China’s domestic parcel delivery is booming. In fact, the number of domestic express deliveries in China increased 52% year-on-year to 14bn in 2014 according to Shanghai’s National Business Daily. What’s more, it’s only expected to grow further. According to projections, domestic express deliveries will increase 40% to 19.6bn in 2015 with 30% revenue growth for providers.
The Chinese shipping industry is still fragmented with some estimates of upwards of 35,000 express delivery companies operating in the country. A highly competitive market, it typically competes on price which then tends to lead the timeliness of delivery and package care to suffer. In addition, because of the cut-throat rate competition, profit per parcel has drastically declined while costs rise.
As a result, in late 2014, the government announced plans to open the express parcel delivery market further to foreign firms in an effort to force domestic companies to improve services.
US-based integrators FedEx and UPS entered the Chinese domestic market in 2012, albeit on a limited scale. At the end of 2014, the State Post Bureau approved Yamato (China) Transport Co Ltd, the China unit of Yamato Holdings Co Ltd, OCS Overseas Courier Service (Shanghai) Co Ltd and Kerry Logistics Co to join FedEx and UPS. In addition, FedEx won approval to operate in 20 more cities for a total of 68 cities.
This is a positive move for China’s domestic express parcel market. Word has it that there are at least 11 additional international providers are waiting for approval to enter the express domestic market.
The newly approved providers bring a host of available services that will benefit the domestic express market. For example, Yamato partners with the China Post with its China Direct service that offers parcel shipping service for web stores that conduct direct sales of products from Japan to Chinese consumers. Also, its Ta-Q-Bin service, a type of click and collect, is available in Hong Kong and could be further expanded into China.
For the other two providers, Kerry Logistics has built out a network of warehousing within China while OCS Overseas Courier Service is a part of Japan’s All Nippon Airways and will benefit cross-border needs.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)