Hong Kong Logistics: Cutting-Edge Fashion and Wine Freight Solutions

Hong Kong is an international logistics hub boasting a vibrant logistics sector. More logistics options have been made available to trading companies in recent years, thanks to changes in the market and government policies. For instance, in addition to traditional truckload shipping, goods can now be shipped to the mainland in the form of cross-border e-commerce retail imports. Meanwhile, as major cities like Beijing, Shanghai and Guangzhou continue to be key high-end consumer goods markets, Hainan is emerging as another prime consumption centre thanks to its duty-free shopping policy for travellers.

Hong Kong logistics solutions providers face a serious challenge in how to adjust operations swiftly to meet client demands. In the face of an ever-changing logistics market, some operators have proactively taken advantage of market changes and created new opportunities, including CN Logistics International Holdings Limited. Founded in 1991 and listed in Hong Kong in 2020, CN Logistics is a leading logistics solutions provider specialising in high-end fashion and wine. The company operates 36 distribution centres in regions including Hong Kong, mainland China, Taiwan, Switzerland and Italy.

In an interview with HKTDC Research, Suki Cheung, Director of CN Logistics, shared how the company copes with changes in the market and her views on the strengths of Hong Kong’s logistics sector, which should provide a valuable reference for industry players.

Being reliable and progressive

Attributing the company’s sustained business growth to its solid track record and word-of-mouth reputation, Cheung said: “As high-end fashion items and wine are both high-value, fragile products, clients attach the utmost importance to logistics solutions providers’ goodwill and experience. Given the products’ hefty price tags, security is a major concern. A branded handbag or a bottle of vintage wine can easily sell for hundreds of thousands of Hong Kong dollars, and it is critical for us to ensure that such products are delivered safely to their destinations.”

“Security aside, clients are also particular about logistics providers’ choice of transport solution. For example, some high-end fashion cannot be folded and must be hung up all the way during transport. For some leather products, the logistics provider must ensure that they are kept in a controlled environment to prevent the leather becoming brittle because of high temperature or mould growing as a result of high humidity.”

Tailored solutions

Worldwide product supply chains have been disrupted during the pandemic. Outlining CN Logistics’ proactive efforts to help businesses resolve logistics blockages, Cheung said: “Unable to travel out of mainland China to shop during the pandemic, mainland consumers of high-end fashion and wine naturally turned to the domestic retail market. To cater to these consumers’ demands, apart from strengthening the manpower in our mainland warehouses, we also offered clients the cross-border e-commerce retail import logistics solution.”

“High-end fashion items and wine imported through the general import channel are subject to customs tariffs, VAT and consumption tax levied by the mainland government. Products imported in the form of cross-border e-commerce retail transactions, however, enjoy relatively lower tax rates overall. Therefore, during the pandemic, many high-end fashion and wine suppliers were interested in expanding into cross-border e-commerce retail imports, and enhancing their sales and brand awareness by launching online sales.”

“We are now co-operating with two famous mainland e-commerce platforms which have helped open online shops for up-market fashion and wine businesses, as well as track sales data to gain insights. On our part, we assist in handling logistics and customs declaration for these companies.”

“The response so far has been very positive. A bottle of fine wine from Europe can be delivered to a mainland consumer from Hong Kong within five to eight days after an order is placed.”

In addition to the new cross-border e-commerce retail avenue, the Hainan Free Trade Port is emerging as a premier destination for mainland consumers seeking high-end fashion and wine. Elaborating on the company’s business in Hainan, Cheung said: “Since Hainan rolled out the duty-free shopping policy for travellers¹ in July 2020, the Hainan Island has quickly turned into a ‘shopping paradise’ for high-end fashion and wine. CN Logistics has assisted high-end fashion and wine companies in shipping their goods from Guangzhou and Hong Kong to Hainan for sale. Moreover, we also took part in the first China International Consumer Products Expo in Haikou in May this year. Hainan’s development prospects are most promising, and it will be a key focus of our business going forward.”

