Express Service Market in China

Thursday, June 28, 2007 9:45
Posted in category Uncategorized

Last week while eating spicy ribs, I was discussing with a logistics executive the potential and the problems that international firms face when cracking the Chinese market.. who has done the best… and what the future holds for the express firms in China

At the same time, Fedex was preparing for its quarterly conference call.. and I am sure they were all grins while doing their math.

Fact is, Fedex has executed well in China, and there isn’t anyone in the industry that is China based that would disagree. They have time definite service to a number of cities (considered a big selling point for international firms… jury is still out on local firms), they will have an airhub in Guangzhou, and they recently absorbed their previous JV partner Datian that will strengthen their ground network….

Life is good at Fedex China…. and the recent comments by Fred Smith, Alan Graf, and Dave Bronczek are full of good things.

For many in the logistics industry, the market in China is the major market of focus.

When discussing the potential China holds with one industry executive, he posed the following question as his answer to what he believed was the potential for China.

“Do you know how many tubes of toothpaste need to be delivered on a daily basis? how many TVs?”

Yet for many, cracking the China logistics market has proven to be a challenge, and even with WTO restrictions lifted on nearly all areas… there is still a long way to go for EVERYONE..

First, companies need to have their debate.. build it or buy it? This is an age old question, and in China those firms that took too long to answer the question often paid dearly for it in terms of opportunity cost and investment.

Following the first steps, many firms are having to expand into the hinterland quickly in order to support either an idea or a few customers. Some of the more conservative firms have established partnerships with outsourced providers (some even painting the trucks of other companies), while others are in the process of establishing sites around the country that are based on regional market research

If the first two weren’t enough, companies have to scale, and hire the THOUSANDS of employees necessary to executed. UPS alone hired several thousand employees to scale up, and they were not the only ones. The HR challenge has been enormous as tens of thousands of new employees will be needed.

Finally, there is creating and sustaining the demand for their services. After all, there are MUCH cheaper options than using Fedex, UPS, or TNT for domestic China business, and each of these firms need to find ways to convince existing customers to move.. and new customers to sign on. BD managers in the logistics industry are some of the hardest working people I know in Shanghai.

More so than in other markets, China’s logistics markets is one of the most dynamic in the world. Where in the States and many parts of the E.U., logistics is more about maintaining clients… China is a complete from the ground up build. There are a number of hurdles for firms to get over, and it is not going to be easy as HK, Singapore, and mainland firms also look to rollout their service platforms.

Look to see a number of acquisitions in the next 12 months as the largest firms stabilize their actives of the past 18 months and take their next steps. If my last 3 meetings with express providers were an indication of things to come, I would say that the landscape could completely change in the next 12-18 months.

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One Response to “Express Service Market in China”

  1. Guoqiang Xing says:

    June 9th, 2008 at 3:07 pm

    Dear Sir/Madam,

    Could you confirm and let me know how can people get their Sichuan Earthquake donations shipped to China from the US or from Europe via the special FedEx’s free shiping service. We have heard from the news that FedEx is operating such a freeshiping service at the moment but not sure how to contact FedEx.

    Thanks and looking forward to your reply.

    Guoqiang Xing

    (Maryland, USA)