Behind SHEIN's Rise: Key Logistics Allies
iMile | Anjun Logistics | J&T Express | Buffalo | Zongteng Group
Shein is intensifying preparations for its upcoming IPO, with a potential listing in London as early as this month, according to recent reports from Reuters.
Shein's global profile has risen dramatically in recent years. In 2023, the company's profit surged by 55% to over $2 billion, with a total GMV of approximately $45 billion, surpassing the entire sales of its rival Inditex, the owner of Zara, for the first time.
Shein's success has spurred the rise of a new wave of service-oriented enterprises, particularly in logistics. As Chinese e-commerce giants like Shein extend their global reach, Chinese logistics firms are also making significant advances abroad, following in their footsteps.
With Shein's substantial order volumes reaching regions such as the Middle East, Latin America, and Africa, Chinese logistics companies are rapidly expanding in these emerging markets, capturing opportunities for swift growth.
Prominent players in this sector include iMile, known as the "Middle Eastern UPS," Brazilian logistics pioneer Anjun Logistics, the billion-dollar express giant J&T Express, Buffalo, dubbed the "DHL at the Cape of Good Hope," and Zongteng Group, recognized as China's leading cross-border logistics provider.
iMile · Middle East
In 2015, Shein ventured into the Middle East as the region witnessed its first e-commerce boom. By 2016, Shein had amassed a sales revenue of $27.77 million USD in the Middle East. The momentum continued in 2017 with Amazon's acquisition of the local platform Souq and the emergence of Noon as another e-commerce player.
Witnessing the influx of products into the Middle East via e-commerce channels, Huang Zhen was inspired to establish a logistics-focused company addressing industry challenges, giving rise to iMile.
Notably, iMile's Series A funding round, spearheaded by a female founder, stands as one of the largest financings in the Middle East to date, securing a total investment of $40 million USD, with ByteDance contributing $10 million USD at a lower valuation.
The Middle East logistics sector faces two formidable challenges: entrenched cash-on-delivery (COD) habits and the complexities of last-mile delivery.
An overwhelming 95% of Middle Eastern consumers prefer COD for their online purchases. While this practice reduces refusal costs for customers, it imposes a financial burden on logistics firms and hampers warehouse efficiency.
Meanwhile, last-mile delivery in the Middle East is particularly challenging. Dispersed populations, scattered dwellings, and rugged terrain—including deserts and hills—complicate the task. Fuzzy regional demarcations further exacerbate the difficulty of pinpointing precise addresses, significantly impeding delivery efficiency and diminishing user experience.
As e-commerce giants like Shein, Souq, and Noon see a surge in orders, iMile has leveraged its technological expertise from Chinese cities such as Hangzhou and Shenzhen. This has led to the development of a sophisticated digital system and the establishment of a robust address database.
As reported in August 2023, iMile has established itself as the dominant force in e-commerce delivery across the Middle East, achieving a significant milestone of profitability. This success is largely attributed to its robust partnership with key client Shein, whose order volumes in the region skyrocketed during the pandemic, reaching nearly $3 billion in sales.
iMile's strategic focus on perfecting the crucial "last-mile" delivery has been pivotal to its success. Beyond platforms like Amazon and Noon, which have in-house last-mile logistics capabilities, iMile has forged collaborative ties with other major players in Middle Eastern e-commerce, including TikTok and Temu.
The unprecedented surge of e-commerce in the Middle East has attracted numerous logistics contenders eager to tap into this burgeoning market. The swift market penetration of J&T Express in 2021, with a robust delivery network established in the UAE and Saudi Arabia within eight months, served as a catalyst for iMile's expansion beyond the Middle East.
Following the trajectory of e-commerce giants like Shein, whose expansion into regions like Latin America and Europe has been relentless, iMile adeptly seized the opportunity to establish its presence in Mexico in late 2021 and subsequently entered Brazil in 2022.
"While iMile and Shein may explore collaborations in other emerging markets, meticulous market assessments will be conducted to evaluate market maturity and policy alignment with cross-border e-commerce, given the substantial investment logistics entail and the imperative of infrastructure development in each country," shared an insider from iMile.
Anjun Logistics · Brazil
Beyond the Middle East, Brazil has emerged as a strategic focal point for Shein's global growth trajectory. With a population of 210 million, Brazil stands out as the largest market in Latin America, offering unparalleled opportunities.
According to Sensor Tower data for 2021, Shein recorded 23.8 million downloads in Brazil, topping the fashion e-commerce charts. The company's estimated revenue in Brazil reached $400 million that year.
However, Brazil's heavy taxation, formidable entry barriers, and complex customs clearance present significant challenges for Chinese global e-commerce enterprises. Logistics, in particular, emerges as a major pain point in getting goods into the country.
With Shopee and Shein making waves in Brazil in recent years, 2023 has seen a surge of global e-commerce platforms setting their sights on this market. Tackling logistics intricacies has become the foremost task in penetrating the Brazilian market. While Shein has leveraged iMile's expertise for last-mile logistics in the Middle East, its partnership with Anjun Logistics is pivotal in addressing similar challenges in Brazil.
