Parcel and Postal Technology International
  • News
    • A-E
      • Automation
      • Business Diversification
      • Construction / Development
      • Cross-border
      • Delivery
      • E-commerce
      • Expo
    • F-O
      • Freight
      • IT & Systems
      • Last Mile
      • Lockers / PUDO
      • Logistics
      • Mail
      • Operations
    • P-R
      • Packets
      • Parcels
      • Peak
      • Retail
      • Returns
    • S-Z
      • Sorting Systems
      • Staff / Personnel
      • Sustainability
      • Technology
      • Vehicles / Fleet
  • Features
  • Online Magazines
    • March 2025
    • September 2023
    • June 2023
    • March 2023
    • December 2022
    • SHOWCASE 2019
    • Archive Issues
    • Subscribe Free!
  • Opinion
  • Videos
  • Analysis
  • Awards
    • 2025 Awards
    • Previous Winners
  • Supplier Spotlight
  • Parcel + Post Expo
LinkedIn YouTube Twitter
  • Sign-up for Breaking News Emails
  • Meet the Editors
  • Contact Us
  • Media Pack
Subscribe
LinkedIn Facebook
Parcel and Postal Technology International
  • News
      • Automation
      • Business Diversification
      • Construction / Development
      • Cross-border
      • Delivery
      • E-commerce
      • Expo
      • Freight
      • IT & Systems
      • Last Mile
      • Lockers / PUDO
      • Logistics
      • Mail
      • Operations
      • Packets
      • Parcels
      • Peak
      • Retail
      • Returns
      • Sorting Systems
      • Staff / Personnel
      • Sustainability
      • Technology
      • Vehicles / Fleet
  • Features
  • Online Magazines
    1. December 2024
    2. September 2024
    3. June 2024
    4. March 2024
    5. SHOWCASE 2019
    6. Subscribe Free!
    Featured
    April 2, 2025

    In this Issue – March 2025

    Online Magazines By Web Team
    Recent

    In this Issue – March 2025

    April 2, 2025

    In this Issue – December 2024

    December 5, 2024

    In this Issue – September 2024

    September 19, 2024
  • Opinion
  • Videos
  • Analysis
  • Awards
    • 2025 Awards
    • 2024 Award Winners
    • 2023 Award Winners
    • 2022 Award Winners
    • 2021 Award Winners
    • 2020 Award Winners
    • 2019 Award Winners
    • Previous Winners
  • Supplier Spotlight
  • Parcel + Post Expo
LinkedIn Facebook
Subscribe
Parcel and Postal Technology International
Features

Growing pains

mmBy Helen NormanApril 1, 201410 Mins Read
Share LinkedIn Twitter Facebook Email

On 11 November 2013, a world record was set for the highest ever online sales in a single day in any country. There were several startling things about this record not the least of which was that it happened, not in the west, but in China. Another two remarkable things were the sheer scale of the shopping event – with US$5.75bn in sales, it eclipsed the amount sold by US retailers on Cyber Monday 2012 by two and a half times; and that all these sales were processed by a single company, the e-commerce giant Alibaba Group.

If you were to assume from this that China is undergoing an e-commerce boom, you would be very right. According to the consultancy Forrester Research, the number of online shoppers in China this year is poised to reach 356 million, exceeding the entire population of the USA and making China’s e-commerce market the world’s largest. These shoppers will help push the market value from US$294bn in 2013 to US$604bn in 2017, Forrester predicts.

The boom in e-commerce has taken many by surprise, including China’s domestic express delivery industry, which is struggling to keep up with demand. The sheer scale of the uptick would be reason enough for the industry being swamped. Last year, express delivery companies handled 4.77 billion items, according to the industry’s own figures. That represented a 70% increase on 2012.

To make things harder, there are no national delivery companies of the stature of FedEx or DHL in China and the market is fragmented. Added to this, transport networks and logistics services vary wildly in quality depending on location. Officials on the ground refer to the problem as China’s logistics bottleneck, and it is something the e-commerce companies are seriously worried about.

