Delivery companies: no global players yet – Shaun Rein

Logistics firms in China, like ZTO Express, build on the booming e-commerce. Despite their success in China, it might take quite some time before they become global players like FedEx or UPS says business analyst Shaun Rein, and author of The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia,to CNBC.

CNBC:

Chinese delivery firms’ strategy behind much of the growth is unique to the country itself. Compared with the United States, sending and receiving packages within China can be quick and inexpensive. Online orders of books and other goods often arrive by the next day, even on weekends. It’s also possible to send parcels across town for same-day delivery, all for a negligible cost. Much of the Chinese delivery business depends on partners and a large fleet of couriers who rush packages through the country and across cities, by bike, moped, subway, truck and other modes of transit.

“The reality, though, it’s going to be very hard for them to become global players,” said Shaun Rein, managing director, China Market Research Group.

He said many of the companies’ management teams and infrastructure aren’t developed enough for international operations….

Fewer brick-and-mortar facilities may make Chinese firms more nimble, but maintaining a large labor force can be a challenge when it comes to expanding into other countries that pay their workers more. Within China, labor costs could also rise, as employees demand more money given the manual nature of the work and air pollution, Rein said.

Other aspects of the domestic Chinese market make it very competitive. More than 11,000 enterprises had authorization to operate express delivery businesses as of the end of 2014, according to a Deloitte study last year. About 60 to 70 percent of the Chinese market was spread among the top 10 players, including the state-backed delivery firm EMS. That compares with the dominance of just two companies — UPS and FedEx — in the United States.