Can Chinese Express Delivery Industry Keep Growing Fast?

The Chinese express delivery business increased 30 times over the past decade thanks to the booming of e-commerce industry. According to State Post Bureau’s most recent report, the express industry extends its growth with revenue of 98.46 billion RMB in the first quarter of 2017. YoY revenue growth rate is 4 times as the GDP’s over the same period. From 2016, the five major express corporations: S.F. ExpressSTO ExpressYTO ExpressZTO Express (NYSE), Yunda Express successively went public to enter a new phase of growth.

An Overview of Chinese Express Industry
1. Market Status
From 2006 to 2016, the delivery volume of Chinese express business grew 30 times from 1 billion to 31.28 billion parcels, and the revenue increased 1226.2% from 29.97 billion RMB to 397.46 billion RMB.

Delivery Volume.png

Delivery Volume of Chinese Express Industry
(Source: DataYes RoboR Research Platform)


Revenue of Chinese Express Industry
(Source: DataYes RoboR Research Platform )

2.Market Segmentation

  • By Shipping Categories

The major express revenue was coming from inter-city express, which accounts for more than 50%. The intra-city express and the international, HK, MC, TW express constituted 14% and 10% respectively. The inter-city express revenue proportion declined slowly since 2012, while the intra-city express increased. International, HK, MC, TW express slipped significantly.

Shipping Distance.png

Revenue Proportion of Different Shipping Categories
(Source: DataYes RoboR Research Platform

Note: The decrease of international, HK, MC, TW express revenue proportion doesn’t mean a decline in the business. In fact, the international express revenue constantly increased from 31.59 billion RMB to 36.96 billion RMB and finally reached 42.9 billion RMB from 2014 to 2016.

  • By Region

Eastern China contributed the largest volume of express delivery, followed by the central China and western China. Guangdong Province stood the first place with 7.67 billion parcels, which was far beyond Zhejiang Province’s 5.99 billion parcels, followed by Jiangsu Province, Shanghai, and Beijing with 2.84 billion, 2.6 billion and 1.96 billion parcels.

Delivery Volume Map.png

Express Delivery Volume in 2016
(Source: DataYes RoboR Research Platform

Regional Proportion.png
Regional Proportion Revenue.png

Regional Proportion of Delivery Volume and Revenue

(Source: DataYes RoboR Research Platform

In terms of the growth rate, Guangxi, Shaanxi, Anhui, Heilongjiang, Gansu, were ranked as the top 5 with the rate of 82.1%, 81.3%, 72.5%, 72.3%, and 71.3%. Tibet, Jiangsu, Xinjiang were ranked as the lowest three provinces with the rate of 27%, 23.9%, and 22,8%. The below map showed a significant difference between the eastern and western China. The central China grew the fastest.

China Express Delivery YoY Growth in 2016.png

Express Delivery YoY Growth in 2016
(Source: DataYes RoboR Research Platform


3. Key Drivers

With the development of online retail business, the express delivery grows simultaneously. The following graphs showed the high correlation between the online retail transaction and express delivery volume. From 2012, the growth rate of express delivery outpaced the online retail transaction.

Volume of E-commerce transaction and Expresss Delivery.png

The correlation between online retail transaction and express delivery
(Source: DataYes RoboR Research Platform

Challenges and Opportunities in Chinese Express Industry
1. Challenges

  • Competitive Pricing

As the express industry is developing rapidly, the competition becomes extremely fierce due to the business giants involvement and the capital inflow. The price of both inter-city and international, HK, MC, TW express declined. Intra-city express price keeps being low.

Average Price of Express Delivery (RMB)
(Source: DataYes RoboR Research Platform

  • Customers' Complaints on Service

The intensified competition and the speedy expansion of the industry also caused service quality issues. From 2014 to 2016, the state post bureau receives more than 200 thousand complaints each year about loss, delay, damage and other service issues. Though the complaints to volume ratio decreased in the recent 3 years, the express corporations still need to work on improving their service in the future.

Proportion of Different Types of Complaints.png

Express Delivery Complaints
(Source: DataYes RoboR Research Platform, State Post Bureau)

Express Delivery Complaints to Volume Ratio
(Source: DataYes RoboR Research Platform, State Post Bureau)

2. Opportunities

  • The China’s rural area will become the blue ocean for express delivery business

With the popularity of the internet and 4G service in China’s rural area, the e-commerce business starts to spring up. From 2014 to 2016, the revenue of online retail in the rural area grows 156% from 180 billion RMB to 460 billion RMB. The express shipping centers have increased to 95,000, which cover 70% of the rural area. As most of these shipping locations are still only available for EMS delivery, there is huge market potential for more express companies to extend their business in the rural area.

E-commerce Transaction in Chinese Rural Area.png

Online Retail Transaction in Chinese Rural Area
(Source: DataYes RoboR Research Platform, CI Consulting)

  • Cross-border e-commerce will be the next hot market

In recent years, the growth rates of cross-border import retail e-commerce have been over 60%. Experts forecast a 70%-80% of growth and 1.2 trillion transactions in 2018. The cross-border e-commerce is expected to be one of the most profitable markets in the future.

Cross-Broader E-Commerce Transactino.png

Cross-Border Import Retail E-commerce Transaction
(Source: DataYes RoboR Research Platform)

With both challenges and opportunities, China’s express industry has a great potential for continuous development and improvement. Having more than 1.2 million people employed in the industry, China express business gains vigorous support from the government. In the meanwhile, the five express giants’ IPO brings more chances for capital investment, which will be beneficial for technology upgrades and management improvement. The State Post Bureau of China forecasts that by 2020, the country is expected to handle 70 billion express parcels, and industry revenue will reach 804.27 billion RMB.