EXPRESS DELIVERY SERVICE is booming in China, thanks to major growth in its e-commerce industry. More than 8,000 express delivery firms operate in China to accommodate growing demand for goods purchased online. According to a Xinhua report, an estimated 10.2 packages were delivered per person in the past year.
Express delivery is leading the growth of China's developing service sector - having grown more than 43% in the first half of 2015 - and has become an essential employment resource during the economic slowdown, employing nearly 6 million people nationwide. Currently, only half of China is covered by express delivery services, while the rest of the country relies on state-run postal service. Service in areas such as developing western China continue to increase, but the area is still largely uncovered. The State Post Bureau aims to extend express delivery coverage to all towns and villages nationwide by 2020.
Many e-commerce customers have come to depend on express delivery for goods purchased online or food ordered from popular takeout mobile apps, including ele.me and baidu.waimai. At noon on any given workday, motorbikes carrying takeout bags from local restaurants are seen zipping through traffic to hungry office workers or college students. Ele.me alone receives 2 million orders per day. In 2014, the online food takeout and delivery market merged to create an efficient system for ordering takeaway food on mobile apps.
Currently, the majority of online food order users are from college campuses, while 28.5% of white collar workers use the apps. According to statistics reported by the China Electronic Commerce Research Center, 370 million orders were placed on online food catering service apps last year. In the first quarter of 2015, orders have increased by 340% year-on-year. Ele.me currently holds a 40% share of the market, followed by Meituan Waimai with 34.2%. Alibaba's Taodiandian and baidu.waimai are also large players in the online food order market - known as o2o or "online to offline."
Ele.me - roughly translated from Chinese as "hungry" - is a mobile app founded by college dropout Zhang Xuhao, who claims that the motive of his company is to standardize food transactions and flow. Ele.me is backed by Tencent and JD.com and has developed its own motorized delivery system, catering primarily to first-tier cities. Recently ele.me managed to raise US$56.4 million in funding from its investors, while its competitor Meituan Waimai has raised US$113 million and is focused on service in second- and third-tier cities.
Express delivery has also influenced the way in which people conduct business. In the past, people spent hours traveling by train or bus to the nearest big city to shop or sell items. Nowadays, parcels containing anything ranging from important office documents to fresh fish and new clothes are delivered directly to customers' doorsteps. Express delivery service is seen as an indispensable part of many people's daily lives, as well as an integral tool in manufacturing. Xinhua news cites Jinan-based China National Heavy Duty Truck Group Co Ltd (CNHTC) as an example of successfully integrating express delivery service into its supply chain. By relying on an express delivery company, CNHTC has been able to increase its daily production by 60%.
Major Chinese corporations have begun to take interest in the burgeoning express delivery market, while smaller courier service firms struggle to hold their own. SF Express, a delivery firm based in Shenzhen, has gathered leading express service teams together to prevent Cainiao Network Technology - the logistics network of Alibaba - from monopolizing the sector, according to Guangzhou's 21st Century Business Herald. On June 6 this year, SF Express spearheaded a project proposing a joint venture between STO Express, ZTO Express, Yunda, and Global Logistics Properties to operate a smart logistic network and gain a foothold in the industry against Cainiao. One of the proposed projects, known as "Hivebox," will offer private lockers servicing e-commerce companies for a fee. The joint venture plans to establish itself in over 10,000 locations in 33 Chinese cities by the end of 2015.
Hivebox is seen as a direct response to Cainiao's proposed mechanism to evaluate the performance of logistics and delivery partners based on its market share, same-day delivery success rate, courier personnel performance, and delivery punctuality. Cainiao CEO Judy Tong claims the evaluation system will force delivery teams to elevate the quality and speed of their service. Many delivery firms, with SF Express at the forefront, complain that this new evaluation plan is intended only to secure Cainiao's leadership position in the delivery market. Yet over 70% of delivery business comes from Alibaba's taobao.com shopping platform, thus linking the two camps closely together and providing a key incentive for individual delivery firms to comply with Cainiao's new evaluation strategy.