How the end of China's travel lockdown could boost online retail powerhouses like Shein

• As of January 8, Chinese citizens may travel out of the country freely for the first time in years.
• More flights to and from China could make sending packages from China to the US faster and cheaper.

On Sunday Jan. 8, many Chinese travelers were able to leave the country for the first time in years.

Even in the first few days following the policy change, enthusiasm is palpable. Travel booking platform Trip.com reported that international bookings shot up 257% the day officals announced the January 8 opening date. And along with citizens eager to reconnect with the world, the change is garnering cheers from the e-commerce industry, too.

Though there are plenty of dedicated cargo flights in and out of China, more than half of air cargo worldwide travels in the belly of passenger planes. Without regular passenger flights, the price to move cargo via plane in and out of China has been sky-high. The fall has started though, and experts expect rates to keep going down.

More passenger flights mean more cargo capacity, which adds up to cheaper, faster shipping for Chinese e-commerce companies like Shein and Alibaba and the US logistics companies helping them take a bite out of the American market.

Gap is one retailer already enjoying easing of air freight rates. The retailer told investors on its November 17 earnings call that falling air freight rates boosted its profit margins — and it expects the benefits to continue as rates fall even more next year.

Chinese online retailers stand to benefit even more, said Brian Bourke, chief commercial officer of Seko Logistics, a freight forwarding company that manages transportation for Shein, among other US and Chinese e-commerce giants.

Shein has become a dominant fast fashion brand in the US in part by focusing on the small but fast-growing field of cross-border e-commerce logistics, even though its packages come all the way from China. But shipping is still slow compared to US online stores. Shein's US president George Chiao told the Wall Street Journal in September that the company is in the process of shaving three to four days off normal shipping times of 10 to 15 days.

In China's $2.6 trillion e-commerce market, two-day delivery is table stakes. Meeting that speed for the US is a priority for Chinese companies that are serious about grabbing American consumers, Bourke told Insider.

Cheaper air cargo rates are likely to encourage even more investment in speed from Shein and others. And since US package carriers like UPS and FedEx have been trying hard to hold onto the high prices they were able to charge during the pandemic, international shippers now have a better chance of competing.

"It's so expensive to ship from the US to US consumers," Bourke said. "Imagine if all of a sudden all this capacity opened up and you can do a lot from China. Then they could beat a lot of the domestic retailers on price point."