In 2020, Shein ventured into the Brazilian market, following in the footsteps of Shopee. By 2021, the company had pivoted to a dual strategy, focusing on both cross-border operations and localizing its presence in Brazil.
"Our partnership with Shein began in 2020. Before that, shipping from China to Brazil took between 30 to 90 days. With the gradual establishment of logistics channels, 80% of shipments now reach major Brazilian cities within 9 to 14 days, while the central-western region sees slightly longer transit times of 14 to 25 days," disclosed Fang Ke, the founder of Anjun Logistics.
"While Shein wasn't our first client, its significance cannot be overstated, given the volume of its orders," affirmed Fang Ke. Initially, Shein had three logistics partners when it began working with Anjun, assigning only a few hundred shipments annually. By 2020, thousands of orders were flowing into Anjun from Shein, with volumes continuing to rise steadily.
Throughout this journey, challenges such as tax evasion and returns due to Brazil's high obesity rates emerged, prompting Shein and Anjun to collaborate closely on refining their logistics model.
Fang Ke observed Shein's remarkable growth in Brazil between 2021 and 2023, noting a significant surge in orders after 2021. By late 2021 and early 2022, Shein had strategically pivoted to bolster its localization efforts. The company's strong performance in the region is now primarily attributed to local businesses, although its cross-border operations continue to witness steady growth. Concurrently, Anjun has ridden the wave of Shein's growth trajectory, experiencing symbiotic expansion alongside its strategic partner.
In March 2022, Shein launched its integrated Marketplace in Brazil, enabling local merchants to set up shops and sell their goods. By April 2023, Shein announced a significant investment of approximately $150 million in Brazil to convert 2,000 apparel manufacturers into its suppliers. The goal is to ship 85% of its locally made products across Latin America by 2026.
A look at the timeline reveals Shein's rapid progress in establishing a local presence and swiftly localizing its supply chain by setting up warehouses. During the initial phase, before Shein had registered its local entity, Anjun played a crucial role. Anjun facilitated Shein's procurement, warehouse equipment purchases, and even assisted with obtaining the necessary certificates for cross-border customs clearances. This groundwork, supported by expertise from Anjun's two acquired Brazilian firms, laid the foundation for Shein's expansion in the region.
Shein's entry into Brazil has been marked by efficiency and cost-effectiveness. "Unlike Shopee, which grappled with logistics losses during its first year in Brazil, Shein managed to turn a profit," emphasized Fang Ke. Beyond its international special lines, Anjun has forged a strategic alliance with Brazil's postal service, providing significant advantages in last-mile delivery. To meet Shein's local business demands, Anjun undertook a substantial expansion of its local team in 2022, with a sharp focus on improving capabilities in collecting and delivering shipments.
By the end of 2023, Anjun Logistics and Brookfield, an asset management company, inked a contract for the delivery of a supervision warehouse at Guarulhos International Airport. The 25,000-square-meter facility aims to enhance customs' commercial express clearance capacity to 1 million tickets per day, addressing the issue of clearance delays in Brazil due to site limitations.
In 2024, Anjun Logistics plans to focus on developing five innovative services: direct mail for small international packages, port services, local deliveries, express transportation, and overseas warehousing. These offerings are set to revolutionize the logistics landscape in Brazil and across Latin America.
J&T Express · Middle East & Mexico
J&T Express went public in the Hong Kong Stock Exchange in October 2023. J&T dominated the Southeast Asian market in 2022. According to its prospectus, in 2022 alone, the company handled 2.513 billion shipments in the region, claiming a market share of 22.5%, clinching the top spot.
Currently, J&T boasts a global network of more than 290 large-scale transit centers and over 22,000 distribution points, with a workforce exceeding 350,000, spanning across Asia, Europe, Africa, the Americas, and Oceania.
Despite its global reach, J&T finds itself ensnared by platform dependencies wherever it ventures. In Southeast Asia, Shopee has been the main conduit for J&T's orders since their collaboration began in 2017.
Learning from Lazada's stumble—attributed to its over-reliance on a single logistics provider—Shopee has been bolstering its own logistics capabilities to reduce dependence on J&T. Meanwhile, in China, J&T faces its toughest challenge, as it remains excluded by Alibaba's Taobao and Tmall, which together command a 50.8% share of the Chinese e-commerce market.
The relationship between J&T Express and Shein in Mexico has grown increasingly nuanced and intriguing.
J&T entered the Mexican market in 2021, largely influenced by Shein's established presence in the region since 2018. Over the past three years, Shein has experienced rapid growth in Mexico, expanding from online retail to brick-and-mortar stores.
Initially, Shein grappled with last-mile logistics challenges in Mexico, with limited logistics services in options. J&T swiftly moved to fill this gap, driven by Shein's substantial order volumes in Mexico and its willingness to collaborate with Chinese cross-border logistics firms.
