"Unmanned Delivery": Low-price wars back the express industry
Journalist/Zhao Yiwei
Issued in the 970th issue of China News Weekly at 2020.11.2
On October 18, in response to the rumors of the suspension of strikes in several cities of the Tongda express company that is undergoing fermentation, YTO, Zhongtong, Shentong, Best and other companies successively responded that the rumors of the strike were false news and the express delivery network is currently operating normally.
However, after many denials, discussions about strikes on wages arrears at express outlets remain lively.
Weibo data shows that there have been more than 10,000 discussions about express strike strikes in the past month, involving multiple outlets of Tongda companies across the country.
According to the statistics list of abnormal outlets provided to China News Weekly by a number of employees of the Tongda department, the five express delivery companies including Yuantong, Shentong, Zhongtong, Best Huitong, and Yunda continued to increase the number of abnormal outlets in the last month. These outlets involved In Hunan, Sichuan, Jiangsu, Shanghai and other provinces and cities, the operating conditions are often marked as "abnormal outlets", "severe express backlog", and "unmanned delivery".
Some employees revealed that most of the abnormal outlets caused the couriers to strike due to wage arrears, and the outlets were shut down, which affected the delivery of packages. The problem of wage arrears at many outlets has not been resolved so far.
This is just the tip of the iceberg of the problems facing Tongda Express.
Since the start of the industry price war in May 2019, the income of the Tongda department's grassroots outlets and grassroots couriers has been squeezed to the survival red line, and the instability of the delivery network is increasing.
"If the price-for-quantity price war is not based on a game under ecological balance, it may be a competitive mudslide." Yang Daqing, deputy director of the Research Office of the China Federation of Logistics and Purchasing and an e-commerce logistics expert, told China News Weekly, " When the price competition strategy becomes a conventional weapon for all companies to fight the market, it will bring about destructive competition rather than constructive competition. In the end, the end points will be unprofitable due to vicious competition. This is the result of ecological destruction. ".
Courier is hard to ask for salary
After the alarm, a new person in charge of the new service department of Yunda Express Jiudingyou in Gusu District, Suzhou City, and implemented special management methods for daily salary settlement.
On the surface, the service department has resumed normal operations to prepare for the "Double Eleven", but in fact, the service department has owed more than 100,000 yuan in wages to its employees since August. The original person in charge of the service department has not heard from the head office. The employees who bear the debts of the outlets and report to no avail do not know where to go to recover the wages owed.
Seeing the "Double Eleven" peak season is approaching, we can only continue to work at the outlets to make a day's money.
“We can’t contact the boss of the service department, we can only contact the headquarters, but the headquarters’ response is always “coordinating”, and we still don’t know who to ask for the money we owe.” Wang Lihua, a courier who was owed two months' wages, told China "Newsweek", "Now the'Double Eleven' is here, the headquarter's solution is to send someone to take over, operate the outlets, and implement daily salary settlement for the employees who continue to work. But the previous boss's arrears of wages have been ineffective."
Since March of this year, the number of Tongda express companies' franchised outlets has increased abnormally, mainly due to two reasons: one is that the superior outlets have reduced or defaulted on the delivery fee, and the lower-level outlets initiated the suspension of business in protest; the second is the poor management of the outlets and funds Tensions, reduction of outlets or default on the salaries of express employees, leading to concentrated strikes or resignations of employees, making it difficult for outlets to operate normally.
Regardless of the cause of the suspension, the final basic level outlets and couriers will bear the consequences.
In the Tongda franchise express network, the headquarters controls the pricing power and management power, and the first-level agency outlets control the subcontracting rights and fines power of the outlets within its jurisdiction, and distribute the delivery at a price of 1 to 1.2 yuan per order.
The second-tier and lower franchisees rely on the basic business of sending and receiving express delivery, earning a profit of 0.1-0.3 yuan per order, and the final delivery person earns a delivery fee of 0.7-0.9 yuan per order.
The increasingly fierce price war in the industry has further squeezed the living space of secondary franchisees and couriers.
