Francesco Alberti

The logistics and delivery services sector in ASEAN is booming as an indirect result of the ongoing COVID-19 pandemic. The lucrative sector has now attracted players from China like Best Inc. The integrated smart supply chain and logistics solutions provider based in Hangzhou, China, has announced that it has started express delivery services in Malaysia, Cambodia and Singapore following its entry into the Thai and Vietnamese markets last year. The company said it plans to set up 12 sortation centres and 400 service stations in the three countries in the next three years. Best is also looking at commencing service in Indonesia and the Philippines in the near future.

The move intensifies the competition for logistics and delivery services in ASEAN, a fast-growing market that is home to over 360 million internet-savvy consumers and has seen its share of E-commerce grow in recent years. The E-commerce sector is expected to reach US$ 150 billion in value by 2025 up from US$ 38 billion in 2019, according to a study published by Google, Temasek and Bain & Co.

In 2018, Kerry Express Thailand, Hong Kong-based Kerry Logistics Thai subsidiary, tied up with Bangkok Mass Transit System (BTS) to launch a same-day delivery service in the Thai capital, leveraging BTS train station kiosks for drop off and pick up of parcels.

The announcement came after VGI Global Media bought a 23% stake in Kerry Express for US$ 187 million in April of the same year. VGI is the media and advertising subsidiary of BTS.

In Asia, Kerry Logistics profit related to the integrated logistics business increased by 22% in 2019 versus a 15% overall growth at the group level, supported by a strong performance by the Thailand operation. The extent of the increase could have been larger if not for the Groups ongoing financing of the Kerry Express operations in Malaysia, Vietnam and Indonesia amounting to US$ 9 million.

Kerry Logistics also planned to spin-off and list Kerry Express on the Stock Exchange of Thailand (SET) in 2020 and has submitted the listing application to SET last February. However, because of the state of emergency declared by Thailand due to the coronavirus pandemic, the listing has been delayed.

Bests announcement follows the start in May 2020 of international parcel delivery to the United States and Southeast Asia.

Johnny Chou, Founder, Chairman and CEO of Best Inc., said, “We are excited to develop our logistics networks in Southeast Asia, a key focus area of our global strategy. The outbreak of the COVID-19 accelerated and amplified consumers reliance on E-commerce and created even larger potential opportunities in the region. We are confident that our technology-enabled logistics services and high-quality express delivery options will be a critical service component for both merchants and consumers, during both this difficult period and beyond it.”

Best Global, the companys global unit, was set up in 2015 to oversee the companys cross-border logistics and overseas warehousing services in the US. The company has since added 10 countries including Germany, Australia, the United Kingdom and Spain to its international operation network.

Pandemic Opportunity

The coronavirus pandemic has increased demand for E-commerce and opened new opportunities to logistics and parcel delivery firms.

Johnny Chou, Best chairman and CEO sees Southeast Asia as a key area for the companys global strategy.

“The outbreak of the COVID-19 accelerated and amplified consumers reliance on E-commerce and created even larger potential opportunities in the region,” Chou said in a press statement.

Although Bests first-quarter results were impacted by the COVID-19 outbreak, the firm is upbeat about the future.

The company, which counts Alibaba among its investors, saw a 20% drop in first-quarter revenue to US$ 771 million and its net loss soar to US$ 106 million from US$ 34 million in the same quarter of 2019.

While the company has lost some ground versus its domestic competitors, it saw solid growth in its international operations. Citing data from the State Post Bureau of China, Best Express, the companys express delivery arm, shipped 1.9% fewer parcels in the first quarter (Year on Year), compared to an industry-wide 3.2% increase, the company said. On the other hand, Best Global shipped 8.8 million parcels in Southeast Asia, up from 237,000 parcels a year earlier.

In an April statement, Best said it was planning to hire up to 40,000 people this year to expand its operations in China and Southeast Asia to meet current and anticipated demand recovery in supply chain and logistics services after the coronavirus outbreak.

The jobs will be created across the companys different divisions, including express, freight, supply chain management and Best Global. The roles will range from technology development to product operations to quality control and procurement. The new hires will also be deployed to front-line operations such as warehousing, sorting and transportation.

In order to expand its international operations, Best expects that 5,000 of these new jobs will be created for network management, operations, customer services and quality control in Southeast Asia.

In a related development, Best announced in May that in order to strengthen its financial position and help it expand its operations, it had signed an agreement with Alibaba.com Hong Kong Ltd., an affiliated company of Alibaba Group, to issue and sell convertible senior notes due 2025 for a total amount of US$ 150 million. The notes will have a yearly coupon of 4.5% payable semi-annually in arrears beginning on January 1, 2021. At maturity, the notes can be converted to at least 16,000 Class A ordinary shares per US$ 100,000 principal amount subject to adjustment under the terms of the notes.

“Were appreciative of the continued support of our investors during the extraordinary market conditions. The financing will strengthen Bests balance sheet and liquidity while providing us abundant resources to further develop our technology-enabled platform and improve our services for customers. As the growth of E-commerce accelerates in China and beyond, we are confident to scale and succeed in an environment of increased demand for integrated supply chain and logistics solutions where BEST is a competitive leader,” commented Best Chairman and CEO Chou in a released statement.

· Source: The ASEAN Post