Inconsistent services

In 2011, Jack Ma, chairman of the Alibaba Group, called logistics “a crucial link in the e-commerce ecosystem” as he announced plans to invest US$1.5bn to build a nationwide network of warehouses.

Last May, Ma’s firm clubbed together with other e-commerce companies and delivery companies to create the China Smart Logistics Network, a consortium that plans to invest US$16.3bn over the next five to eight years to relieve the bottleneck.

“China is unlike any other in terms of geography,” a spokesman for the Alibaba Group tells Postal Technology International. “The offline infrastructure is extremely underdeveloped, which is one of the contributors towards the massive uptake of e-commerce. And the logistics sector is fragmented and has no unified standards.” He identifies infrastructure, and in particular technological capabilities, as the biggest things holding back logistics. “Many logistics companies lack the ability to efficiently allocate resources and manpower based on volume and location of incoming orders.”

Chee Wee Gan, a principal in the consultancy AT Kearney’s Strategic Operations Practice, says the current express delivery landscape in China can be divided into three distinct blocks. “First you have the state-run company, China Postal Express. Then you have the nationwide private delivery company Shunfeng Express, also known as SF Express,” says Gan, who is based in Shanghai.

“The third block is composed of logistics providers that operate through a franchise model. The biggest of these is Shanghai STO Express. Between them, China Postal Express, SF Express and STO probably account for about two-thirds of the e-commerce delivery market.”

Companies like STO oversee a network of locally based courier services and, alongside SF Express, account for approximately 80% of the express delivery market, according to industry figures.

But Gan says that as the e-commerce market grows, this model is being tested. “A company like STO has hundreds of small courier firms working under its franchise and this means 
the level of service can be inconsistent. It also makes certain services less efficient.

“For example, in the case

of product returns, if a different company in the franchise handles the return, there may be no financial incentive for them to do a good job.”

Right: As of January 2014, SF Express has nearly 10,000 vehicles and 7,600 service centres in mainland China and overseas regions

Taking control

Concerns about poor service have been laid bare several times in recent years. In 2012, the Chinese postal authority cancelled the permits of 116 express delivery companies amid growing reports of customers complaining about losses, theft, poor handling of parcels and massive delays, especially during peak times.

The most shocking case of malpractice happened last year when a Shanghai-based express delivery company sent out parcels coated in poison, resulting in the death of one recipient and leaving several others very ill. The company, Shanghai YTO Express, issued a public apology after the toxic chemical apparently leaked on to parcels during shipment, the Xinhua News Agency reported.

Concerns about the domestic market have led some e-commerce companies to set up their own networks. Online supermarket site Yihaodian has created its own last mile delivery, for example. Yihaodian launched five years ago to sell supermarket items, but it now offers a broad range of consumer products. It has 18 fulfilment centres in eight cities nationwide. “We have around 3,000 last mile workers in 330 delivery depots, each worker owns a moped or bicycle,” says Harvey Wang, Yihaodian’s vice president of operations. The workers are independent freelancers or contracted to one of the 30 third-party logistics providers that Yihaodian also uses as partners in its last-mile service.

Wang says complaints about local couriers led Yihaodian to set up its own last mile service. He says the problems included “customer satisfaction on delivery services, including a stable lead-time, missing/wrong/damaged goods, and a poor attitude towards customer service”.

By building its own network, Wang claims the company, which has a yearly turnover of approximately US$1bn and is half owned by the US retail giant Walmart, has achieved better lead-times than comparable delivery services in the USA or Europe.

Strengthening the network

Left: Launched in May 2003, Taobao Marketplace is the most popular C2C online marketplace in China

The undisputed king of Chinese e-commerce is the Alibaba Group. Taobao, Alibaba Group’s giant e-commerce site, generates 20 million parcel deliveries every day, accounting for 70% of China’s total. The site is often compared with C2C sites like eBay, but it’s really more akin to store-hosting websites like the arts and crafts site Etsy. Users set up their own online shops, selling goods to one another and to outside visitors to the site.

For Richard Wishart, from UK-based consultancy Delivery Management, the mass appeal of Taobao is no surprise. “The Chinese have retail in their DNA,” says Wishart, who helped develop China Postal Express’s express delivery service, EMS. “They’re a nation of shopkeepers, and online is no different.”

