Case study: Express delivery fast tracks competition

Shining a light on the rapidly growing courier business in China.

A three-wheel electric courier vehicle parked up on a busy street in China while the driver checks his mobile phone.

Shining a light on the rapidly growing courier business in China.

As in many other countries, the express courier industry in China has expanded rapidly in recent years, owing in large part to the growth in online shopping. In 2020, it delivered over 74 billion parcels, an increase of 16 per cent on the year before (MordorIntelligence, 2020), with revenues in the industry estimated to be US$127bn.

The perceived opportunities in the industry have seen a number of new and well-funded competitors enter the market. One of those new entrants is J&T Express, who have sought to grab market share through attracting customers by pricing below the competition and often below cost (Lee, 2021). As a result, in 2020, the average selling price per unit in the industry fell by 10 per cent (Fitch, 2021), while volumes increased.

To try to protect dwindling profit margins, operators have sought to introduce efficiencies and cut costs. This has resulted in concerns for the health and welfare of the couriers who deliver the parcels, many of whom are working excessive hours to cope with demand. This has also seen the wages of the couriers increase, putting further pressures on costs. Several of the major firms (e.g. JD.com and Alibaba) have opted for technological innovations to address the problem, introducing drones and autonomous delivery vehicles for the last mile of delivery (Reuters, 2021).

1. Which of the following reasons might explain why a price war has occurred in this industry? (Tick the three correct answers.)

Insufficient demand

Insufficient supply

Established competitors seeking to block new entrants

Excess supply

Excess demand

New competitors seeking to gain market share