Sun, February 13, 2011
Business > Industries

Express delivery face dilemma, likely to be segmented

2011-02-13 08:53:17 GMT2011-02-13 16:53:17(Beijing Time)  Global Times

Express delivery service companies are facing challenges to their capabilities and management. As a result of rapid development benefiting from China's booming e-commerce industry, a trend towards segmentation appears to be in the offing, a People's Daily report said Friday.

The taking off of express delivery services was accompanied by accelerated development of China's e-commerce industry since 2005. The output value of the express delivery industry in China topped 60 billion yuan ($9.12 billion) in 2010, growing by more than 20 percent year on year. More than 55 percent of the orders of the leading four express delivery service companies in China were from e-commerce during the past six years, the report said.

However, in the process of expansion, express delivery companies were caught in price battles, which raised user resistance to price hikes when these companies face inflation and oil shortage. Besides, excessive expansion has resulted in slack management and supervision of local branches of major express delivery companies, contributing to low efficiency and bad quality of service.

The capacity of express delivery companies, although they have grown fast, is challenged by the incredible development pace of e-commerce.

Last year's November 11 promotion on Taobao.com, China's biggest online shopping marketplace, brought forth more than 10 million orders to express delivery service companies on that day alone. Due to the year-end online business boom, from November last year there is heavy overload in the operations of almost all express delivery service companies. Many of them had to stop orders as the capacity of their storehouses was overtaken amidst labor shortage, causing headaches to both online shop owners and buyers, according to an earlier Globaltimes.cn report.

Many online retailers, including Alibaba Group, 360buy.com and dangdang.com, have started building their own warehousing and logistics systems due to the low quality and inadequate express delivery services. Experts believe that once their systems are built and achieve nationwide coverage, the impact on the industry will be profound: cross-province parcels would be lesser in volume; and, branches and affiliated local firms of big express delivery companies would have more saying power, and even consider striking out on their own. These could lead the express delivery service industry to become more segmented.

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