Logistics

Packaged deal

JD.com opens its logistic network to rival SF

SF Express courier boxes are displayed in this illustration photo at the company's headquarters in Shenzhen

More local rivals, SF goes global

To solve the shortage of warehouse space as consumer shopping habits move increasingly online, Amazon’s engineers have figured out a solution: put the storage facilities underwater.

According to Amazon’s patent filing, the aquatic warehouse would be filled with goods stored in watertight containers. The containers would be outfitted with cartridges that inflate, controlling their depth in the water. When a container needs to be retrieved, acoustic waves are sent to activate the cartridge, which sends the package to the water’s surface, says Business Insider.

The e-commerce firm often termed China’s Amazon – JD.com – has also set out to shake up the country’s logistics industry. In its case the Beijing-based company is opening up its logistics infrastructure to all.

Starting this week, consumers and business customers in Beijing, Shanghai and Guangzhou were able to use the courier service to send parcels around China, using the company’s app or through Tencent’s mobile messaging app WeChat.

The company says the plan is to roll out a nationwide service by next year with a variety of pricing options based on delivery timing and distance. The company says its network can reach 99% of the population, and deliver more than 90% of orders in one day or less.

The new venture “marks the next step in leveraging the nationwide logistics network that JD.com has built over the past decade to expand the range of services available to our users,” announced JD Logistics chief executive Wang Zhenhui.

JD.com’s distribution network, which cost about Rmb30 billion ($4.3 billion) to build, now includes 15 logistics parks, more than 500 warehouses and over 12,000 couriers as well as a rapidly growing number of robots.

JD.com doesn’t have its own planes like SF Express. But its new service will compete directly with China’s leading logistics firm, especially in the consumer courier business.

Industry observers say the move makes sense, as JD.com already offers its logistics and distribution infrastructure to corporate customers like Unilever to shift goods around the country.

“After all, it already has the infrastructure so it can generate more cashflow without increasing operating costs,” reckoned an analyst at Oceanwide Securities.

“SF Express has a lot of business users, delivering packages and documents. For JD.com, they should focus on short-distance delivery by offering the same quality service as SF Express but at a slightly lower price. They can really steal a lot of these customers from SF Express,” Lanjing TMT, a tech portal, opined.

JD.com’s new offer comes on the heels of separate announcements from the country’s four largest courier companies that they will each be raising delivery fees ahead of this year’s Singles’ Day, Alibaba’s annual shopping bonanza, which occurs on November 11.

In mid-October, ZTO announced that fees will go up because of the rising costs of transportation, labour and packaging materials. STO, ZTO and Yunda Express followed suit, pricing express delivery at Rmb0.5 more for each package. The four firms deliver roughly half the packages in China.

In 2017, 40.1 billion parcels were delivered in China, up 28% year-on-year. Such double-digit growth might seem high, but it was down from the 50% level seen from 2012 to 2016. Meanwhile, the average profit margin dropped for parcel deliveries from around 30% in 2007 to as low as 5% today, according to statistics from CICC.

With JD.com’s entrance, competition is about to become even more cutthroat. “Before JD.com entered the market, courier companies like SF Express had already encountered a lot of challenges. Now that it has to compete head-to-head against JD.com, SF Express is under even more pressure,” 36kr.com surmised.

In the wake of intensifying domestic competition, SF Express has geared up for international expansion.

The company announced this week it will acquire the Greater China supply chain business of Deutsche Post DHL Group. DHL will receive an upfront payment of Rmb5.5 billion and a revenue-based partnership fee over the next 10 years.


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