J&T Express in Mexico: Everyone has a security map | Unseen Currents to See the World
Platforms and sellers from all directions are moving towards Mexico, the fastest-growing new e-commerce territory in the world, on seemingly crowded but non-interfering routes.
The local giant MercadoLibre, which is firmly in the leading position, recently released the data for the third quarter of this year: Its net revenue is 5.3 billion US dollars (an increase of 35% compared to the previous year), and the GMV in Mexico has increased by 27%. Amazon, which has been investing in Mexico for 9 consecutive years, has attracted 27,000 sellers. The Chinese-funded SHEIN and TEMU can achieve a daily GMV of 7 to 9 million US dollars in Mexico, while Shopee and AliExpress are also making rapid progress.
The key to the rapid development of e-commerce lies in logistics. According to a survey by STATISTA, 4 out of the top 5 reasons why Mexican consumers "do not want to shop online" are related to logistics. Conversely, many of the reasons why they "like to shop online" are also related to logistics.
Once the level of logistics infrastructure does not match the scale of e-commerce development, conflicts will arise between platforms. This is particularly evident in the early stages of a new market.
In the third year (2021) when SHEIN entered the Mexican market, it already had a considerable number of orders, and its business extended from online e-commerce to offline entities. However, it has always faced the problem of last-mile delivery. The delivery partners of SHEIN in Mexico are mostly traditional international giants such as FedEx, DHL, UPS, and local brands such as Estafeta and Redpack. Although these companies have invested heavily in logistics centers and delivery outlets, they are more concentrated in central urban areas and densely populated areas. Deliveries to remote and dangerous areas are more likely to be transferred to third parties.
The cognitive gap regarding express delivery is also huge. Most of the express deliveries for Chinese e-commerce, especially cross-border packages, are mainly small commodities and clothing, with an overall weight of generally 200 - 300 grams. However, the general perception of packages by logistics companies in Mexico is an average weight of 2.5 kg per piece.
J&T Express sensed an opportunity. In the winter of 2021, a pioneer team of more than 20 people was sent to Mexico. They were divided into 10 groups to conduct concentrated investigations in all 32 states. Later, with the advantage of capital, they quickly established a network, obtaining all of SHEIN's local business orders in Mexico at that time, as well as approximately 60% of its cross-border business.
In May 2023, Temu also entered the Mexican market, and the orders naturally fell to J&T Express, which is closer to Pinduoduo (at that time, 80% of J&T Express' domestic orders came from Pinduoduo). But then something happened - at the end of 2023, due to the excessive volume of orders, the warehouse burst, resulting in a serious backlog of inventory and delivery delays, which somewhat affected other e-commerce platforms that cooperated with J&T Express.
Laying out terminal outlets, handling the relationship with e-commerce platforms, and solving the problems of high prices and slow delivery times are the top priorities in the three years since J&T Express entered Mexico. At the same time, other Chinese-background courier companies such as iMile and Rabee are also making inroads in Mexico - a localized war that combines the successful experience of the Chinese logistics and e-commerce model is unfolding secretly.
The internationalization of J&T Express is inherent in its genes. This courier company, established in Indonesia in 2015, became the number one in the Southeast Asian market in four years. In early 2020, it returned to China, and within just 10 months, its daily order volume exceeded 20 million - a scale that domestic counterparts have accumulated for more than ten years.
An e-commerce practitioner in Mexico told "Dark Waves" that "Among all the Chinese-funded courier companies in Mexico, J&T Express is the most willing to spend money, not even blinking when investing billions, and the team mainly comes from the OV system, with a very strong execution ability." He also revealed that J&T Express had an average daily order volume of less than 200,000 last year, but this year it has doubled, and the peak daily order volume can reach 700,000.
This is in line with Li Jie's decisive and resolute style. He once mentioned that internationalization is not just about going on a business trip, studying abroad, or doing OEM, but rather having the courage to take risks, take root locally, and the determination to build one's own brand.
His approach is to first pick the "low-hanging fruits", replicate the successful experience in markets similar to China, which is the largest and fastest-growing market, to form a granary market, and then enter high-potential markets such as the Middle East and Latin America with this experience. In the first half of this year, J&T Express' net profit turned positive for the first time, relying on its business in China.
Now, as the competition in overseas markets is also heating up, a logistics and express delivery enterprise that can achieve full coverage and meet the needs of e-commerce is becoming even more "precious". Currently, J&T Express has laid out more than 1,300 outlets throughout Mexico. To ensure the safety of deliveries, each courier even has a security map in hand.
