Top Biz News
Couriers' price hike threatens online business
By Qiang Xiaoji (chinadaily.com.cn)
Updated: 2009-11-26 18:01
Several domestic private couriers recently adjusted prices of their express delivery services. Shentong Express, Shanghai Yuan Tong Express, Yunda Express and ZTO Express all published statements on their websites, announcing a hike in prices by one to two yuan per kg.
The price adjustment directly affects the profits of millions of online store owners, especially those who run their online business at Taobao.com -- the biggest online commercial site in China -- who largely rely on domestic logistics firms to deliver their goods, the National Business Daily (NBD) reported Wednesday.
Officials from the China Express Association will be holding a meeting with the Hangzhou-based e-commerce giant Taobao Thursday to discuss the issue, the NBD reported.
Price rise
Yunda Express was the first to announce the price rise. According to a statement published Nov 21 on its website, the company will be raising the basic charge by one yuan and additional charges by 0.5 yuan per each additional kg. For express delivery services covering remote areas, prices will be raised by two yuan for the basic charge and one to two yuan per each additional kg, the NBD said.
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An unnamed senior executive of a courier company told China Business News (CBN) that during his ten years working in the industry, it was the first time he has witnessed a price hike.
Prices for express delivery services provided by China Post and foreign logistics companies remain unchanged so far.
Reasons behind the price hike
According to the statements posted on their websites, recent high commodity prices, increases of oil prices and higher labor costs are to blame. An unnamed staff member with the Shanghai-based Shentong Express told the NBD the recent oil price hike was the main reason which had greatly added to transport costs.
An unnamed employee with Shanghai Yuan Tong Express said the online business boom had made business in the courier service industry thriving, and logistics companies had to expand their networks to meet increasing needs. As the cost of labor, oil and other commodities increased, they had no choice but raise service charges to make ends meet.
The China Express Association said because the courier business expanded rapidly, logistics companies were too busy to get their business done and sometimes senior executives even had to help sort parcels. Moreover, about 80 percent of private courier firms were renting new warehouses, purchasing motors and hiring more delivery workers, which added to their expenditures, the Beijing Evening News reported.
According to an unnamed staff member working for a private delivery firm, raising prices will drive away some small businesses, which will to some extent release the working pressure, the paper said.
Impacts on online stores
The biggest victim in this round of price increases may be Taobao users, as the four big courier firms mentioned above have now covered 80 percent of Taobao's delivery business.
Some online store owners have used "free shipping" to attract customers. Some others, in order to offer prices that are much lower than conventional stores, have cut the price of their goods but squeezed profits from delivery fee differences between the amount they charge buyers and the amount they pay delivery companies.
It is also not cost-effective for those who buy cheap goods on the Internet as the delivery charge might be even higher than the goods themselves.
According to an online survey conducted by China's Internet giant Tencent, 89 percent of net users said the price rise would affect their online purchases.
The NBD reported that officials of the China Express Association would meet with Taobao Thursday to discuss the operation between courier firms and Taobao. An unnamed member of the association said he hoped an agreement could be reached on building a united payment platform where delivery charges are based on the same standards.
A number of big online stores recently said they may build their own delivery channels to save costs, according to the Beijing Evening News.
But Taobao President Jonathan Lu told CBN the company had no plan to set up its own delivery arm yet.
