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Logistics- Slower growth, price promotions erode profits

Logistics: Slower growth, price promotions erode profits

E-commerce customers become competitors

With a decline of 6 percent, the logistics category was among eight categories that lost value in the 2019 BrandZ™ China Top 100. The logistics category was added to the ranking for the first time a year ago. Of the five logistics brands in the ranking, only two—ZTO Express and Yunda Express—increased in value.

Driven by the rapid growth of e-commerce in China, the logistics category continued to expand during the first three quarters of 2018, but the rate of growth slowed somewhat, according to the State Post Bureau of China. Still, 49 billion parcels were expected to be shipped in mainland China this year, up 20 percent from around 40 billion last year.

Despite the growth, promotional shipping discounts by online retailers and competition among the logistics brands has put pressure on profits. And a new competitor entered the category when JD.com, China’s second largest e-commerce site, opened its own logistics network to consumers, often with the promise of same-day or next-day delivery.

Meanwhile, Alibaba and Cainiao Network, its logistics business, purchased a stake in ZTO Express. The strategic investment was intended to strengthen Alibaba’s logistical capabilities as it expands its New Retail, enabling consumers to purchase online and receive their purchases rapidly and conveniently.

In separate developments, YTO Express joined with Alibaba’s Cainiao Network to build a logistics center in Hong Kong. SF Express entered a joint venture with UPS to improve service from China to the US. It also acquired the China supply chain business of Germany-based DHL, which is expected to accelerate the business-to-business growth of the SF Express.