In China, the express delivery sector has undergone unprecedented transformation since the rise of e-commerce, with hundreds of millions of packages now delivered to consumers daily through courier companies. According to the latest data, China's express delivery business volume has maintained a growth rate exceeding 50% for 28 consecutive months. These figures not only reflect the prosperity of e-commerce but also reveal the hidden profitability crisis and challenges facing the logistics industry.
The express industry finds itself in an exciting era. While surging business volumes present opportunities for growth, hidden operational costs and profit pressures have created a state of "sub-health" across the sector. Data from the State Post Bureau shows this year's express volume reached 3.84 billion parcels, a 60.6% year-on-year increase, with revenue hitting 62.98 billion yuan (approximately $9.7 billion), up 34.5%. Behind this apparent prosperity, however, overall industry profits fail to keep pace, creating a striking profit differentiation phenomenon.
Global Leadership with Shrinking Margins
China's express industry has rapidly ascended to global prominence and is projected to surpass the United States this year as the world's largest express market. Yet despite massive business volumes, courier companies aren't seeing proportional profit growth. Many firms now operate with profit margins below 5%, squeezed by rising labor costs, land rentals, capital pressures, and intense price wars within the industry.
This growth wave has simultaneously driven up operational expenses. Industry analysts note that labor costs now claim an increasing share of expenses, while infrastructure investments for vehicles, warehouses, and equipment continue climbing. These factors severely compress profit margins, raising widespread concerns about the sector's sustainable development.
More alarmingly, average revenue per package continues declining. State Post Bureau data reveals per-package revenue dropped from 28.6 yuan in 2007 to just 16.4 yuan in the first half of this year - a staggering decrease. Even as Chinese household incomes rise, the express sector fails to benefit from this economic growth, resulting in shrinking overall profitability.
Regulatory Response and Industry Transformation
Facing these challenges, the State Post Bureau has implemented policy measures to support healthy industry development. To address transportation efficiency and operational cost issues, authorities plan to integrate various transportation resources including railways, highways, and aviation - aiming to improve logistics efficiency and reduce corporate burdens. These policies are expected to significantly impact current market competition.
Within the industry, companies have begun self-reflection and transformation. Experts suggest implementing a "quality-price" mechanism through star ratings, potentially creating a new model where "five-star companies set five-star prices." This approach could help restore reasonable pricing and improve profit margins.
Global Expansion and Intensified Competition
Beyond government support, express firms are exploring new growth avenues through international expansion. As domestic competition intensifies, many have turned to overseas markets for greater opportunities. Reports indicate nine companies have applied for international express licenses, with industry leaders like SF Express and ZJS Express already operating in Japan, South Korea, and the United States while expanding into European markets.
However, global competition presents its own challenges. With international giants FedEx and UPS obtaining Chinese operating licenses, these well-established players are exploring China's market, increasing pressure on domestic firms. Foreign companies' management expertise and scale advantages will significantly impact local operators, requiring Chinese firms to clearly identify their competitive strengths and weaknesses to survive.
Consumer Demands Driving Service Innovation
E-commerce development has raised consumer expectations for delivery services. User experience has become the new competitive benchmark, prompting companies to introduce diversified services including same-day, next-day, and scheduled deliveries. This trend toward personalized, high-quality services will likely define the industry's future direction.
In summary, while China's express industry has achieved remarkable growth through e-commerce, profitability declines and intensifying competition present complex challenges. Finding sustainable profit models and improving operational efficiency remain critical issues. Future success may depend on technological innovation and smarter logistics management systems to adapt to this rapidly evolving, highly competitive market environment - the potential path toward overcoming current profit challenges and achieving broader development prospects.
