(Yicai Global) Dec. 23 -- China has exported ever more goods via cross-border e-commerce since the outbreak of the Covid-19 epidemic and the overseas warehouse business has taken off on this strong demand, a sector insider told Yicai Global.

These storage facilities abroad are a key link in the transnational e-commerce business-to-consumer supply chain. Chinese sellers deliver goods to such warehouses using international logistics channels, take orders on their e-commerce platforms, and send the goods from these depots to complete last-mile delivery.

Direct logistics and overseas warehousing are two business models common in cross-border e-commerce B2C exports. The first used to be paramount, but demand for the offshore warehouse mode ballooned when its advantages became clear as the Covid-19 epidemic closed off logistic routes.

Several trans-frontier sellers and overseas warehouse operators described their business growth this year to Yicai Global using the word“double.”

Sales rose almost twice to more than CNY1 billion (USD153 million) this year, said Li Lie, chief executive of Shanghai Gudao Business Consulting.

Declining Custom

The company's sales have roughly doubled this year, said one seller who started using overseas warehouses 10 years ago and mainly expanded in the European market.

Regular customers’ demand for overseas storage rose onefold and many new customers also had a strong need, Li Cong, vice president of China's largest overseas warehouse operator Zongteng Group, told Yicai Global, adding he had to turn down new clients from a lack of both manpower and space.

“It is hard to find a warehouse. It fills up soon as soon as you open one,” Li said. Zongteng Group’s overseas storage area was 500,000 square meters at the start of the year. It topped 700,000 sqm this month, he added.

"We haven’t had any weekends [off] since June. Everyone has had to pull overtime,” Liu Quanli, US regional operation manager of Winit Shanghai Information Technology, told Yicai Global, adding, “We [had to] set three shifts to handle the goods going in and out."

Both Zongteng and Winit are China's leading third-party overseas warehouse operators. Zongteng has 25 storage and transit hubs abroad sprawling over more than 700,000 square meters and processing more than 1 million orders each day. Winit has 13 overseas warehouses worldwide that span over 220,000 square meters and handle nearly 200,000 orders daily on average.

Confounding Expectations

Liu anticipated a drop in business this year as Covid-19 exploded at its start, but more buyers went online as the pestilence spread. Winit's US warehouses’ deliveries jumped from March.

Cross-border sellers’ large-scale restocking further spurred demand. "Warehousing entries from May to June turned out to be 50 to 60 percent more than usual," Liu said.

Yet goods depots, as well as manpower, were soon in short supply. "We rented satellite warehouses and allocated goods with relatively low turnover or those not needed within seven days of sales per historical data to these satellites," Liu said.

Winit began to rent backup storage sites in the US last year, but it only used them for two to three months during the peak season. Demand hardened this year. "We need to ensure 4,000 to 5,000 cubic meters," Liu said.

Winit will have 21 overseas warehouses with a total area of over 340,000 square meters by 2023, predicted Liao Yuanjin, its vice president.

New Normal

Zongteng will continue to expand its overseas goods depositories, Li also said. But he did not offer any specific plan for this.

"Overseas warehouse deliveries will be the mainstream choice for exports of Chinese brands and Chinese manufacturing in the next few years," Liao stated.

The five countries with the most storage space for China's cross-border e-commerce merchants are the US, UK, Australia, Germany and Russia, data from cross-border e-commerce intermediary service provider Shenzhen Eccang Technology shows.

Most operators are small and medium firms. No more than a handful of Chinese companies have set up foreign goods depots of at least 100,000 square meters, Liao said.

This is an asset-heavy business. It needs about CNY10 million (USD1.5 million) investment for 10,000 square meters of overseas warehouses, Winit said. The company is preparing for an initial public offering, hoping to gain more abundant funds to hasten the construction and improve the layout of its facilities abroad.

A transnational e-commerce sector will emerge in the capital market, Li believes. "Many cross-border e-commerce companies will flock to list as the system eases," he predicted.

Editors: Tang Shihua, Ben Armour, Xiao Yi