United Parcel Service (UPS) is teaming up with SF Holding, the parent company of China’s biggest package distribution specialist SF Express, in a bid to better capitalize on the international delivery boom currently sweeping across the People’s Republic. The two companies announced the joint venture in a statement Friday.
According to the Wall Street Journal, both companies will invest $5 million each to establish the joint venture, which will initially be based in Hong Kong and, pending regulatory approval, eventually relocated to mainland China.“This joint venture will support products that provide competitive benefits to our Chinese customers who trade or seek to trade internationally,” said Ross McCullough, President of UPS Asia Pacific. “Our combined efforts will result in new logistics products and services to simplify and accelerate B2B and B2C customers’ cross-border trade.” (See also: United Parcel Adds Stations, Extends China-Europe Rail Route.)
UPS has already built up a sizeable presence in the People’s Republic — in the first quarter it reportedly grew its business in the country by 30 percent. However, McCullough believes that teaming up with SF Express, which boasts over 13,000 service points across China, is necessary to further bolster the Atlanta-based company’s ability to take full advantage of the world’s largest and fastest growing package delivery market. „They have a footprint in China that’s amazing; we have a global network they don’t have,” he said to the Journal. (See also: United Parcel (UPS) Beats Q1 Earnings, Revenue Estimates.)
The joint venture will initially specialize in providing delivery services from China to U.S., although plans have also been made to eventually expand those capabilities to other Asian countries and Europe.
China’s Ecommerce Gold Rush
China, home to 18.5 percent of the world’s population, has more internet users than any other country in the globe, making it a number one destination for online shopping. After an economic boom, the nation has seen a rise in middle class consumers, many of which are keen to buy Western products not readily available in China.
The Chinese government predicts that the country’s delivery-sector revenue will reach $116 billion by 2020, up from $51 billion last year, according to the Wall Street Journal. Together, UPS and SF Holding, which through their joint venture promise to offer Chinese consumers more international shipping options, transit times and services, could emerge as the biggest beneficiaries of this spike in demand.
“China is leading the world in terms of e-commerce market size, growth, penetration and mobile business usage,“ said SF’s vice president Alan Wong. “Coupled with a rapidly growing and internet-savvy consumer base, it’s imperative that SF and UPS collaborate to revolutionize the logistics sector. Together, we aim to bring greater competitive advantages to our customers in China, to succeed globally.”