China's Errand Runners Encroach On A Crowded Delivery Market!

China's dog-eat-dog parcel delivery market, one of the world's largest, is being flooded by startups launching innovative services to challenge the established players.

In 2018, 50.7 billion home deliveries were made, up 27% from the previous year, according to China's State Post Bureau. This torrid pace has been driven by the country's strong economic growth and the explosive development of its internet services.

But the home delivery industry's total revenue grew by a slower 22%, to 603.8 billion yuan ($84 billion), in 2018. In fact, the industry's revenue has been increasing at a slower clip than the number of deliveries for the past five years, which means tumbling unit prices and profits.

For consumers needing a package delivered, the situation is ideal.

A 30-something Guangzhou man recently faced a conundrum: He had brought back a box of confectioneries from Japan for a friend who also lives in Guangzhou. He was in a hurry to hand them over before the weekend, when he had to go on a business trip, but his friend was too busy to take the package on a weekday. Also, the sweets' best-before date was approaching.

The hopeful souvenir giver decided to try Shansong, or FlashEx, whose ads have popped up everywhere in the city.

Using Shansong's smartphone app, he designated a pickup point and destination. Three minutes later, a delivery person arrived to pick up the package. Twenty minutes after that, he received a message from his friend, who had just received the treats from Japan.
China's Errand Runners Encroach On A Crowded Delivery Market!
China's Errand Runners Encroach On A Crowded Delivery Market!
The man paid 22 yuan to have the parcel delivered to his friend's workplace, about 3 km away.

Shansong is an intracity express delivery service operated by internet startup Beijing Tongcheng Biying Technology, which was founded in 2013.

This quick-delivery service has grown at breakneck speed in major cities in the past couple of years by tapping venture capital at home and abroad. The company is currently valued at $700 million, according to market researcher ITjuzi.

Its competitive edge is its commitment to a "one delivery worker for each parcel" principle.

The lack of handoffs helps to reduce delivery errors and parcel damage while shortening the average delivery time, according to the company.

Like Didi Chuxing's ride-hailing service, Shansong's parcel delivery is powered by the mobile internet, which allows each user to connect to the nearest delivery worker.

But Shansong differs from Didi in the way it deploys its manpower. Most ride-hailing and food delivery services use past data to have their workers concentrated in areas where demand is strong.

Shansong bucks the trend by using a system designed to ensure that workers are evenly deployed across the areas it serves. The approach allows the company to deal with orders in wider areas and offer shorter response times than rivals.

The company charges higher fees to make up for its higher labor costs brought on by the even deployment system.

In China, this type of service is called pao tui, which means running errands.

Shansong's rivals include UUpt and Dianwoda.

Unlike online food delivery services, which mainly take business-to-consumer assignments, such as from restaurants delivering meals to individuals, pao tui providers generally focus on consumer-to-consumer deliveries.

But pao tui companies are beginning to take on a wider variety of tasks, from messenger services to picking up lunch at someone's home and delivering it to the person's workplace.

While most online food delivery services stay within a radius of several kilometers, pao tui operators often handle deliveries of over 10 km.

Pao tui services are, however, beginning to encroach on food delivery companies' territory, at least when it comes to birthday cakes.

More Chinese are choosing pao tui over food delivery services to make sure these crucial cakes are taken to the designated address at the specified time without fail.

Pao tui runners, meanwhile, are having their turf invaded by some online food and parcel delivery services, including Meituan Dianping and SF Express, as these more established players seek the newcomers' fatter profit margins. Pao tui fees are several times higher than those of simple food and conventional same-day delivery providers.

The battle will continue, with many players trying to ensure a piece of a very large pie. The total number of home deliveries in China, including letters, has already surpassed the combined figure for the U.S., Europe and Japan, according to some estimates.

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