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SF
EXPRESS, one of China's largest couriers,
has announced that it will expand cold chain
services from first to second tier cities
this year and then into even smaller centres.
Meanwhile,
a smaller courier, which once aimed to be
the sixth largest in China, is facing likely
bankruptcy as the sector goes through a
shakeout on government approved, if not
mandated, consolidation.
As
the early first half is traditionally slack
for the express industry, the elimination
of smaller firms is expected to accelerate,
said China Supply Chain Management Union
executive Huang Gang.
China's
express industry business volume is growing
at a dramatic rate of 50 per cent per year,
but smaller firms are being left behind,
reports Xinhua.
Even
in the November 11 "Singles Day"
cyber shopping spree in 2013, when hundreds
of millions of express packages were generated,
many smaller couriers did not have enough
orders because the five largest firms –
SF Express, EMS, STO, ZTO, YTO and Yunda
– absorbed more than 80 per cent of the
market.
Price
wars in the express industry have been fierce
in recent years and have greatly reduced
the courier profits. Many smaller firms
are struggling with meagre earnings while
others drop out.
Niu
Zhiwen, a manager from a logistics consultancy
firm in Qingdao, said neither the market
nor policies discriminate against smaller
couriers. They go out of business because
they do not have the network to attract
customers.
Meanwhile,
big companies upgrade services. In mid-January,
12 companies applied to the State Post Bureau
for licences for new services.
HNA
Cargo, the cargo arm of China's largest
private air carrier HNA, and Yixun, the
logistics arm of Tencent, applied to run
domestic express service. Suning Appliance,
one of the largest appliance retailers in
China, applied for international express
service.
Expanding
larger firms also brings more pressures
on smaller ones, said Mr Niu.
Shen
Zhengyuan, a researcher from domestic consultancy
firm CIConsulting said that smaller couriers
need capital to support upgrades before
they can improve their businesses.
They
should do their best to attract investors
and raise funds to enhance facilities and
services. They should also hire qualified
personnel and improve efficiency, he said.
Finally,
Mr Shen said, these firms should change
their strategy away from an all-too-frequent
low-price policy.
Mr
Niu did not comment on whether the larger
firms' applications for new services is
a signal that Internet is changing China's
logistics industry, but pointed out that
China's express market will continue to
expand as e-commerce business thrives.
There
are two kinds of e-commerce express service
providers in China. One is the large third-party
service providers like SF Express, EMS,
STO, ZTO, YTO and Yunda. The other one is
the delivery arm of standalone e-tailers
like Jingdong, Yixun and Amazon. Smaller
firms are thus struggling in the cracks
between the giants and will face a harsher
climate this year.
Fast
rising e-commerce business has been offering
vast business opportunities for the express
industry and lagging regulations have resulted
in cut-throat competition.
But
the situation is expected to change this
year, said Mr Shen, as low price is no longer
the sole focus of the customers, while reliability
becomes the courier's core competitive strength.
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