British postal operator comes calling

Updated: 2012-08-24 09:16

By Cecily Liu and Zhou Siyu (China Daily)

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 British postal operator comes calling

Royal Mail aims to increase its share in the international business-to-business parcel delivery market in China. Provided to China Daily

Royal Mail and Chinese company sign B2B parcel deal for Europe

Britain's state-owned postal operator Royal Mail Group Ltd has joined hands with the Chinese company ZJS Express Co Ltd to start a business-to-business parcel delivery service from China to Europe.

The deal marks Royal Mail's formal entry into China's business-to-business parcel delivery market, although it already provides international business-to-consumer and consumer-to-consumer parcel services in association with China Post.

Facing strong competition from the world's four largest logistics companies - Deutsche Post DHL, FedEx Corp, United Parcel Service Inc and TNT Holdings BV - Royal Mail hopes to attract Chinese customers with a service cheaper by about "10 to 20 percent".

"We're coming in with a product we think would provide some great choices for customers not to spend more than they need to," says Mark Thomson, managing director of Royal Mail's international operations.

"We expect to become the No 3 player in China's international business-to-business parcel delivery market in the next three years."

The Euro Business Parcel service is available only for onward shipments to Europe from China and not vice-versa.

"For the moment, we are focusing on linking up Chinese small and medium-sized enterprises with businesses throughout Europe. We will look to expand in time to other distribution lanes," Thomson says.

He says the services ideally suit three types of products - textiles, high-tech products and machine parts.

Delivery prices depend on the parcel's weight and country of final destination. For example, a 1-kilogram parcel to the UK costs 336 yuan ($53, 42.7 euros), while the same parcel to Turkey would cost 358 yuan. A 20-kilogram parcel to the UK costs 2,608 yuan.

Parcels have an upper limit of 50 kilograms in weight, 2 meters in length and 3 meters in combined length and girth.

Under the partnership, ZJS Express will collect parcels in China, and Royal Mail will transport them from collection points in Beijing, Shanghai and Shenzhen to London and Frankfurt.

General Logistics Systems BV, Royal Mail's European subsidiary, will deliver the parcels to the recipients in Europe.

Parcels addressed to the UK and Germany would take three days for delivery, exclusive of the time ZJS spends to deposit the parcels at the three collection points in China. Parcels to other locations such as France and Italy would take four to five days, while services to the Czech Republic may take as long as six days.

In comparison, most other China-Europe delivery services take only one to two days.

The new service takes longer because Royal Mail does not have its own airfreight fleet to support the services. Instead, it is dependent on third-party airline companies to minimize infrastructural costs.

Companies such as DHL, FedEx, UPS and TNT boast their own air and road networks that enable them to offer quicker services.

FedEx, which entered China in 1995 after purchasing the Chinese route authority from Evergreen International Airlines Inc, usually delivers parcels between China and the US within three days. FedEx's two flights a week to China has risen to more than 11.

Initially, FedEx's Chinese partner, DTW Group, was responsible for the China leg of parcel collection and delivery, but FedEx acquired the company's China express network in 2006 to take control of the entire delivery process.

Despite Royal Mail's smaller investment, it does not expect to make a profit immediately. "Very few things these days make a profit straightaway, but we expect to get to a break-even point well inside the first year of trading," Thomson says.

He adds that Royal Mail first entered into talks with ZJS about the partnership more than a year ago.

"We looked for companies that were close to us in values. We realized that ZJS has a passion for customer service, good experience and good coverage in China," he says.

Set up in 1993 by entrepreneur Chen Ping, ZJS is currently China's third-largest private delivery company by revenue, after SF Express (Group) Co and Shentong Express Co Ltd, according to information published in an online article this month.

ZJS provides delivery services to more than 2,000 villages, towns and cities across China. It offers a seven-day collection service between 8 am and 8 pm, and employs about 20,000 people across 3,000 locations.

Chen Xianbao, president of ZJS, told Guangzhou-based newspaper 21st Century Business Herald that the Euro Business Parcel service will initially be available in North China and extended to other parts of the country by October.

Chen was quoted as saying that he hopes the partnership with Royal Mail will be a springboard for ZJS to enter more international markets.

If the service proves profitable, ZJS will partner with leading delivery companies in North America and the Asia Pacific to deliver similar services.

Thomson says another advantage of the Euro Business Parcel is the experience and track-and-trace technology both ZJS and General Logistics Systems have in their respective markets.

According to Royal Mail, the chances of a parcel getting lost or damaged while in Europe are less than 0.01 percent. If lost, the company will offer compensation of $20 (16 euros) for every kilogram of the parcel.

China is currently the largest exporter to the European Union. Goods from China accounted for 17.3 percent of the EU's total imports last year, according to data from China's General Administration of Customs.

Over the past five years, China's exports to the EU increased by about 50 percent, leading to a rapid growth in China-Europe parcel volume over this period, industry data showed.

However, trade has accelerated at a slower pace in recent months. The country's exports to the EU declined by 0.8 percent in the first half of this year to $163.1 billion, while the country's overall exports increased 9.2 percent to $954.4 billion.

But Thomson sees no danger for future prospects due to the trade slowdown. Despite the slowdown, China's trade and economy is still increasing at a faster rate than other markets and is "a great place for business", he says.

Saadi Al-Soudani, managing director of General Logistics Systems, adds that the slowdown could be an opportunity. "Our product, which offers lower prices, is partly an answer to the economic slowdown as exporters are trying to control their costs," he says.

During the first six months of the year, China's express industry handled a total of 2.39 billion items of express mail and parcels, up 51 percent year-on-year, according to data from China's State Post Bureau.

The industry's revenue increased by 39.7 percent year-on-year in the first half of 2012 to 46.8 billion yuan. Revenue from the international express business, meanwhile, jumped 11.8 percent to 9.92 billion yuan during the same period.

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(China Daily 08/24/2012 page19)