In May 2019, the first round of the industry price war started with SF Express's first price reduction, and Tongda Department has lowered the fare of express delivery.
Since February this year, the cost of express delivery companies has further decreased due to the national highway waivers and the superimposed decline in oil prices. In order to compete for the market, the industry has set off a more intense price war.
However, the low-price competition in the express delivery industry is not a multi-party payment.
The capitalist who reaped the increase in market share gained a sharp increase in profits, but passed the losses to the grass-roots agents and couriers.
The survey shows that among franchise express companies, 40% of franchisees are losing money, 50% of franchisees have the same profit and loss, and only 10% are making money.
This is equivalent to 90% of express franchisees are not profitable.
"Tongda express secondary franchisees earn the least and the hardest, especially after several price cuts since last year, almost all secondary franchisees across the country are hovering at the loss line." Yuantong Express secondary franchisee Yu Lei told China News Weekly, the second-level franchisee not only needs to pay the contracting fee and deposit to the first-level, but also undertake various assessment tasks distributed by the first-level, and the task of receiving and dispatching parts will be fined.
At the same time, the secondary franchisees also need to bear the store rent and staff costs. "Unless it is a school or a densely populated community, it is difficult for most secondary franchisees to make money."
Secondary agents that bear the pressure of assessment and cost, and only earn a meager price difference, have almost no ability to resist risks. Once the superior outlets do not manage well or default on payment, the second-tier agent outlets will immediately fall into trouble.
Recently, Hunan Changsha Yunda Express Guanshaling Service Station was unable to settle accounts with the second-level agency due to poor management, which caused the second-level business to shut down and defaulted on the delivery staff. Many couriers only received 5,000 yuan in salary since April. .
On the other hand, the couriers who are directly employed at the grass-roots outlets do not have labor contracts and social security. Once a dispute occurs, the couriers can hardly even produce evidence of rights protection.
Wang Lihua, who has been in the express delivery industry for nearly 8 years, told China News Weekly that almost no couriers in the Tongda department sign labor contracts and do not have social insurance. The salary and benefits are entirely verbally promised by the employers of the employed outlets.
After a dispute occurs, even if the courier reports the franchisee to the labor bureau, it is difficult to have a clear description.
"Even if there is a strike, the money will not necessarily be returned. You can only wait for a change of boss or branch and continue to work." Wang Lihua said, "Previously, in order to ask for pay, the couriers pulled banners and went on strike at the door of the branch. The use also affects public security. We can only wait for the new boss to take over and continue to work. I don't know if the previous debts are gone."
Headquarters and franchisees blame each other
On October 12, Yunda Express responded to the problem of wage arrears at the Guanshaling service station in Changsha, saying that the problem at the outlet was a contradiction between the first-level franchisee and the second-level franchisee, and it was a business problem, and said that the wage was arrears. The salary of the courier should be the responsibility of the franchisee, and the company is urging and coordinating.
"This situation often occurs. Once a dispute occurs, the headquarters will transfer all the responsibility to the agent and franchisee without mentioning its own management problems." Ma Jianjun, a secondary franchisee of Yunda Express in Hunan, told China News Weekly , "The headquarters does not supervise the first-level agents in place. If the first-level agents have problems, all the second-level franchisees under this first-level site will be affected."
The franchise express companies represented by the Tongda system have similar structures and operating mechanisms.
The headquarters is responsible for establishing a transfer center for transfer and sorting in large stations, formulating agency and franchise operation rules, and providing brands, express orders and settlement systems.
The final delivery is usually completed by the first-level franchisees and the second-level franchisees they develop.
Therefore, the timeliness and service quality of terminal distribution are often directly related to the operating conditions of franchisees in the region.
"The biggest drawback of the franchise system is that the quality of the franchisees is uneven. As long as they have money, they can do it." Ma Jianjun said bluntly, "Some first-level agents operate irregularly and may use fines or defaults to squeeze the second-level franchisees. Poor attitude or poor service may also damage the reputation of the entire area and the business with major customers."
