Is the SEA parcel carrier market too concentrated?
And what this means for the rest of the world
Why is it that in South East Asia (SEA), parcel carrier market share is so highly concentrated?
I recently came across Momentum Works WeiHan Chen's article on this topic.
Notably J&T, Shopee Xpress’s, and Lazada Logistics control 60% of a parcel delivery market that is already 71% the size of the US by parcel (not by revenue!)
Weihan is thinking that "The key lies in parcel allocation. In China, sellers pick their logistics partners. In Southeast Asia, platforms assign parcel volumes."
I agree and I disagree.
SEA is dominated by marketplaces. Shopee, Lazada, Tokopedia, and other regionals dominated almost all eCommerce.
Weihan correctly draws the comparison to China where marketplaces like Alibaba Group's Taobao Marketplace, JD.COM, PinDuoduo, and now even Douyin Marketplace (the TikTok Shop) dominate the scene...
YET China's 150 billion parcel market is not dominated by them, but instead by a healthy and competitive landscape of players such as S.F. EXPRESS CO. LTD, ZTO Express, YTO International, STO, YUNDA Express, and J&T.
Weihan is completely correct in stating that by picking carriers, the marketplaces in SEA decide the winners.
However, I don't think that this is going to be isolated to SEA only -- I think it's happening globally, around the world, including US and China as well.
My hypothesis is that given enough scale, all marketplaces should and will converge on providing their own logistics services.
Look at the evidence! Amazon is now the #1 3PL in the USA with nearly 5x the revenue of it's next largest competitor, and now Walmart is entering the fray too.
In China, Alibaba Group's Cainiao Group effectively dictates and controls all logistics orchestrated on TaoBao's platform - charging fees and often providing the logistics services directly to merchants. China's last mile delivery partners are just relegated to being a last mile partner.
The reason that SEA marketplaces got there first is due to the speed at which marketplaces dominated the market, and the fragmentation of the region, where each country is really it's own separate market, so that the task of covering the entire city state of Singapore, or country of Malaysia, was much easier than doing all of China or the USA.
In other words, we're all going to live in a world dominated by marketplace or retail owned logistics services, it's just that SEA got their first.
And how do I explain J&T Express? It’s not an anomaly. They are a public company and you see see where this is going. The below chart is their average revenue per parcel, but it may as well their their stock price of their earnings — once it’s gone it will be filled by SPX and Lazada.
