Friday, May 11, 2018

Shipping inside China

Here's an excerpt from an email exchange with a client regarding shipping in China that may be of interest...

I thought you might be able to answer a question regarding the presence of DHL, UPS or FedEx in the Chinese market?

Every once in while we’re being asked to ship within China using one of the those 3 companies only to find out that it is difficult to do and it works better with local Chinese forwarders (e.g. Deppon Logistics, SF Express, etc.)

How present are UPS, DHL and FedEx in China?

UPS/FedEx/DHL have a big presence in China.  However…  Their strength in China is mainly outgoing (export) shipments.  When it comes to Chinese domestic delivery, these three combined cannot come close any one of the domestic grown deliver companies. 

There’s one simple reason for this.  Foreign companies are used to be bound by various business ethics and management policies.  When they come to China, they will not be able to compete with the local Chinese companies on the same level.  For instance, workers’ wages.  While Chinese companies are going to grind and exploit their employees, the foreign companies would not dare to do the same.  The foreign companies won’t do the same because mostly it goes against their corporate culture, AND, most importantly, if exposed, their business in China would basically be over.  Not only will they be heavily criticized by the people (consumer); they’ll usually find themselves under some type of hassle from the government.  On the other hand, their Chinese competitors will be held-up as heros for providing jobs and adding to the economy.

When I ride the subways in China, I almost always see “plain cloth” workers for Chinese delivery companies station themselves inside the toll stalls.   These people are basically “mules” for the delivery companies. Their job is to take huge bags of shipments from one station to the next.  In essence, they spend their entire working day riding the subway back and forth.  Every station, a driver would bring down bags full of shipment and toss them over the dividing walls and/or stalls.  And would take other bags from the mule so he can deliver them.  The driver never has to pay the subway fare since he’s not going to be riding on them.  The mules usually just pay the lowest ticket fare at the beginning of the day, and then rides the subway back and forth until the end of the day. 

So basically, these delivery companies are using the subway to do most of the heavy lifting while only paying the price of one single ticket per day.  Most of the deliver drivers ride their own scooters, hence, the delivery companies won’t have to invest in and maintain a fleet of motorized vehicles.  These are just many, many cost-saving measures that’s taking place in China that no foreign companies dare to do.  To the Chinese people, if a Chinese company is using these unconventional tactics, they are okay with it.  But when it comes to a foreign company, their expectation will rise dramatically.  This is from the focal point of both as consumers and as employees.

Now, the two Chinese companies you pointed out: Deppon and SF Express.  Yes, they are now the “major” delivery companies in China.  We worked with both companies over a decade ago when they were just tiny potatoes.  Today, they’re becoming more and more like their foreign competitors (i.e. UPS, FedEx).  While their brand and service level have risen, they are also losing out against other smaller Chinese delivery companies.  After all, you don’t really want to be wearing your company uniform when you’re abusing the subway system as your main mode of transporting shipments.

If you’re occasional sending stuff to China from an outside country, it’s okay to continue using UPS/FexEx.  But, if you’re trying to send stuff from inside China to other Chinese destinations, UPS/FedEx will not have the delivery network to make it happen.  Even if it does (to major destinations), the cost will be much higher.  One more thing you want to also check is that usually UPS and FedEx will not be able to use your U.S. account number to do shipments inside China; a special account may be required.