Corporate social responsibility

The society is placing increasing emphasis on green supply chain management. Where high-end consumer goods are concerned, consumers care particularly about whether enterprises are using more eco-friendly packaging materials. Detailing CN Logistics’ initiative to offer green supply chain solutions, Cheung said: “The concept of ‘circular economy’ ²is extremely relevant to the up-market fashion and wine businesses, as such products require more packaging materials than other goods to ensure that they are properly stored and transported. Meanwhile, fashion items, often being seasonal and susceptible to changing trends, have relatively shorter product cycles. These factors, together with consumers’ rising environmental awareness, means that businesses have a keen demand for green supply chain solutions.”

CN Logistics supports the United Nations Sustainable Development Goals, under which recycling and carbon emissions reduction are incorporated into day-to-day business operations. Cheung spelled out the company’s environment protection efforts, saying: “First, we provide clients with specially designed recyclable cartons supplied by our e-commerce platform partners. Using such cartons forms part of our co-operation agreement with the platforms in order to reduce the quantity of cartons discarded.”

“Second, we provide services collecting recyclable materials from our clients, such as plastic bags, clothes hangers, cosmetics plastic bottles, used clothes donated by consumers, etc. These materials will then be handed over to our recycling partners.”

“Third, we started a trial using electric vehicles delivering goods to and from our distribution centres in Hong Kong and mainland China this year. Fourth, through supporting projects listed on the United Nations Carbon Offset Platform, we strive to promote carbon neutrality. In 2020-21, we achieved a reduction in greenhouse gas emissions equivalent to 6,403 tonnes of carbon dioxide.”

These green efforts have contributed to significant improvements in the company’s carbon footprint, despite not improving its bottom line directly. Cheung said: “These projects have enabled our clients to participate in building a circular economy and lowering carbon emissions, and can form part of their companies’ environmental, social and governance (ESG) initiatives.”

“Frankly, providing such green supply chain solutions to clients does not generate profit for us. Take collecting clients’ recyclable materials as an example: we have to deploy staff to help sort materials and pay for recyclers to handle them. Yet, we acknowledge that environmental protection is an irresistible trend and a common responsibility for every business in the logistics sector.”

Takeaways

Amidst all the changes in Hong Kong’s logistics sector in recent years, CN Logistics continues to maintain its leading status. Cheung believes that the company’s success lies in its strong sense of preparedness for the future, saying: “Many of our client services were conceived and planned years ago. Cross-border e-commerce retail imports is a case in point. As early as in 2013 when cross-border e-commerce retail imports began to catch on in the mainland, we were already keeping close tabs on changes in the relevant policies and searching for possible opportunities.

“Our formula for success is to stay alert and sensitive to market developments all the time and constantly explore ways to enhance our services in keeping with market changes.”

Cheung advised Hong Kong companies to capitalise on their key advantages, saying: “Hong Kong companies’ strengths have always been their flexibility and international outlook. They should capitalise on Hong Kong’s advantages as one of the world’s freest economies as well as strong global connections to provide clients with world-class custom-made services.

“For the logistics industry in particular, it should be noted that the Outline of the 14^th Five-Year Plan for the National Economic and Social Development and the Long-Range Objectives Through the Year 2035 specifies that support will be rendered to Hong Kong to raise its status as a centre of international finance, shipping and trade, and an international aviation hub.³Good opportunities will also arise from the development of the Guangdong-Hong Kong-Macao Greater Bay Area and Regional Comprehensive Economic Partnership (RCEP). Hong Kong companies that can maintain their agility and international horizon will certainly be able to seize the upcoming opportunities and scale new heights.”

¹ According to the announcement on duty-free shopping policy for travellers departing Hainan released by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration (Announcement No.33 [2020]), for travellers – both overseas and domestic – departing the island who have purchased at duty-free shops that implement the duty-free policy and operate on a franchise, their annual duty-free shopping allowance is raised from RMB30,000 to RMB100,000. The Announcement took effect on 1 July 2020.

² Circular economy refers to reducing consumption of resources in economic activities, and recycling and reusing waste materials produced by economic activities.

³ For details of the support policies for Hong Kong in the 14^th Five-Year Plan, see: China’s 14^th Five-Year Plan: Key Policies.