China's express delivery sector may finally adjust price upward: analysts
In the run-up to China's November 11 online shopping carnival, two major couriers in the market have pronounced price increase in mid-October. Although SF express, the industry leader and several other companies refused to confirm if they are going to follow suit, some industry insiders regard this as a turning point for couriers to raise prices across-the-board under pressures of rising cost and backlog of work.

Along with the booming of online shopping, express industry has embraced golden periods over the past several years. On the other hand, price war waged among top players to fight for more market share keeps prices in the sector under reasonable levels, putting quite a pressure on the operational cost of couriers.

Some industry insiders surveyed by the National Business Daily expects the price increase recently to work as an impetus for the whole industry to adjust price upward. Backlog of work and rising cost are commonly cited as main causes.

ZTO, one of the top ten biggest couriers in China by scale cited rising costs in transportation, labor and packaging materials as reason for the escalation, and the claim was substantiated by several other industry insiders.

The rise in prices of consumptive materials, steels, gasoline, and labor leads to the adjustment, analyzed Tan Chong, the CEO of sandangjia.com.cn, a supply chain management company based in middle China's Hubei province. Yao Jianfang, analyst with the China e-Commerce Research Center agreed, noting the prices of cardboard box and gasoline affect the cost of the industry considerably.

According to a television report by CCTV, China's national broadcaster on September 10, prices of wrapping papers like corrugated paper have doubled recently due to decreased supply and raw material price hike.

Previously, news about couriers switching job to deliver food and express companies piled up with backlog of work closing down had caught widespread attention at the beginning of the year.

Tan Chong disclosed that for the coming “Double 11” –annual November 11 shopping festival—online retailing platforms and stores are all targeting high, although the carrying capabilities of couriers could hardly catch up. “Online stores are like lifeline to couriers. Under fierce competition, most companies dare not to ask for price increases, while with the impetus of rising cost, the sector may take the opportunity to achieve across-the-board price increase,” analyzed Yao Jianfang.

Yang Daqing, analyst with the China Society of Logistics indicated the surge in logistics demand over the years has boosted franchising business in the industry. “Most franchisee-couriers are facing challenges in operation and management and their services of lower quality are featureless. For the prices to take a step forward, services must follow up.”

Yang took SF express as an example, which earlier told the media that they've got no message from the headquarters to raise price. “The company is already charging prices higher than the average level, and it has been sharpening its edge in air freight, providing high-quality logistic services while braving into new areas.”

Several other industry insiders agreed, noting couriers must put the price war to an end, and then develop high value-added services of differentiation.

As of October 11, several other major couriers including YTO and STO express all denied to confirm if they will raise prices or not. Tan Chong predicts all market participants, except for those with high profit margin like the SF express or vying for bigger market share, would all take moves to raise price within reasonable range.

Yang Daqing noted, this does not mean prices would only go up. After Alibaba, China's e-commerce giant, built up the Green Hand logistics network along with all major couriers in the market to construct a big data service system. It is expected that the optimum distribution of resources would help bring down logistics cost in the future.

No matter if other couriers would follow suit, it is clear that online retailing platforms and shops would be affected. Yao Jianfang told the National Business Daily although the new situation would have limited effect on consumers, it will inflict considerable loss on shops.

Yang Daqin suggested online shops to optimize their supply chains. “They are required to take their supply chains under control. The new challenge make the shops realize they must learn to manage their supply chains, in order to strike a balance between cost and good logistic services. 

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