Steven Wang: From last year to this year, under the push of the semi-fulfillment model on e-commerce platforms, there has been a new wave of overseas warehouse construction. Many top-tier and mid-tier companies are rapidly expanding their warehouse capacities in the U.S., and warehouses over 500,000 square feet are currently in high demand. Against the backdrop of warehouses filling up as soon as they open, we need to rationally evaluate this round of overseas warehouse expansion.

First, the semi-fulfillment model has indeed driven the demand for overseas warehouses. During the pandemic, many top companies did not significantly expand their overseas warehouse space, and some even saw partial contractions. As a result, there was no substantial growth in the supply capacity of the entire overseas warehouse industry.

Second, as more companies build overseas warehouses, the industry will soon enter a new round of price wars. The main reason for this is that the balance between market supply and demand will inevitably be reached at some point. Once the market reaches this balance, price competition will begin in the industry.

Third, recent reports suggest that e-commerce platforms are preparing to segment overseas warehouse services. Some platforms have already started experimenting with this in certain countries or regions. Segmenting overseas warehouse services means that platforms will break down different aspects of the service—such as inventory management, first-mile delivery, and last-mile delivery—and choose different companies for each segment, rather than relying on a single company. For example, a platform might select one company for first-mile services, another for in-warehouse operations, and yet another for last-mile delivery.

Once e-commerce platforms fully implement this segmental procurement model for overseas warehouses, it will present enormous challenges for warehouse companies. It is well known that many overseas warehouse companies rely on value-added services, surrounding services, and advantages like last-mile delivery accounts to generate profits. If platforms disassemble these services, making all costs transparent, overseas warehouses could become merely labor providers for the platforms. This is a major challenge that these companies must face moving forward.

Many newly established overseas warehouses are pinning their hopes on fully managed services from specific platforms, which is a very risky strategy. If the platform one day decides to cut off access to its interfaces, these companies would lose their primary channel for acquiring traffic and orders through the platform, severely impacting their shipment volumes.

Faced with the upcoming price wars and the possibility of service segmentation by e-commerce platforms, overseas warehouse companies are likely to face significant cost pressures. Therefore, it is strongly recommended that overseas warehouse companies diversify their customer base and not rely solely on the seemingly explosive growth demand brought by a platform’s fully managed services.

Additionally, it is crucial to quickly diversify service scenarios by integrating both online and offline operations. Companies cannot rely only on online orders from specific platforms and expect that becoming a certified warehouse for the platform will be enough to guarantee growth. Otherwise, they will face increasing restrictions imposed by the platform.

Furthermore, in-warehouse operations should move towards automation. Only tech-enabled, smart overseas warehouses will thrive in the future.

In conclusion, companies looking to enter or expand in the overseas warehouse space must recognize the challenges posed by heavy asset investments. These challenges include changes in e-commerce platform policies and competition among peers. Companies need to make rational plans and strategies based on these potential challenges.

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Cross-border E-commerce Logistics Baixiaosheng