The Alibaba Group, which owns a number of other e-commerce sites, including the highly successful B2C site Tmall.com, has so far resisted building its own in-house operation. Instead it has focused its efforts on strengthening its existing logistics through the China Smart Logistics Network. 

“The reason why Alibaba chose to throw open its delivery arm to the market has to do with the type of company it is,” says Gan. “You have to remember it made its name with Taobao, an online marketplace, so the marketplace is where it feels at home.”

Alongside the Alibaba Group, the major shareholders in the China Smart Logistics Network are retailer Yintai Group, Chinese conglomerate Fosun Group, SF Express, and four other Chinese courier companies – Shentong, Yuantong, Zhong Tong and Yunda.

Their goal is to build an IT-driven network capable of delivering packages anywhere in the country within 24 hours. To do this, they plan to use technologies such as cloud computing to create a shared data platform to serve e-commerce, logistics companies, warehouse operators and supply-chain managers.

Creating such a network will be a major undertaking. Among the difficulties to overcome are the massive variations in quality and technological advancement between some of the courier companies. SF Express, for example, has 10,000 vehicles, 14 aircraft and a network of 7,600 service centres. It offers SMS pick-up notification, a redirect service and security features that enable customers to see a photo of the delivery person before they arrive. Its 200+ distribution hubs are equipped with automated sorting systems.

This is a far cry from some of the warehousing operations run by the franchised courier companies Gan has visited, where he says there are “very low levels of automation, no warehouse management system and products strewn all over the ground with no clear sorting process”.

Another area where differences in quality can be found is in transport infrastructure. About 80% of China’s express deliveries are carried by road, according to analysts Anbang Logistics. But the road network in China is patchy at best, says Wishart.

“There’s a huge disparity between the eastern coastal cities and rural China,” he says. “Once you leave the cities, motorways disappear into dirt roads. You’re talking about two totally different worlds.”

China grades its cities into ‘tiers’ ranging from 1 to 4 according to their stage of development. The coastal cities Shanghai, Beijing, Shenzhen and Guangzhou are classed as Tier 1, as they were the first to be opened to competitive economic development and have a large middle class and income levels well above the national average.

But the biggest growth in e-commerce is actually going on in Tier 2 and 3 cities. This is because there aren’t the bricks-and-mortar stores on the ground in these places to offer the diversity of shopping experience you could find in, say, Shanghai,” Gan says. “As a result, e-commerce is plugging the gap.”

Barriers to entry

Right: By the end of 2013, SF Airlines owned 14 all-cargo carriers

One group conspicuously absent from China’s e-commerce boom are the well-established western courier brands such as FedEx, UPS and DHL. According to Gan, the main reason they have had little impact on the domestic market are low margins.

He says: “The price points are just too low for them to compete. DHL, for example, bought a Chinese delivery company a few years ago with a view to getting into the domestic market but sold it at a big loss a couple of years later. These companies have focused instead on B2B delivery, where the margins are higher.”

Low margins may not be the only reason, however. Until recently, Chinese government policy largely excluded foreign couriers from its domestic market. UPS, for example, has had a base in China since 1988, but it wasn’t until two years ago that it was granted approval to provide domestic express-package services, and even then only to five cities. FedEx, which already provides service to more than 400 Chinese towns and cities through joint ventures with Chinese companies, was granted sole access to serve eight cities. 

Wishart says that China remains quite proprietary about its domestic market and that within government there is still a culture of suspicion towards western companies. He cites his own experience in setting up an e-commerce website a few years ago. Although created in the UK, it was translated into Chinese and aimed at the Chinese market. When he travelled to China, however, he found that the website was blocked in much of the country. “I’d come up against the Great Firewall of China!”

