Why has China taken the lead in parcels industry innovation?

Delivery robot
JD.com has been using ground delivery robots since 2017. Travelling at 3-4km/h they have the capacity to deliver up to 20 items on one trip, and have been so successful the firm plans to have 100 in use, serving residential and university campuses, by the end of this year.

The Chinese delivery vehicle manufacturer Hanergy has just announced the launch of its solar powered express delivery cars, which are now in service with leading carriers STO Express and ZJS Express.

SF Express is building the world’s largest parcels hub at Wuhan which will incorporate one of the busiest airports in the world.

While the West’s regulatory frameworks on drone delivery have been extremely tight and slowed down the rollout of such services, many drone delivery operations in China are better established. JD.com for instance has been using drone delivery since 2016 and now has regulatory approval to use them in four provinces – Jiangsu, rural Beijing, Sichuan and Guangxi – and by the end of this year will have 100 fixed routes across the country.

Why is China rapidly implementing technology that remains on the drawing board in the West?

Previously viewed as a country of low labour costs, China is seeing wage inflation as the increasing wealth of the nation reaches ever more people. This has resulted in increased logistics and delivery costs, and a drive toward automation to tackle the issue.

With slowing population growth and the strong growth of Tier 3 and 4 cities, there is both a smaller pool of migrant labourers willing to travel to take unskilled jobs at low wages and a greater demand for their labour. The China State Post Bureau encourages better pay and conditions as well as union organisation for couriers, and as a result carriers face increased labour costs at the time when growth remains rapid. In the run up to Singles Day last year, delivery couriers were able to take wages at the same level as university graduates.

This challenging labour environment is forcing logistics and delivery companies to innovate. While rapid market growth provides the resources and scale to enable them to do so. Carriers are increasingly looking toward automation throughout their networks to tackle manpower costs. In warehousing and distribution centres, STO Express reported that sorting robots improved efficiency by approximately 30% and saved 70% of manpower costs at the company’s Shandong Province sorting hub.

This, and other issues, are discussed in our recent report: China Parcels Market, Market Insight Report 2018.