SF Express sees e-commerce driving air cargo business

November 19, 2014 11:21
SF Express will be an integrated logistics supplier with a focus on mid- to high-end clients, says Vice-President George Li.

Courier services firm SF Express Co. Ltd. expects to receive next year the first of five newly bought aircraft as the company seeks to boost its domestic and overseas parcel and cargo deliveries.

The Shenzhen-based firm aims to double its air cargo delivery business by the end of 2018 due to rapid expansion of e-commerce transactions globally, a senior executive said.

To prepare for huge increase in logistics demand, "we are going to receive the first Boeing 767 by next year," George Li, vice president of SF Express and chairman of SF Best, told reporters in Hong Kong Tuesday. He did not reveal the timeline for the delivery schedule of the remaining four new planes.

SF Best operates an online food shopping store that sells global quality items and many imported brands.

"We saw 100 percent growth in deliveries on Singles' Day (Nov. 11) compared with the delivery in normal days," Li said.

"This is the third decade of development for the company and the theme is change. We would like to be an integrated logistics supplier with a focus on mid- to high-end clients and providing services, including loans, to small and medium enterprises," the executive said.

Traditional courier service which mainly focuses on business-to-business (B2B) segment currently accounts for 70 to 80 percent of SF Express' revenue, while e-commerce distribution makes up the rest.

Revenue from e-commerce will expand significantly, Li said, without giving a specific target.

SF Express has about 20 percent market share in terms of revenue in China. Courier services market in the world's second largest economy was worth about 130 billion yuan (US$21 billion) last year.

Air cargo delivery of SF Express "will be more than 2 million metric tons by 2018, compared with one million metric tons as of October," Li said. 

The company intends to increase its cargo fleet size to 100 planes by 2018 from the current 36. As of now, SF Express owns 16 aircraft and has another 20 on charter.

It saw about 40 percent year-on-year increase in both cargo delivery and revenue so far this year.

The Chinese firm, however, has no plans as of now for a stock market listing.

Europe foray

SF Express has gained a foothold in Europe with regard to cross-border e-commerce. The company launched delivery service for small products in partnership with PostNL, a delivery service firm that has operations in the Netherlands, Germany, Italy, Belgium and the United Kingdom.

"This is the first step for our European plan and it is for B2C only. We will do it step by step," Li said.

To better map its road overseas, SF Express has invested in a huge logistics center in Hong Kong's Tsing Yi district. The facility is expected to be launched next year.

Separately, Li told a conference Tuesday that cross-border e-commerce will develop with the Chinese government's support.

"The market is expected to jump to 5.2 trillion yuan by 2015 and to 6.5 trillion yuan by 2016," he said.

This compares with 2.3 trillion yuan in 2012, an estimated 3.1 trillion yuan in 2013 and a forecast of 4 trillion yuan for this year, according to Li.

"Favorable policies such as customs, quality inspection, foreign exchange, payment and credit support, boom in commissioned purchase market and aggressive competition among e-commerce giants have pushed the growth of the market," he said.

ZTO Express, another Chinese express delivery firm and an Alibaba logistics partner, has reached an understanding with the French post office for strategic cooperation. The cooperation will help ZTO to launch courier service to Europe, especially for orders from Alibaba's e-commerce platforms.

-- Contact the reporter at [email protected]


Ayishah Ma is a financial reporter on Greater China issues.