One key factor to measure eCommerce growth in China is the number of package delivered. During the Q1 2016 in China, totally package delivered increased 56.4% to 5.77 billion, compared with 41.7% growth in the same quarter of 2015. Among them, eCommerce orders generate more than 80% of parcels shipped in China, according to China’s eCommerce giant Alibaba Group Holding Ltd.

eCommerce Parcels Stand Out

One of the many reasons could be many eCommerce retailers continued to operate through the Chinese New Year period in February. Meanwhile, eCommerce 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.

How about the shipping cost? Based on the report, 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 report 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%.

Global Logistics Companies VS Local Chinese Shippers

While China market offer great opportunity for global logistics companies, they should still be aware of the challenges from the “local forces”. It was back to 2007 when China opened its parcel shipping business to foreign companies. 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. To reduce costs, some Chinese shipping companies don’t provide benefits like health care Insurance to their workers.” –Wang Fang, a previous FedEx employee and now a logistics consultant.

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.

Contact TMO Group for China eCommerce logistics solutions!

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