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China’s courier sector: slower growth, higher customer satisfaction
Across China, one can have anything delivered fast. Last year, Chinese people spent an average of RMB 287 ($42) on courier services, says an industry report released by the State Postal Bureau on June 24th. Shipping parcels around for Chinese consumers is generating a fortune for entrepreneurs: the surge in shares of SF Express—China’s biggest courier service by revenue—has made its founder Wang Wei, once a delivery boy, the country’s third-richest man. Wang and five other package delivery billionaires in the nation have a combined wealth of around $47 billion, according to Bloomberg Index.
Although Chinese people are getting more parcels to their doorsteps each year—23 parcels per person throughout 2016, up from eight the previous year—the pace is slowing down after years of red-hot growth. The state report reveals that the nation’s express delivery services handled a total of 13.91 billion parcels from January to May this year, with growth rate dropped to 30.3% YoY compared to last year’s 56.7%.
Over the past decade, courier companies have benefited from the e-commerce boom led by Alibaba. The cooling of express delivery is attributed to the slowdown of retail e-commerce sales, some argue (in Chinese). According to global consultancy McKinsey & Co, the growth of e-commerce gross merchandise volume in China is expected to slow to 19% this year, compared with the staggering 74% rise in 2011.
The lucrative shipping industry’s increasing cutthroat competition has led to price cuts. Average cost per item is on course for a fifth consecutive yearly decline, the state report shows, from RMB 18.6 ($2.72) to RMB 12.7 ($1.86). Meanwhile, Chinese consumers are increasingly satisfied with the service. Satisfaction rate across the industry stood at 74.7% in 2016, up 0.7% from the previous year, with SF Express leading in the game.
As the domestic market becomes more crowded the delivery giants are looking to woo users overseas. SF Express announced in May it was teaming up with UPS. Already present in 51 countries and regions, the new joint venture boosts SF Express’s reach to almost every country in the world. Alibaba-backed YTO Express also recently announced a global parcel alliance (in Chinese) with 50 couriers in 25 countries and regions.
“The world needs China’s service,” says YTO Express chairman Yu Weijiao at a logistics conference in Yiwu, a city 300km south of Shanghai named the “largest small commodity wholesale market in the world”.