The e-commerce boom has brought unprecedented growth to Yiwu’s express delivery companies but, locked in a price war, they are too busy to make money.
All photos by Shen Wei
By SHEN Wei
Yiwu, famous for its light industry commodity trade, is now an e-commerce hub. The express delivery industry in the city once called “a sort of 'Wall Street' for the counterfeiting industry,” has never been busier.
The pandemic has brought unexpected silver lining for the hundreds of thousands of local e-commerce sellers, as people all over the world resort to online shopping. More than 7 billion packages left Yiwu last year: yes, that means one package for every human on the face of the Earth, give or take a few million. Currently, around 30 million packages are processed in Yiwu every day, and that number is expected to increase. But none of the deliverymen are making any money.
A grisly price war rages in Yiwu with no end in sight. Despite a 50 percent growth in volume, the revenue of Yiwu’s delivery industry was only up 23 percent. Costs have never been higher. SF Express has lost 1 billion yuan (US$154.6 million) this year already and shares are a long way underwater. Regulators are sounding the alarm. Delivery workers grumble about too much work and not enough pay.
The express delivery gold rush started before the pandemic with the rise of social-media-based e-commerce. More than forty delivery companies operate in Yiwu, and demand grows every day.
As the number of parcels goes off the scale, prices per unit have been in a death spiral. There have been multiple attempts by the government and even the companies themselves to regulate prices, none with much material impact. Individual companies are helpless.
Many expect regulators to intervene, but not much has been done. In early April, the sorting facilities of two companies were shut down, reportedly as a result of their pricing practices, but officially as “safety issues.”
Companies have sensed a change in the wind. Most now refrain from openly snatching orders from competitors, previously a common practice. Prices for local deliveries seem to have converged, although many companies are reluctant to quote for long-distance deliveries, except on a case-by-case basis.
A large number of small online sellers in Yiwu’s Beixiazhu neighborhood operate from nondescript storefronts, which serve as offices, showrooms, distribution centers and sometimes even live streaming studios. Ads for delivery services are everywhere, all with incredibly low prices written in cheerful fonts. But the price is not everything.
Fang, who sells snacks online, based his operation in Yiwu partly because of its logistics. “Even in low season I send out around 100 packages a day,” he said.
Fang uses Yunda Express almost exclusively. It is not the cheapest and he’s been offered cheaper, but would rather stick with a company known to be reliable, and that good customer reviews are worth the extra money. Another seller who sends over 2000 packages a day through ZTO Express, said Yiwu was not the cheapest place to get packages delivered but sellers take advantage of the well-maintained supply chain.
The e-commerce boom has made Yiwu too big to ignore for express delivery companies, so put more salespeople and delivery staff in the field and set ceaselessly higher performance goals. Many have begun to worry that more players will be attracted to the already crowded arena.
A spokesperson from J&T Express said the company was stretched too thin to deal with marketing, fulfillment and customer service all at once. Other companies who have taken on more than can handle have experienced major delays or even complete operational shutdown.
Recent experience shows that the result of price wars largely depends on clients’ price sensitivity. Early in the pandemic, online sellers were losing money and cheap delivery held a tremendous attraction. But this year, profits are good, and low prices are no longer enough. One logistics company owner said large sellers have enough bargaining power to name their own prices and choose the best services.
Prices can’t go much lower and the local market may be about to go through some profound changes. The profile of Yiwu has evolved from cheap, crappy knock-offs to reputable brands. Delivery companies may want to take a similar path and end the hopeless price war.