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September 26, 2017

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Foreign express delivery firms find it difficult to deliver the goods in China

Workers in Chinese companies do not wear uniforms, make deliveries via a scooter, bicycle or subway, and scribble receipts on paper.

Untrained workers also mean delivery service is often poor, prompting frequent complaints of late, damaged or lost packages.

During the Chinese New Year period, delivery comes almost to a standstill because local companies are overwhelmed with orders while couriers visit home and families.

Poor service notwithstanding, cost-conscious Chinese still prefer to give business to the locals.

While the likes of FedEx and UPS have deep pockets, they cannot slash their charges as readily as their local rivals.

Said the former DHL executive: "They have to maintain their brand value. If they start to go really cheap, it would affect their global brand name." DHL's local venture, which started in 2009, lost 99.2 million yuan as of the end of last year.

Foreign companies may have strong networks in coastal cities, but they lose out to local firms once they move inland. Chinese companies rely on franchising with low barriers to entry, which allows their networks to expand across the vast country quickly.

Foreign companies are also disadvantaged by government regulations. In 2009, for instance, they were banned from delivering documents within China — a sizeable chunk of the business.

All this means that the global giants are missing out on a market that is now ranked third in the world, with 10 million domestic express deliveries a day. The United States has 30 million, followed by Japan with 13 million.

With a per capita delivery of fewer than two parcels a day, compared with the international average of 4.1, China has great potential to become the world's biggest market by 2020, with a value of about 60 billion euros.

Still, some analysts do not think it is the end of the road for foreign courier companies.

Said Professor Hong Tao from the Beijing Technology and Business University: "They are more modern and a bit ahead of their time for China, where the market is still young and messy. Give it a few years, and China will be more ready for DHL and FedEx."

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