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Taking Stock: Opportunities outweigh the challenges – Royale China GM on China’s logistics outlook

The Royale International Group has been providing customised, one stop integrated courier solutions to international customers since its foundation in the early 1980’s. The logistic group established Royale China in 2006 and today has already opened 30 offices and warehouse in China, providing One Stop Courier Solution to retailers and other businesses across the country. With his solid experience in the market, Spencer Lam, general manager of China at Royale China talks to Retail in Asia about the latest logistics trends, challenges and opportunities in the growing retail market in China.

RIA: Last year, various challenges such as the global economic downtown, natural disasters and increasing labour costs brought some significant challenges to supply chains and logistics to Asia. Will these challenges continue affecting Asia in 2012? How do these challenges affect retailers in Asia?

Spencer Lam (SL): Since the worldwide economic downtown from the global financial crisis in the late 2000s, many economists have considered it to be comparable to the worst financial crisis of the Great Depression in the 1930s. Many medium sized China logistics players find themselves facing difficulties due to a business shortfall and this has led to cost-cutting, staff redundancies, bankruptcy and fading out from the industry altogether. 

Royale China remains optimistic on both the worldwide and the Chinese logistics markets. Since Royale China’s establishment in 2006, the Royale International Group has managed to set up 30 offices and warehouse facilities. We believe that it is a great opportunity to "purify" the Chinese Logistics market by "weeding out the weak and retaining the strong". We have been fortunate to remain one of the market leaders in China and in the world through our reputation on service quality, strong financial background, international logistics network and knowledgeable staff. 

Despite the global financial crisis, the Asian retail market has rebounded well and the outlook for Asia remains positive. It seems that many companies are either working on establishing and solidifying their presence, or expanding their operations in the first, second and third-tier markets. Multinational retailers such as Wal-Mart, Tesco and Metro continue to expand their operations in Asia. Demand seems to be growing across the board, from inexpensive fast-moving consumer goods to exclusive luxury items. The challenges of operating in Asia with its huge and diversified markets, weak infrastructure, and opaque and shifting regulations are great, but the opportunities outweigh the challenges.  

RIA: Can you talk us through the latest retail scenes in China? What is the outlook for the logistics industry here?

SL:China has already proved that in the foreseeable future (at least five years from now), its position ad the world’s factory position remain unchanged, even with new competitors from the emerging markets such as India, Brazil, etc. China will still be driving the regional momentum for production & supply to the international consumers. These include: high technology & health related products, i.e computer parts, wafers, electronic parts & accessories, telecommunication devices, vaccines, pharmaceutical & medicines; basic products such as clothing & textiles; toys & games; automotive parts & accessories, etc. According to Price Waterhouse Cooper, the average growth is expected to be about 6 percent in Asia’s retail sector. 

In order to cope with the international logistics demands, we need to expand in China and we believe that this is the right time for Royale China to expand its network here. The economic situation has been affecting the global logistics market, but China still maintains a healthy growth for both export & import in 2011 as "the leader of the world".  

RIA: Apart from the challenges mentioned above, are there any other challenges that Asian retailers may see this year?

SL: Most of the products and service retailers are still providing conventional logistics services even though they aim to offer multi-modal transportation and total logistics solutions. However, few tend to succeed because they are resistant to change and thus lack innovation. 

Although, there are some international logistics operators with sophisticated and traditional set ups in line with various service offerings in the market, they lose out because customers are looking for the "one stop solution" without having to wait for a long time for feedback from different logistics divisions. 

The Royale International Group believes in maintaining the "Never Give-Up" legacy so that we can provide our professional "One Stop Solution" to fulfil our customers’ needs in the fastest time available.

RIA: What are the latest logistic trends in the region in 2012? Can you talk us through these trends? 

SL: The growth of the Chinese logistic industry in recent years and the government initiatives to frame industry specific policy and their regulatory framework present a positive outlook for the logistics industry here. They offer opportunities for both international and domestics companies. 

We are seeing an increasing shift in Chinese logistics activities towards green logistics with the growing awareness of global environmental concern. In addition, outsourcing logistics facilities is gaining in importance due to the growing demand for hi-tech logistics facilities. There also seems to be a rise in investment for transportation infrastructural development in the Chinese logistics industry. 

The Royale International Group foresaw the growing importance of logistics in China so we have expanded our China network to 30 offices and warehouse facilities to meet the international logistics demand.

