BEST Plans Expansion After Singles' Day Growth Tops 30%

Following its launch in Vietnam, Best is looking to deliver in other countries in Southeast Asia.

Anthony Russo
    Nov 25, 2019 10:30 AM  PT
BEST Plans Expansion After Singles' Day Growth Tops 30%
author: Anthony Russo   

After posting strong quarterly results and launching in Vietnam, Best Inc. (NYSE: BEST) is looking to take a larger share of the logistics market in Southeast Asia.

George Chow, the chief strategy and investment officer of the Chinese company, said that Best is expanding its delivery services and aiming to provide cross-border logistics in Malaysia, Cambodia and Indonesia.

"We see Southeast Asia as a strategically important region for our expansion, as it has a relatively young population and a fast-growing economy. Mobile penetration and the e-commerce market in Southeast Asia has also been growing rapidly, which requires integrated supply chain solutions as well as quality delivery services," Chow told CapitalWatch in a written statement on Friday.

Last month, Best expanded its express parcel delivery service to Vietnam, which marked the company's 19th venture overseas. Citing research from World Bank, Chow said logistics costs account for about 21% of Vietnam's GDP, which is among the highest in the ASEAN region.

"Vietnam has a dynamic and young population that is eager for new ways of lives and work. With billions of dollars of consumer spending power and tens of millions of online consumers, Vietnam is the third-largest e-commerce market in Southeast Asia, and it's still growing at an amazing pace," Chow said.

He also noted that high costs and inefficiency of transportation have hindered the development of e-commerce in Vietnam.

He wrote, "This presents an opportunity to us. We hope our technology-enabled logistics solutions will contribute to the advancement of e-commerce and the digital economy in Vietnam as well as across the region."

Best said in a statement last month that it will set up seven warehousing centers across Vietnam and is now building the first in Ho Chi Minh in partnership with BW Industrial Development JSC.

Chow noted that warehousing quality has yet to catch up with the demands of e-commerce and logistics. As a result, the company signed an agreement with BW, a local industrial supplier.

The flagship operation center remains on track for completion in April 2020, Chow said.

Raising $450 million in its initial public offering in September 2017, the Hangzhou-based company is backed by Chinese e-commerce giant Alibaba Group Holding Ltd. (NYSE: BABA). Alibaba has been one of Best's largest shareholders, holding 46% of the voting power in the company through Class A and Class B shares, as of December, according to a filing with the U.S. Securities and Exchange Commission.

Best provides supply chain management services to Alibaba among its 600 corporate customers, according to Chow. He said that Best generates just 1% of its revenue directly from Alibaba, but it does engage with merchants and brands that sell goods on Alibaba's online retail platforms.

"These merchants make individual and independent decisions on which parcel delivery company to engage with. On average, BEST Express ships more than 20 million parcels on a daily basis for these merchants," Chow wrote.

He continued, "For reference, about 80% of China's parcel volume is related to e-commerce platforms, not only from Alibaba's shopping platforms, but also from many other fast-growing platforms."

During China's largest shopping event, Singles' Day, which traditionally takes place on November 11, Best processed 130 million orders, up 31% from last year, according to Chow. He also said Singles' Day typically shows a big jump in e-commerce sales and brings a "surging demand" for Best's smart supply chain and logistics business. Daily parcel volume for its Express service handles around three to four times more on Singles' Day compared with Best's daily average, according to Chou.

Alibaba, meanwhile, has set its own new record on Singles' Day, with gross merchandise volume reaching $38.4 billion.

Best said earlier this month its third quarter revenue was $1.2 billion, up 22% year-over-year. Net loss narrowed to $900,000, down 87% from the same period a year ago, according to the report.

Chow said, "Our mission is to empower business, enrich life. By leveraging our technology capabilities and integrated business model, we want to facilitate the business of merchants and brands to deliver their goods to the consumers wherever and whenever needed."

The stock in Best was trading up nearly 2%, at $5.50 per American depositary share, on Monday afternoon.