Promoting Logistics Development in Rural Areas by Asian Development Bank;

Author:Asian Development Bank;
Language: eng
Format: epub
Publisher: Asian Development Bank Institute
Published: 2017-08-15T00:00:00+00:00

B. The Rapid Development of Parcel Express Companies

Supported by the rapid rise of e-commerce, the PRC’s parcel express industry grew at breakneck speed. From 1 billion parcels a year at the start of the 2006 postal reform,14 total volume grew to 14 billion parcels in 2014. Shengtong Express rode the e-commerce wave to become the largest parcel express company in the PRC. Its growth can be largely attributed to its special partnership with Alibaba, the world’s largest e-commerce company. The PRC’s parcel-express volume now exceeds that of the United States, and is ranked the largest in the world by volume. However, due to the low average rate per package (CNY14.50), the PRC’s parcel express market is still below that of the United States in terms of revenue.

Generally, the service quality of Chinese parcel-express companies is low, far from the stringent standards set by global express companies such as FedEx, UPS, TNT, and DHL. The need for improvement is shown by the fact that Chinese parcel-express companies have a dismal share of the international express-delivery market. Their low market share is due to the following reasons:

(i) A highly fragmented domestic market populated by many small operators limits the prices that can be charged for providing quality service. Thus, local parcel express companies cannot afford to meet the service standard required to compete in the international parcel-express market.

(ii) Low profit margins mean insufficient funds for investment in network expansion; and without a global network, local parcel carriers cannot meet the coverage requirements met by large multinational companies.

(iii) Low profit margins also mean insufficient funds for service upgrades, capacity expansion, and personnel training.

(iv) The dominance of foreign markets by strong, capable, and well-funded parcel express companies creates a tough barrier to entry.

By improving the use of information and communication technology, one could implement an integrated information management process for logistics systems. However, the current level of information systems cannot meet current needs.

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