RIA: As the retail market in China is blooming, both local and international retailers are eyeing to expand into lower-tier cities (tier three and four). What challenges do they see here? How can they ensure that their supply chain is cost effective and efficient?

SL: China’s economic growth has remained strong these past few years, Gross Domestic Products (GDP) and Gross National Products (GNP) and demand for consumer products continues to be on the rise. China’s rapid economic growth has raised living standards and disposable income, particularly in tier-one cities. Wealth is being created across China, contributing to their CPI inflation.

With the continuous inflation by multiple factors such as ample liquidity, booming demand, high commodity prices and upward wage pressures and the rising importance of the domestic market in inland provinces, many foreign investors are relocating their production bases into the lower tier cities with their cheaper labour and production costs, favourable local policies, rising consumer income, surging demand and easier access to the inland markets. Big names such as Intel & Texas Instrument have already moved their production units to Chengdu from Shanghai while Foxconn has also moved part of their assembly lines to Zhengzhou from Shenzhen.

However, logistics, warehousing and shipping are still very inefficient in China and the traffic conditions in those lower-tier locations in conjunction with the major gateways affects the efficiency of the supply chain process. Even though the local government is committed to upgrading the related facilities (e.g. Air Traffic Rights), the situation will still take time to improve.

Distribution in China is also a problem for retailers since there is no national freight carrier in the country. Instead, there are hundreds of thousands of companies operating 5 million trucks across the country. Long-haul delivery trucks often return empty because of the lack of uniform regulations and the lack of uniform systems for tracking, issuing invoices or collecting payments by credit cards by local companies.

These are the reasons for why Royale China has continued to extend our office locations across various  tier-two and tier-three cities and has also established a larger range of services to help provide our customers with a one-stop courier solution. Our flexibility, extensive global networks coverage, superior customer service and customised service have aided many companies in China with their warehousing, distribution, logistics & courier needs and "just in time" management strategies.

RIA: Royale International opened some new offices in China last year. What is your expansion plan this year?

SL: Yes, since Royale China’s establishment in 2006, the Royale International Group has managed to set up 30 offices and warehouse facilities. Last year, we set up 14 new offices and facilities in the country. We will also continue to open more offices in China in areas such as Wuhan, Yiwu, Chongqing, Wuxi and Nanjing this year. And as a part of our service commitment to our customers, Royale China will be focusing on developing our people as "service" is the core element in our industry and it is also the core value of the Royale International Group.  

We have established various programmes and processes such as training programme, career development programme (CDP) and "Talk, Listen & Analysis Process" (TLA). Through these programmes, we believe that our staff will gain a better understanding of today’s technology and corporate concepts which can help them to improve the productivity and the services of the company and to bring along a lot of fresh and innovative ideas. Royale China has also invested in new technology and huge facilities set up by implementing the Online Waybill and Tracking System and we will continue to upgrade our technology this year. 

RIA: With your new plans, how will your service be enhanced in the region and how do you address retailers’ logistic needs here?

SL: The Royale International Group is always one step ahead of our competitors. We have realised the importance of understanding our markets earlier than others, and we cater to these market changes by delivering ongoing value to our customers’ evolving needs. Amid today’s dynamic markets and increasingly changing technologies, companies must be responsive to competition and market changes. Our ultimate goal is to deliver the best value to customers by providing customised, premium "One Stop Courier Solution".

While most international logistics operators in China are still conventional freight forwarders at major gateways, lacking flexibility for their customers, Royale China has already introduced the Gateway & Multimodal Transportation Process to our customers who are moving their production units to lower tier locations. We are experienced in helping our customers by reviewing their existing production and export timelines, and finding the best interconnecting modes of transport which can ensure an efficient and cost-effective delivery process for them.


Spencer Lam is the general manager of China for Royale China, a member of the Royale International Group. With more than 35 years of experience in the logistics industry, Lam has built a responsive team of staff that consistently delivers results that aligns with the corporate goals. He has successfully registered one of the first foreign wholly-owned class A-international freight forwarding agents in China and opened more than 30 offices in the country. He was educated in Hong Kong and China with two master degrees majoring in Business Administration (EMBA) and Finance (M.Fin.).

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Taking Stock is Retail in Asia’s column dedicated to showcasing opinions and providing advice from experts in the retail industry.

(Source: Retail in Asia)