The future of Korea logistics
South Korea is pushing hard to create “inner city logistics centres”. In its recently announced initiative, “e-Logis Town”, the government…
South Korea is pushing hard to create “inner city logistics centres”. In its recently announced initiative, “e-Logis Town”, the government has opted to renovate old, obsolete truck terminals instead of building from scratch. These terminals will be remodelled into small-scale modern logistics hubs suitable for e-commerce, B2C delivery and quick delivery schedules.
Within the six locations which the government has chosen to redevelop, three locations are situated in Seoul: Korea Truck Terminal (86,000 square metres) in Seocho-Gu, West Truck Terminal (98,895 square metres) in Yangcheon-Gu, Siheung Distribution Center (156,071 square metres) in Geumcheon-Gu.
Many experts believe these areas are ideal for inner city logistics hubs due to their superb accessibility to districts and well established transportation infrastructure around these locations. According to the government roadmap of “e-Logis Town”, these locations are beyond ordinary shipping yards. They have the potential to transform into futuristic logistics hubs armed with robots and IoT technologies. These hubs will be a centralization location integrating and connecting distribution, logistics and technology industries.
Government officials anticipate more than US$200 million saved in logistics thanks to shorter distances. With half day deliveries achievable due to diversified distribution channels, it will enable more direct trades. In addition, delivery couriers taking advantage of new IT technology would benefit from a shortened delivery time to customers.
Recent media has shed light on this new government scheme which could present new investment opportunities for domestic and oversea investors seeking high yields, with a handful of these locations highlighted in highly quoted IB analyst report: “Why did foreigners buy IFC” by HI Investment & Securities.
However, this high profile plan is raising concerns as these centres need to compete with existing distribution centres like Gunpo Integrated Freight Terminal, which is located close to these six places. Furthermore, the highly anticipated Bucheon Ojung logistics (459,987 square metres) centre just came online, boosting existing logistics capacity even further.
Many critics argue that the mastermind behind this plan, the Ministry of Land, Infrastructure and Transport, should revaluate overall demand thoroughly and come up with concrete measures on how these six locations can coexist with other logistics centres given that many local e-commerce businesses already have their own their distribution centres near Seoul.
Nevertheless, the future of these logistics centres appears to be bright with the growth of the e-commerce sector. According to Shinyoung Securities, over the last 15 years, online retail has grown 20 times whereas offline sales have merely risen two fold over the same period.
With this trend continuing in 2018, online retail sales are expected to reach US$100 Billion, representing 30 per cent of total retail sales. The rapid growth of e-commerce is likely to continue in the immediate future, driving demand for new logistics centres in the future.
Beyond slashing their prices, many online retailers differentiate themselves from other e-commerce players by offering same-day delivery services, meaning that they need to expand their inner city logistics capabilities. Thanks to “e-Logis Town”, I may soon see all of my favourite items delivered to my doorstep within a few hours.