Shao Zhonglin, a senior expert in China's express logistics industry and former deputy secretary-general of the China Express Association, believes that the franchise system will cause such things to happen inevitable, mainly because the interests of the headquarters and franchisees are inconsistent.
Zhongtong, Yunda, Yuantong, etc. all adopt similar franchise systems.
The price war that has been burning since May 2019 is still spreading in the industry, further deepening the trilateral conflict between franchise express company headquarters, agents, and franchisees.
According to statistics from Shenwan Hongyuan, the average single-ticket revenue of the express delivery industry in August this year was 10.05 yuan, a record low and the decline continued to expand.
At the same time, the financial report data of various express companies show that in September this year, the single ticket revenue of Yunda Express was 2.15 yuan, Yuantong and Shentong both were 2.18 yuan, a year-on-year decrease of 31%, 23%, and 20% respectively.
The revenue composition of single tickets disclosed in the financial reports of various express companies shows that if consumers pay 10 yuan for express delivery, 3 yuan of which goes to the recipient of the outlet, the distribution fee within the city is 0.6 yuan, the distribution center is 0.3 yuan, and the express company headquarters charges 1 yuan. The face-to-face fee, the transfer fee of 2 yuan, the delivery fee of 1.5 yuan, and the final delivery fee to the franchisees and couriers are only 1.6 yuan.
Many Tongda couriers told China News Weekly that since this year, the delivery fee for first-level agents to second-level franchisees has dropped from 1.5 yuan to 1.2 yuan, and the delivery fee for second-level franchisees to hire couriers has dropped from 1. Yuan Duopu dropped to 0.7 Yuan.
After the headquarters price cuts, the pressure on first-level agents, second-level franchisees, and couriers is increasing.
“The express delivery fee dropped again and again. Last year it fell to 9 mao, this year it fell to 7 mao, and even to 5 mao in Zhejiang and Guangdong.” By Wang Lihua's side, many colleagues have switched to deliver takeaways with higher delivery costs. "The low-level couriers deliver hundreds of couriers every day. They are exhausted, but their income is not as good as each day."
As the receipt price at the source is reduced, the receipt of face-to-face, transit fees, and transportation costs are basically fixed, which will eventually reduce the delivery fee.
Under normal circumstances, the income of express franchise outlets includes two aspects of receiving and dispatching, and the continuously depressed single ticket price is squeezing the survival space of franchisees in both aspects.
A Yunda courier revealed to China News Weekly that some first-level agents and second-level franchisees rely on downward fines to increase their profits. There are dozens of fine items, each with a fine of 100 yuan.
"If you don't arrive in time, you will have to pay a fine, if you don't have a meeting in time, you will have to pay a fine, a package is damaged, a customer complains about a fine, etc., after a few fines, one week will be for nothing. This is also the reason why many couriers leave their jobs."
"From the perspective of the responsibilities of brands and listed companies, the headquarters of express delivery companies should unconditionally cover fluctuating outlets. No matter how the headquarters and outlets negotiate, the grassroots couriers should not suffer losses." Express logistics expert Zhao Xiaomin told China News The Weekly said, “Express companies need to consider the reasons for both the headquarters and franchisees. The headquarters’ network management and control capabilities are insufficient, and once problems occur in local operations, isolated small outlets can easily go bankrupt. The most important thing is to receive, deliver, etc. The core links are all completed by the franchisee, and the franchisee represents the head office outside. It is very irresponsible for the headquarters to directly dump the franchisee."
Price war may fail
On October 18, China's 60 billionth shipment in 2020 was born.
Monitoring data from the State Post Bureau shows that in September 2020, the volume of express delivery services was 8.09 billion, a growth rate that hit a three-year high.
However, the increase in the number of express delivery does not mean revenue growth of the same scale. The rapid market expansion has led to increasing internal price competition.
Data from the National Bureau of Statistics show that although China's annual express delivery volume and express business revenue are rising, the unit price of each express delivery is less than half of what it was ten years ago.
Price swapping is the simplest and direct competitive strategy in the express industry.
In the context of the slowdown in e-commerce growth, the competition among express delivery companies tends to be homogenized, thus relying on continuously lowering prices to compete for the market.
