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Package delivery volume

and competition increase

Discounts and trade tensions erode margins

The COVID-19 lockdown increased the cost of operations and labor for logistics brands, already contending with intensifying competition, price discounting, and the impact of China-US trade tensions on shipping volume. The need to pay fix costs with reduced income created cash flow pressure.

Businesses rebounded as consumer demand increased, flights resumed, and access was restored to restricted areas. Returning to normal still meant facing the existing conditions of a rapidly expanding parcel delivery business, but with heightened competition that squeezed margins.

Of the five BrandZ™ China logistics category brands only one increased in value, ZTO Express. Leveraging its scale, SF Holdings Company Ltd., owner of SF Express, No. 1 in brand value, trialed a food delivery service. The logistics category declined 10 percent in value, following a 6 percent decline a year ago.

Driven by China’s booming e-commerce business the number of packages delivered increased exponentially. During just Singles’ Day period, November 11 to 16, over 2.3 billion packages were shipped, according to the State Post Bureau. But revenue per package has been declining.

In response to heated competition, ZTO Express offered deep discounts, which helped drive volume to a level roughly 50 percent higher year-on-year, in the third quarter of 2019. Yunda was second in the number of packages delivered. Competition impacted profit for Yunda and STO.

SF Express experienced strong profit growth during the first half of the year and expanded into new business included intra-city delivery, delivery of pharmaceutical products, and cold chain logistics, which moves packages at a stabilized temperature throughout the journey.

SF Express also entered global shipping with a services connecting China and the US. It has been present in the US since 2012.  The market capitalization of SF declined, however, primarily because of strong competition, rising costs including new business expansion .