The number of packages delivered in China, a key indicator of e-commerce growth, increased 56.4% to 5.77 billion in the first quarter of 2016 in China, compared with 41.7% growth in the same quarter of 2015, according to State Post Bureau, a government agency that manages shipping companies in China. Online orders generate more than 80% of parcels shipped in China, according to China’s e-commerce giant Alibaba Group Holding Ltd. 

The bureau attributes the growth to the increased online orders in Q1. The agency says many e-retailers continued to operate through the Chinese New Year period in February, and e-retailers increased online promotions during the holiday season.

Among the more than 5 billion packages delivered, 180 million needed delivery workers to collect payment on delivery, representing about 3% of total parcels shipped, according to the agency.

The bureau says the average shipping cost per parcel had declined 8.8% to 13.4 yuan (US$2.06) in Q1 from 14.7 yuan ($2.25) in the same quarter a year ago, the result of fierce competition among China’s 3,000 shipping companies.

Courier-service providers grew their businesses, though not at the same rate, the bureau says. The number of parcels shipped by all global companies, including U.S.-based FedEx Corp. and United Parcel Service Inc., grew 38.5%, while state-owned companies grew 20% and privately owned Chinese companies 62.1%.

The bureau also reports market share in China for global courier-service companies is 0.7%, which translates into delivery of 40 million parcels in Q1 by overseas companies.

The Chinese market offers an opportunity for global shipping companies, but it is also full of challenges because those firms must compete with thousands of Chinese shippers. China opened its parcel shipping business to foreign companies in 2007. However, ordinary mail delivery service remains limited to domestic companies, the Bureau says.         

FedEx, for example, says it will target multinational clients and cross-border shipping contracts in China. Although FedEx declined to break out its parcel shipment volume in China, the company says it manages 200 freight flights per week into China and operates 2,700 shipping vehicles in the country.  

“Global shipping companies like FedEx have a higher labor cost, which makes it hard for them to compete with Chinese companies for low-end business,” Wang Fang, a previous FedEx employee and now a logistics consultant, tells Internet Retailer. “To reduce costs, some Chinese shipping companies don’t provide benefits like health care Insurance to their workers.”

FedEx operates facilities in 78 Chinese cities and continues to expand. In 2015, the company upgraded facilities in 18 midsized Chinese cities, including Fuzhou and Xiamen, to cut a day off shipping times in those areas. FedEx also plans to invest $100 million to build an international shipping center in Shanghai in 2017, creating 100,000 square meters (1.08 million square feet) of storage space.

(Source: internetretailer.com  Author: FRANK TONG)