The first half of 2020 financial report released by listed express companies showed that the single ticket price of the six logistics companies' express delivery business fell by more than 20%. Among them, the single ticket price of SF Express fell 22.18%, Zhongtong fell 21.86%, Yunda fell 28.48%, and YTO fell 25.23. %, Shentong fell 21.34%.
In the most intense period from March to June, some express companies even hit the lowest market price of "8 hairs nationwide" in Yiwu to quickly grab market share.
The direct consequence of low-price competition is the continuous decline of the company's net profit.
According to the financial report data of Yunda Express, which ranks second in market share, in the first half of 2019, a total of 4.334 billion tickets were completed and a net profit of 1.296 billion yuan.
In the first half of this year, the total volume of express delivery services reached 5.629 billion, and the net profit was only 681 million yuan.
In just one year, Yunda's express delivery business volume increased by more than 1 billion tickets, but the profit per ticket fell from 0.30 yuan to 0.12 yuan.
The industry has approached the profit red line, but it is still the strategic consensus of Tongda companies to continue the price war.
In September, ZTO Express was listed for the second time in Hong Kong. It clearly stated in the prospectus that in order to maintain competitive pricing and increase profit margins, it must continue to control costs.
"Our delivery service market prices have fallen in the past, and we may continue to face downward pressure in the future."
"At present, the price war in the express delivery industry has reached the point where the enemy is indifferent. Killing one thousand enemies loses nine hundred." Zhao Xiaomin said that in the past ten years, the rapid rise of express delivery companies is based on cheap labor, the strong purchasing power of the public and the economy. In terms of rapid development, the first round of primary competition relying on manual labor and raw capital has long since ended.
Now that it has entered the second round of competition, cold chains, supply chains, rural revitalization, and internationalization require high investment and chain construction.
"Unfortunately, relying on price wars to compete for the market is still the easiest way, and companies do not actively seek higher levels of competition."
Outside of the Tongda system, new entrants have added fire to the price war.
Three new companies, namely Jitu Express, JD Zhongyou, and SF Express, which started online in China only this year, entered the market at a low price. In particular, Jitu Express relied on ultra-low unit prices, rubbing the Internet, and other methods. Annual business volume.
"Double Eleven" is approaching, the three express delivery companies have repeatedly exceeded the reserve price to compete, and the vortex of the industry's price war has been expanded again.
On October 19th, Yunda published the national notice of prohibiting the agent of Extreme Rabbit on its official website.
Prior to this, Shentong and YTO Express also made it clear at the headquarters that they were prohibited from acting as an agent for Jitu.
This means that the Tongda company intends to fully encircle and suppress Extreme Rabbit Express.
"Price war is the usual competitive strategy of enterprises, and it will not stop." Yang Daqing believes that there are two decisive factors for price war to return to a reasonable range. The first factor is whether the new retail market can achieve relative stability.
The decisive factor for the stability of the e-commerce express market is on the demand side. Express delivery relies on e-commerce giants to decide whether to advance or retreat.
Once the top e-commerce companies form a dominant position, they will be deeply tied with express companies in terms of services to support value competition instead of price competition.
The second factor is whether the leading express companies have established a significant lead. If the leading Chinese express companies still maintain a balanced competition in terms of market share, the price war will not return to the rational range.
Zhao Xiaomin, an express logistics expert, predicts that the industry's price war will reach a critical point in the next 8 to 10 months.
"Now is the time when contradictions are concentrated." Zhao Xiaomin said that when the growth rate of business volume is lower than 30% no matter how low the price is, the price war strategy will face failure.
At the same time, continuous fluctuations in outlets, loss of personnel, and tight cash flow brought about by price wars will also overwhelm companies and reduce the service quality of companies and the entire industry.
"Before the end of the price war, strikes and runaways at express outlets will continue to occur."
(Due to the request of the interviewee, Yu Lei and Wang Lihua are aliases in the text)
China News Weekly, Issue 40, 2020
Statement: The publication of "China News Weekly" manuscript is authorized in writing