People can't help but wonder how a courier company with a global gene has opened up the situation in Mexico. Some time ago, "Dark Waves" had a chat with Ethen Huang, Vice President of J&T Express in Mexico, about how a group of people took root in a strange market and the stories of hardships and pains they experienced in the process.
"Dark Waves Looks at the World" is a new column of Dark Waves. Over the past three years, we have successively launched a series of globalized content, and currently, we are more systematically launching a series of reports. Latin America remains the focus of our research at this stage.
The following is the conversation:
The Correct Route
"Dark Waves": I heard that when you were setting up the network, you spent more than half a year preparing and found many areas with huge cognitive differences?
Ethen: At that time, we established a project team in China, and there were not many research reports on Latin America at hand. We could only organize the team while visiting freight forwarders related to Mexican businesses to obtain first-hand information as much as possible.
In the winter of 2021, more than 20 members of our pioneer team flew to Mexico and were divided into 10 groups for concentrated investigation and field research. Then, we divided the full coverage into several stages, giving priority to the capital cities of states with a large population and prosperous businesses. In November, we officially launched the network in Mexico City, the capital, and basically completed the coverage of the entire Mexican network by April of the following year.
After the network coverage was established, it was a long wait. When the network coverage was just realized, the entire team was very excited, but after the excitement, there was confusion because there were no customers. In order to open the market and build trust, we carried out a "free trial", focusing on local small and medium-sized merchants to get the logistics network running first.
The customer that really helped us open up the situation is the local Mexican brand Italika (under the economic oligarch Carlos Slim Helú). For enterprises with national demand, J&T Express started operating its network routes even when the loads were not full, and the investment cost was not low.
In addition to the pain points of price and delivery time, another pain point of logistics in Mexico is the signing rate. You should know that there are no express lockers in Mexico, and local regulations require the user's handwritten signature. Coupled with the fact that there is no link to contact the user to confirm the delivery time before the delivery, the problem of package loss is particularly serious.
"Dark Waves": This seems to be the place where you are most criticized? Because of this, the online reputation of J&T Express is said to be very poor, but you have never defended yourself.
Ethen: In the first two years of entering Mexico, our main focus was on laying out outlets and achieving full coverage. This is very important. It can be said that the foundation we laid has given us the ticket to enter the first echelon.
The last mile is the last and one of the most critical links in logistics and distribution. However, not all logistics enterprises have sufficient cash flow and courage to invest in the last mile. From the moment we set out in 2015, as long as we enter a country, we must quickly achieve full coverage. This is our consensus.
Although the online evaluation of our reputation is important, we were busy improving the evaluation of our platform at that time. Consumers' doubts can drive us to think in time. Next, service quality and delivery time will be placed in a higher position. For example, we have provided a series of packages in Mexico: door-to-door pickup, real-time trajectory query, electronic signature proof, and multiple delivery services that can actively contact customers.
"Dark Waves": What happened in the warehouse burst incident at the end of 2023?
Ethen: In 2023, with the influx of new e-commerce platforms and many Chinese e-commerce sellers, the purchasing power of the Mexican market indeed exceeded our expectations. Our previous predictions and preparations could not keep up with the market growth, and that was a major test for our entire logistics fulfillment service capacity.
"Dark Waves": After this incident, what adjustments have you made?
Ethen: After discovering the problem, we focused on improving our own supply chain problem, that is, the logic of building the network: the delivery capacity of the outlets and the delivery time of the planned products. This year, we have completed the first round of upgrading of our venues, and in April next year, we will carry out the second round of upgrading with fully automated equipment.
There are not many companies with more than 1,000 outlets in Mexico, but we have 1,300. November this year is the peak season, and we will be much more relaxed than last year.
"Dark Waves": According to the previous experience in Southeast Asia and China, the fit between J&T Express and e-commerce platforms is indeed very high. But you have also developed more than 1,000 local small and medium-sized enterprises. How did you gain this trust?
Ethen: I show these enterprises three things.
The first is network construction, which requires time and cost. The second is the system link trajectory, the visualization of the entire link system.
The third is that our service logic is different from that of Mexican counterparts. We follow a mature Chinese model of shortening the transportation, distribution, and signing process, such as market assessment, regulations on the departure time of trunk lines, and the time for outlets to dispatch packages. When I demonstrate the Chinese experience to customers through the system equipment, it is clear at a glance.
"Dark Waves": The Chinese experience is a kind of dimensionality reduction attack in the local area.
Ethen: There are many courier companies in Mexico, but there is a lack of logistics companies with full coverage, not only because the upfront investment cost is very high, but also due to the complex factors of the geographical environment and security.
