South Korea’s logistics companies such as the local industry leader CJ Logistics Corp. are expanding overseas operations to take advantage of the growing demand for the country’s goods abroad and maintain profitability amid the falling market share at home.
Overseas sales of CJ Logistics and its smaller rival Hanjin Transportation Co. increased so far this year, according to industry sources in Seoul on Tuesday.
CJ Logistics’ global business generated sales of 3.3 trillion won in the first three quarters, up 4.4% from a year earlier. The sales made up 36.8% of the company’s total revenue in January-September.
Sales of Hanjin’s overseas business jumped 55% to 398.6 billion won during the period, accounting for 18.1% of the company’s total revenue, up from 12.4% a year ago.
Their global business includes freight forwarding, which is the organization and shipment of goods from South Korea to other countries using single or multiple carriers, as well as warehouse and distribution (W&D) services abroad.
Demand for the forwarding and W&D services increased as more South Korean companies export their products thanks to the growing demand abroad, industry sources said.
“Many smaller sellers without logistics networks want one-stop services including storage and delivery in other countries,” said a Hanjin official.
LOCAL COMPANIES IN OTHER COUNTRIES
South Korean logistics providers bagged more deals from local companies in other countries based on advanced technology.
“India and Southeast Asian countries prefer Korean companies as logistics technology in those markets is not developed much,” said an industry source in Seoul.
CJ Logistics’ unit in India, which provides freight delivery through land and rail transportation, as well as W&D service there, reported sales of 195.7 billion won in the third quarter, up 13% from a year earlier.
CJ Logistics and Hanjin are expanding their businesses in the US, the world’s largest economy.
CJ Logistics and Korea Ocean Business Corp. last month broke ground on a new logistics center in Elwood, Illinois, which is expected to require investments of $416 million. The logistics provider opened a cold-chain center in Gainesville, Georgia earlier this month.
Hanjin plans to expand a warehouse in New Jersey, its Eastern US hub, by 50% after increasing a fulfillment center in Los Angeles, California by 50% in June.
COUPANG IN SOUTH KOREAN LOGISTICS SECTOR
The moves came as they are losing market shares at home with the rapid growth of Coupang Inc., South Korea’s top e-commerce platform.
CJ Logistics and Hanjin were the country’s largest logistics providers in 2019 with market shares of 47.2% and 13.8%, respectively.
But Coupang Logistics Service Ltd., the e-commerce giant’s unit, bit into their market shares in the country.
CJ Logistics’ market share fell to 33.6% last year as Coupang Logistics Service accounted for 24.1% of the local market.
By Sun A Lee and Hyun-jin Ra
suna@hankyung.com
Jongwoo Cheon edited this article.
