How the end of China’s travel lockdown could empower online retail giants like Shein

• From January 8, Chinese citizens will be able to freely leave the country for the first time in years.

• More flights to and from China could make sending packages from China to the US faster and cheaper.

• The change could bolster Chinese e-commerce powerhouses such as Shein and Alibaba.

On Sunday, January 8, many Chinese travellers were able to leave the country for the first time in years.

Even in the early days of the policy change, there is palpable enthusiasm. Travel booking platform Trip.com said international bookings jumped 257% the day officials announced the Jan. 8 reopening date. In addition to citizens eager to reconnect with the world, the change is also being hailed by the e-commerce industry.

While there are many dedicated cargo flights to and from China, more than half of the world’s air cargo travels in the belly of passenger planes. Without regular passenger flights, the cost of airlifting cargo to and from China was very high. However, the decline has already begun and experts expect rates to continue to fall.

More passenger flights mean more cargo capacity, which means cheaper and faster deliveries for Chinese e-commerce companies like Shein and Alibaba and the U.S. logistics companies that are helping them tap the U.S. market.

Gap is one retailer already enjoying the fall in air freight rates. The retailer told investors during its Nov. 17 earnings conference call that falling air freight rates have boosted its profit margins — and it expects those benefits to continue as rates fall even further next year.

Chinese online retailers will benefit even more, said Brian Bourke, chief commercial officer of Seko Logistics, a freight forwarder that manages transportation for Shein as well as other U.S. and Chinese e-commerce giants.

Shein has become the dominant fast-fashion brand in the U.S., in part, by focusing on the small but rapidly growing field of cross-border e-commerce logistics, even though its shipments come all the way from China. But shipping is still slow compared to US online stores. Shein’s U.S. president, George Chiao, told the Wall Street Journal in September that the company was in the process of reducing its normal shipping time of 10 to 15 days by three to four days.

In China’s $2.6 trillion e-commerce market, two-day delivery is key. Reaching that speed in the U.S. is a priority for Chinese companies that are serious about winning over American consumers, Bourke told Insider.

Cheaper air cargo rates will likely encourage Shein and others to invest even more in speed. And because U.S. parcel carriers like UPS and FedEx have tried hard to maintain the high prices they could charge during the pandemic, international shippers now have a better chance to compete.

“Shipping from the U.S. to American consumers is so expensive,” Bourke said. “Imagine if all of a sudden all of these opportunities opened up and you could do a lot of it from China. Then they could beat a lot of domestic retailers on price.”

Read the original article on Business Insider