Considering the cultural characteristics of Mexico, we even hired a professional security team from the local area. This team will clearly tell you which routes and at what time points the delivery may be more efficient, and some need to be selectively avoided. This relies on the addition of local experts from large enterprises, with historical data and dynamic maps.
In two years, we have used these data to form our own strategic map, and this map supports the integrated construction of outlets and the underlying logic of distribution.
It is also necessary to consider the stability of the network and the delivery radius. The population distribution in Mexico varies greatly. The northern region has a large span and a higher level of urbanization, and it is basically a core city. However, there are many villages in the southeastern region, and the density of outlets will be very different.
"Dark Waves": As two major companies that entered Mexico almost simultaneously, people inevitably compare J&T Express with another company. From different dimensions, what are the differences between your two companies?
Ethen: We respect our Chinese counterparts who come to Mexico to explore the market together, but everyone has their own survival rules and methods. Our long-term development strategy path in Mexico has always been relatively clear, and you will find that the path J&T Express is taking now is basically the same as what was planned three years ago. Because there were many temptations back then.
Leaving aside the platform factor, J&T Express' ability to quickly spread its terminal network in Mexico is inseparable from the company's capital investment. It can be said that this is the most critical triggering condition.
Initially, we used the logic of full coverage to infer the investment in infrastructure, and this aspect has never stopped. For example, we now have more than 1,300 outlets, more than 2,000 vehicles, and more than 60 central warehouses. These investments determine whether you can adhere to the long-termism.
Open 365 Days a Year, Can It Work?
"Dark Waves": What is the staffing configuration of J&T Express in Mexico currently?
Ethen: Mexican law stipulates that the ratio of local employees to Chinese employees should not exceed 10:1. Our team has more than 7,000 people. There are more Chinese among the executives, while 90% of the department managers are locals. Executives need to bring more Chinese experience and strategies.
"Dark Waves": 365 days of non-stop operation, I heard that you were the first to launch it. Why?
Ethen: In the final analysis, it is not for the sake of competition, but for the quality and efficiency of delivery services. Established logistics companies such as DHL, UPS, and FEDEX generally do not provide delivery services on weekends. The General Post Office in Mexico City closes at 3 p.m. on Saturdays and is closed on Sundays. This means that on weekends, postal services will also be affected, and deliveries cannot be made.
According to the basic data we have accumulated, you will find that consumers still hope to receive packages in a timely manner, even on weekends. We use a method that complies with Mexican regulations to prioritize achieving 365-day non-stop operation, and this has also promoted the entire industry to solve the problem of 365-day non-stop operation. However, in Latin American countries, weekend delivery means higher wages and labor costs, which is also part of the cost.
"Dark Waves": So how to convince local employees to implement it?
Ethen: Mexican employees are willing to accept the rules set in advance and reach a consensus. In fact, Mexican young people are very diligent and hardworking. As long as it is clearly written in the recruitment and employment contract which days to work and which days to rest, and at the same time, they are paid a certain amount of extra compensation for working on weekends, they can still implement it.
We place great importance on respecting local employees. They really hope to have a sense of participation.
At first, we set two rules: First, for all major decisions, whether it is a local employee or a non-local employee, as long as he is the person corresponding to the module, he should fully participate in the decision-making. The internal business data of the company is shared synchronously between executives and some local employees.
Second, for all major decisions, executives will take the time to explain to local employees why we are doing this and what the logic is, because the network logic in China and the local perception in Mexico are very different. But once they understand, their execution ability is not bad.
"Dark Waves": Are there any other local experience that can be used for reference?
Ethen: Especially for local to-business enterprises in Mexico, they very much hope that you have a complete set of SOP (Standard Operating Procedure), such as the employee badges, work uniforms, and even the corresponding vehicles of each employee, which should be unified.
In addition to ensuring basic logistics services, I believe that what really makes J&T Express recognized by customers is its efficiency and execution ability that are different from the Latin American style. Most local enterprises in Mexico communicate mainly by Email. When a customer raises a problem in the morning, J&T Express has a solution in the afternoon and implements it the next day. When the other party receives the reply that the problem has been solved, this efficiency even surprises the person in charge.
When entering any new market, the first step is to survive. At this stage, we have survived. At least we have a clear strategy, basic service quality, and a decent number of customer orders.
Next, on the one hand, many previous cross-border e-commerce platforms will focus more on local businesses, and this also puts forward higher-dimensional requirements for the in-depth localization of logistics. On the other hand, local merchants in Mexico