it must choose wisely; otherwise, policy shifts could render its investment obsolete.

- Second, invest in overseas warehouses, but do so cautiously. Cross-border logistics is subject to the policies of e-commerce platforms, making long-term planning difficult. Investing in mobile assets like planes, ships, and trucks may be better than investing in immobile assets like warehouses.

Long-term planning should follow a foundational logic. Regardless of platform or tax policy changes, companies should focus on certainties—making choices based on core capabilities and resources, simplifying operations, and identifying their niche. Either companies should build close ties to upstream logistics capacity or strengthen core competencies at a particular point in the supply chain. With limited resources, it’s challenging to self-operate across the entire chain, but creating a competitive edge at a key node can still be highly valuable.

Third, become a customer-centric company. During my visit to the U.S., I found that some warehouses don’t accept platform orders or offer managed services. Some have up to 30% of their orders from local U.S. customers and don’t serve Chinese sellers. Others offer customized services for major Chinese appliance brands, operating at high utilization. These companies are thriving in terms of turnover and profit margins.

Thus, when investing in overseas assets, companies must align their investments with their capabilities and identity, making selective decisions.

3. Blue Oceans in the U.S. and European Markets

The U.S. and European markets are often seen as large, competitive spaces, dominated by major players. However, even in mature markets, there are blue oceans.

Take the U.S. for example. While USPS, UPS, DHL, and FedEx dominate the domestic market, certain non-mainland U.S. regions offer growth opportunities. Areas like Alaska and Hawaii have high delivery costs, and companies like UPS classify them as remote areas. This makes them prime targets for mid-sized companies to establish a presence and develop their business.

There’s also significant potential in customs clearance, warehousing, and delivery. Some U.S.-based delivery companies run by Chinese-Americans are directly copying the logistics models from China’s major couriers and applying them to the U.S. market, offering services at half the price of USPS while handling large order volumes. However, it’s important to note that these models are still in their early stages, and the differences between the U.S. and Chinese markets mean further adjustments will be needed.

Conclusion

Currently, the growth rate of the cross-border e-commerce industry far exceeds the data we see, with opportunities in every node, niche, and vertical of the logistics chain. I am optimistic about the industry’s development over the next 5-10 years. In this rapidly changing environment, cross-border logistics companies must focus on their unique positioning, resources, and strengths, simplifying where necessary to carve out their growth space.