Express delivery sector to grow at least 40% in 2017: expert

Updated 2016-12-26 09:30:06 Global Times

Companies grapple with rising labor costs, thin profit margins

Further policy support could ensure that China's express delivery business maintains a strong growth momentum in 2017, an industry expert said Sunday, following an announcement by the nation's postal authority that the industry handled 30 billion express delivery parcels as of December 20.

Xu Yong, chief analyst at industry portal, said the volume, already the world's largest and an impressive figure in itself, could grow another 40 percent to 50 percent year-on-year in 2017 if more supportive policies were put in place.

The growth is exceptional given an overall slowing economy, Xu said.

But he also pointed out that legal barriers, rising labor costs and low profit margins are hindering the growth of the fast-expanding industry.

There is still legal work to do on compensation clauses that deal with missing or damaged parcels, or with the expedited handling process for express delivery parcels, according to Xu.

As of December 20, the nation's express delivery business had handled a total of 30 billion parcels, the Beijing Business Today newspaper reported on Wednesday, citing data released by the State Post Bureau (SPB), which supervises the industry's growth.

From January to November, 27.89 billion parcels were handled, increasing 52.8 percent over the same period last year, according to the SPB. Industry-wide revenue stood at 354.41 billion yuan ( billion), up 44.3 percent year-on-year.

In November, the busiest month so far this year, 125 million parcels, or 1.4 times the corresponding figure in 2015, were handled every day.

"A very fast growth rate upon a very big base, increased parcel-handling capacity and increasing level of government support were some of the hallmarks of the industry in 2016," Xu told the Global Times Sunday.

Another milestone: five express delivery companies began on the process of getting stock market listings this year, which shows how the industry is being transformed, Xu said. "However, once get listed, these companies will only have a short period in which to strike a balance between investors' expectations of making a profit and the reality of low profit margins, that are being further eroded by rising labor costs."

On average, the revenue for each parcel is only 13.3 yuan, which is comparatively low, according to Xu.

For instance, global giant UPS has annual revenue of nearly billion, which is almost equal to the aggregate profits of all Chinese express delivery companies. On a per parcel basis, UPS earns .37 while FedEx gets .2, in contrast to Chinese companies'average of 13.3 yuan.

Xu said this is because the global giants are more focused on business clients, while domestic express companies grew out of the business-to-consumer business, such as delivering items consumers buy from online shopping platforms.

"One of the trends that will run from 2017 through the next few years will be that we start to see differentiation of companies by developing their own niche strengths, such as cold-chain logistics, transporting IT goods, or specializing in baby and maternal products and cosmetics," Xu said.

A delivery man who only gave his surname as Ji told the Global Times that in 2016 he felt the volume of express delivery parcels increased "significantly."

"The growth of some ancillary businesses, such as agents that collect parcels on behalf of customers for a fee, also boosted the growth of the industry," Ji told the Global Times Sunday.

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