Backed by its financial prowess, J&T rapidly expanded its network, achieving favorable average order values. Consequently, Shein entrusted all its local orders in Mexico to J&T, with 60% to 70% of its cross-border volume following suit. J&T was even recognized as a strategic long-term partner by Shein.
In May 2022, J&T proudly announced its full coverage across Mexico and Brazil.
In May 2023, Temu ventured into Mexico, marking another significant win for J&T in securing an e-commerce giant. However, a hiccup in late 2022 involving J&T's Mexican warehouse led to a period of turbulence. In China, 80% of J&T's orders come from Pinduoduo, Temu's parent company.
Leveraging Pinduoduo's influence, Temu demanded J&T's unwavering commitment to fulfilling its Mexican orders. This put J&T in a difficult position, forcing it to scale back on fulfilling some of Shein's orders across 16 Mexican regions to meet Temu's demands, causing ripples in Shein's supply chain stability.
Since then, Shein has kept J&T at arm's length. Currently, in addition to forging logistics alliances with firms like iMile, Shein has established its own warehouse in Mexico. Meanwhile, J&T's strategy for 2023 mirrors Shein's approach in Brazil. Insiders report that Shein has offered J&T an additional 1% profit margin compared to Temu.
Buffalo · South Africa
Despite Buffalo's establishment in 2017, its remarkable ascent began only recently—more than two years after Shein's entry into South Africa in 2020. Although Shein utilizes two logistics providers within South Africa, Buffalo International Logistics has emerged as a pivotal element contributing to its growth.
In 2023, Shein experienced a surge in popularity, coinciding with Buffalo Logistics attaining its Level 1 Authorized Economic Operator (AEO) accreditation from the South African Revenue Service (SARS). This certification, valid for five years, grants Buffalo Logistics access to streamlined procedures, reduced frequency and swiftness of inspections, exemptions from certain customs oversight, and lower security deposits, according to SARS.
"We have consistently maintained the lowest inspection rate and the highest clearance rate at Johannesburg airport customs over the years," Buffalo's website asserts, highlighting the company's operational efficiency and reliability.
With Shein's meteoric rise in South Africa, Buffalo has been riding the wave of success: capturing 90% of the market share of e-commerce shipments from China to South Africa, with streamlined delivery times from an initial month-long wait to as quick as three days.
Cross-border logistics in South Africa is largely dominated by DHL, UPS, TNT, and FedEx, which prioritize bulk shipments. In contrast, Buffalo exclusively serves clients and procures orders from Chinese e-commerce platforms, concentrating on small to medium-sized parcels.
This strategic focus allows Buffalo to operate symbiotically alongside established players like DHL and UPS, thereby circumventing direct competition. Buffalo explains that it ships products in bulk to its sorting center in South Africa and leverages local couriers for fast last-mile deliveries.
Earlier this year, Temu made its official debut in South Africa. Capitalizing on its swift shipping and efficient customs clearance, Buffalo successfully forged a partnership with Temu. Additionally, South African online fashion retailer Zando has recently partnered with Buffalo to serve as its logistics provider for Zando Global, an international e-commerce platform akin to Shein.
Buffalo now stands as the premier B2C logistics company facilitating shipments from China to South Africa, paying up to 1 billion Rand ($53.88 million USD) annually in customs duties to the South African government.
Zongteng Group · North America
Although Zongteng Group has maintained a low public profile, it has not escaped the notice of investors, especially given the meteoric rise of Shein, with whom it has collaborated for years.
As the logistical backbone for major cross-border e-commerce platforms such as Amazon, eBay, TikTok, Shein, and Walmart, Zongteng has established itself as an industry unicorn, bolstered by billions in investments from entities like ByteDance and Hillhouse Capital.
Li Cong, Vice President of Zongteng, attributes the company's rapid growth to its strategic decision in 2014 to invest in global logistics infrastructure, particularly targeting the European and American markets.
Shein's agile supply chain owes much to Zongteng's support, ensuring timely deliveries to American consumers. This collaboration underscores that the trend of going global extends beyond products to essential infrastructure services.
Zongteng operates primarily in two domains: direct line logistics services and overseas warehousing, bolstered by international freight forwarding and customized logistics solutions.
Currently, the company manages a daily volume of 1.5 million parcels and boasts 1.2 million square meters of overseas warehousing space, marking a significant milestone as the first entity in China to surpass the one million square meter benchmark. Additionally, Zongteng owns and operates two 777 cargo planes.
The current prominence of Zongteng can be attributed to a combination of its proactive endeavors and favorable historical circumstances. A pivotal aspect of its success is rooted in China's robust manufacturing capacities, adeptly meeting the demands of the global market.
In 2024, Zongteng's strategic trajectory involves strengthening air routes to ensure stability, beginning with two additional charter flights this year and more expansions planned. The company aims to enhance its overseas warehousing footprint, both in terms of quantity and strategic distribution. Additionally, Zongteng plans to support Chinese brands venturing into international markets, targeting both commercial entities and end consumers.