This is
indeed disappointing news for not only the integrators but for businesses that
have expanded into China. Many integrators have waited several years for the
opportunity to compete in this growing market.
According to Transport Intelligence estimates, China’s domestic express
and parcel market is expected to grow over 33% between 2011 and 2015.
Among the
anticipated growth areas for domestic service is that of ecommerce. Online
retail generated $121bn in sales in China, up 66% from 2010, according to
Barclays Capital. The size of China’s ecommerce market is expected to more than
triple over the next three years, with sales reaching $420bn by 2015.
The
integrators have built out infrastructure within the country for not only
international operations but also in anticipation for the allowance to expand
into domestic service. DHL went a step further and invested in three Chinese
express companies. However, its efforts remained unsuccessful and the company
suffered financial losses due price competitiveness and a strict regulation
that banned international carriers from entering domestic markets. As a result,
DHL backed out of its Chinese domestic presence by selling back these companies
in 2011.
So, for the
foreseeable future, the much fragmented domestic express and small parcel
market will be dominated by the likes of Chinese state-owned China Post along
with other Chinese express/parcel providers as SF Express, STO Express and SJS
Express.
The need to
open up the domestic market is great. Indications are that due to the rising demand,
customer dissatisfaction concerning existing service offerings is on the
increase. Infrastructure continues to be a problem. For some businesses, in
order to service customers throughout the country, there is a need to piece
together delivery networks among several domestic providers and modes of
transportation thus resulting in higher delivery costs.
