China’s Alibaba says Singles Day sales nearly US$8 billion in 10 hours
SHANGHAI: On China’s giant Singles Day internet shopping festival, the country’s delivery firms are stretched so thin that they are looking for tie-ups, listings and new investors to husband their resources.
E-commerce has been a huge boon to the logistics industry, but the ever-bigger Singles Day, run by leading online market company Alibaba Group Holding Ltd on Nov 11 every year, exacerbates the industry’s twin dilemmas of cut-throat competition and rising labour costs.
With low barriers to entry, express couriers proliferated rapidly over the past decade to more than 8,000 firms, squeezing profit margins to about 5 per cent, down from 30 per cent 10 years ago, according to analysts.
Singles Day, which overtook the US’s Cyber Monday as the world’s biggest shopping event in 2012, generated sales of US$9.3 billion in 2014. Parcel deliveries are expected to rise 42 per cent to 760 million this week, creating a logistical headache for the army of companies that will bring them to the customer’s door.
The planning began three months ago for Shanghai-based Zhongtong (ZTO) Express, one of China’s largest couriers, which saw parcel volumes jump fourfold during last year’s event.
The firm, which currently employs a quarter of a million people and has 28,000 delivery vehicles, said it decided to add 40,000 temporary and permanent workers, buy an extra 7,000 vehicles and open dozens of sorting centres, at a cost of tens of millions of dollars.
“We don’t treat Singles Day like business; it’s our responsibility,” said Zheng Chao, its marketing director.
It is to ease the burden and meet the cost of such investment that delivery companies are considering stock market listings and mergers and opening up to outside funding, providing investors access to a rapidly growing sector that is mostly in private hands.
“The industry’s restructuring is not wholly driven by Singles Day, but Singles Day may make the competitive pressures more evident,” said Yan Shujun, analyst at China Logistic Information Centre.
ZTO’s Zheng said his company was targeting a 2017 listing.
“Express delivery firms are very asset-heavy. Going public can offer additional development funds and capital,” he said.
“There are a couple of companies that are hoping to list as soon as possible,” he added.
Rival Shentong Express said in September it would merge its assets with that of another large courier, Tiantian Express.
It is also pursuing a back-door listing through a Shenzhen valve-maker, it told Reuters last month.
Despite the huge number of firms and double-digit annual growth in the sector, there have been few capital market deals and most companies are still run by their founders, who often started with small fleets of trucks or motorcycles. — Reuters