April 1, 2014

Share. Twitter LinkedIn Facebook Email
Previous ArticleDelivering customer choice
Next Article DHL embarks on new digital marketing strategy

Related Posts

Features

EXCLUSIVE INTERVIEW: Egypt Post

May 1, 202511 Mins Read
Features

FEATURE: Improving reverse logistics with better data and collaboration

April 15, 202514 Mins Read
Features

SUPPLIER INTERVIEW: Simon Thompson, Group CEO of Windracers Group

April 7, 20257 Mins Read

Receive breaking stories and features in your inbox each week, for free


Enter your email address:


Latest News

Whistl to provide e-commerce fulfillment services to Tesco F&F Online

May 13, 2025

NZ Post’s Auckland Processing Centre becomes fully operational

May 13, 2025

XPO Logistics boosts cross-border capacity with state-of-the-art container trailers

May 13, 2025
Getting in Touch
  • Contact Us / Advertiser
  • Meet the Editors
  • Download Media Pack
  • Breaking News Emails
Our Social Channels
  • Facebook
  • LinkedIn
Supplier Spotlights
  • Cleveron AS
  • Cookie Policy
  • Privacy Policy
  • Terms & Conditions
  • Notice & Takedown Policy
  • Site FAQs
© 2025 UKi Media & Events a division of UKIP Media & Events Ltd

Type above and press Enter to search. Press Esc to cancel.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.

CookieDurationDescription
cookielawinfo-checkbox-advertisement1 yearSet by the GDPR Cookie Consent plugin, this cookie records the user consent for the cookies in the "Advertisement" category.
cookielawinfo-checkbox-analytics1 yearSet by the GDPR Cookie Consent plugin, this cookie records the user consent for the cookies in the "Analytics" category.
cookielawinfo-checkbox-functional1 yearThe GDPR Cookie Consent plugin sets the cookie to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary1 yearSet by the GDPR Cookie Consent plugin, this cookie records the user consent for the cookies in the "Necessary" category.
cookielawinfo-checkbox-others1 yearSet by the GDPR Cookie Consent plugin, this cookie stores user consent for cookies in the category "Others".
cookielawinfo-checkbox-performance1 yearSet by the GDPR Cookie Consent plugin, this cookie stores the user consent for cookies in the category "Performance".
elementorneverThe website's WordPress theme uses this cookie. It allows the website owner to implement or change the website's content in real-time.
JSESSIONIDsessionNew Relic uses this cookie to store a session identifier so that New Relic can monitor session counts for an application.

Functional

Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.

CookieDurationDescription
__cf_bm30 minutesCloudflare set the cookie to support Cloudflare Bot Management.

Analytics

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.

CookieDurationDescription
CONSENT2 yearsYouTube sets this cookie via embedded YouTube videos and registers anonymous statistical data.
uidsessionThis is a Google UserID cookie that tracks users across various website segments.
vuid1 year 1 month 4 daysVimeo installs this cookie to collect tracking information by setting a unique ID to embed videos on the website.
_ga1 year 1 month 4 daysGoogle Analytics sets this cookie to calculate visitor, session and campaign data and track site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognise unique visitors.
_ga_*1 year 1 month 4 daysGoogle Analytics sets this cookie to store and count page views.

Advertisement

Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.

CookieDurationDescription
OAGEOsessionOpenX sets this cookie to avoid the repeated display of the same ad.
OAID1 yearCookie set to record whether the user has opted out of the collection of information by the AdsWizz Service Cookies.
VISITOR_INFO1_LIVE5 months 27 daysYouTube sets this cookie to measure bandwidth, determining whether the user gets the new or old player interface.
YSCsessionYoutube sets this cookie to track the views of embedded videos on Youtube pages.
yt-remote-connected-devicesneverYouTube sets this cookie to store the user's video preferences using embedded YouTube videos.
yt-remote-device-idneverYouTube sets this cookie to store the user's video preferences using embedded YouTube videos.
yt.innertube::nextIdneverYouTube sets this cookie to register a unique ID to store data on what videos from YouTube the user has seen.
yt.innertube::requestsneverYouTube sets this cookie to register a unique ID to store data on what videos from YouTube the user has seen.

Others

Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.

CookieDurationDescription
VISITOR_PRIVACY_METADATA5 months 27 daysDescription is currently not available.

SAVE & ACCEPT
Powered by