The development of China’s express delivery sector is limiting the opportunities for international providers


China’s express delivery market continues to grow at a rapid pace. According to the State Post Bureau, 2.6bn deliveries were made during the first three months of 2014, an increase of almost 52% over the same period in 2013. In terms of revenue, the express delivery market achieved US$6.64bn up 45.6% over the same period for 2013.

According to one express company, its business has seen rapid growth since the Lunar New Year mostly because of the increase in online shopping. Indeed, while retail sales increased 12% January to March, online retail sales increased 51% for the same period.

It is estimated that the Alibaba Group accounts for four-fifths of all Chinese online consumption. According to the company, it accounts for more than half of all parcel deliveries in China.

Next week, it is expected that the company will file for a US initial public offering (IPO). This could have huge ramifications in not only China but also in the US. More profitable than Amazon, Alibaba’s revenue jumped 66% from a year earlier to US$3.06bn, and profits more than doubled to US$1.35bn.

It is expected the IPO will fetch upwards of US$15bn which the company will use for expansion purposes. Alibaba is expected to move further into the US with plans for a new e-commerce site that will offer high-quality products from select merchants in industries like fashion and jewelry. Its website, 11main.com notes on its home page, “Shop owners are unpacking and getting settled”.

Express providers such as SF Express and YTO Express will likely benefit from the IPO, as well as several other delivery/ logistics companies that have partnered with Alibaba for its China Smart Logistics Network. SF Express has been expanding its presence in the US perhaps in hopes of extending its partnership with Alibaba.

For international express providers such as DHL, FedEx and UPS, there may not be significant opportunity. Perceived as being “higher cost”, these providers may see some uptick in international demand. However, some Chinese express providers such as SF Express, STO, YTO Express and at least twelve private Chinese express companies have applied for international business licenses from the State Post Bureau of China. If approved, competition between China and US will probably increase and could also drive rates down – something that DHL, FedEx and UPS could ill-afford to be drawn into.