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[Exclusive] Retail

LX Group’s Pantos to enter e-commerce market with fulfillment service

The logistics firm aims to eventually rival Amazon and Alibaba in the $113.6 billion market

By Jun 22, 2021 (Gmt+09:00)

A fulfillment center of Pantos, a logistics unit of LX Group, in Cheongna, Incheon
A fulfillment center of Pantos, a logistics unit of LX Group, in Cheongna, Incheon

Pantos Co., the logistics unit of South Korea’s newly established LX Group, is entering the global e-commerce market by launching a worldwide fulfillment service to compete against bigger rivals such as Amazon and Alibaba.

Pantos has already developed an integrated e-commerce logistics management system and started offering services in mid-June, a senior LG Group official said on Tuesday.

“With some 250 logistics centers and 360 branch offices across the globe, we aim to transition into a global e-commerce company that focuses on comprehensive fulfillment services,” he said.

The business is the group’s first project since it was spun off from Korea’s fourth-largest conglomerate LG Group and relaunched as LX Group on May 1.

As part of a corporate restructuring, the older LG Group hived off five subsidiaries and placed them under another holding firm, LX Holdings Corp.

The new holding entity has LG International Corp., LG Hausys Ltd., LG MMA Corp. and Silicon Works Co. and Pantos Co. under its wing. The units will drop LG from their names and add LX instead.

LX International is the parent of Pantos with a 51% stake in the logistics firm.

With its global network, Pantos has so far engaged in business-to-business (B2B) delivery services. But during a general shareholders’ meeting in March, LX International added e-commerce, particularly fulfillment services, as a new business area, to enter the global e-commerce market.

LX Group logo
LX Group logo

FULFILLMENT SERVICES: A BOOMING MARKET

Analysts expect fulfillment companies to enjoy sharp growth in coming years thanks to the global e-commerce boom fueling demand for fulfillment services, which include managing, packaging and shipping products for e-commerce sellers.

According to US business consulting firm Grand View Research, the global fulfillment service market is forecast to grow at an annual average rate of 6.5% to $113.6 billion in 2027 from $72.9 billion in 2020.

South Korea is the world’s fifth-largest e-commerce market, where China and the US are dominant players. The Korean fulfillment market is projected at around 2.6 trillion won ($2.3 billion) this year, according to the Korea SMEs and Startups Agency (KOSME).

Domestic e-commerce giants such as Coupang Corp., Naver Corp. and eBay Korea recently strengthened their fulfillment businesses but largely limited their services to the Korean market.

Coupang, which owns Coupang Fulfillment Services Ltd., last month began pilot fulfillment services in Japan. Naver has joined hands with CJ Logistics Co. to offer such services in Korea.

Industry officials said Pantos isn’t considering a strategic tie-up with a domestic e-commerce company to launch a global fulfillment service. Pantos will start the new business utilizing its own global logistics network and then consider a partnership later, they said.

Workflow at a fulfillment center
Workflow at a fulfillment center

STYLENANDA, ESTEE LAUDER, APRIL, HYBE AMONG CLIENTS

Pantos has already secured big local companies as its e-commerce clients.

The L'Oréal affiliate Stylenanda, a Korea-based make-up and fashion brand, Estee Lauder, and April Co., a Korean skincare firm known widely as April Skin, are among them.

Pantos has also signed an e-commerce fulfillment service contract with HYBE Co., the global entertainment powerhouse behind boyband sensation BTS.

A Pantos official said it opened a fulfillment center in Cheongna, Incheon, and is preparing to deliver goods related to K-pop artists to some 200 countries.

“We aim to strengthen our fulfillment business for global services to eventually compete with market leaders such as Amazon,” said the official.

LX Group is led by Koo Bon-joon, uncle of LG Group Chairman Koo Kwang-mo.

Koo Bon-joon ran LG Electronics Inc. for six years from 2010 and was vice chairman of LG Corp., the holding firm of LG Group, for three years after that. He is the second-largest shareholder of LG Corp. with a 7.72% stake.

Write to Kyung-Min Kang at Kkm1026@hankyung.com

In-Soo Nam edited this article.

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