Keeping it in the family: China’s express delivery industry

Keeping it in the family: China’s express delivery industry

Staff Reporter

2013-11-24

China’s major express delivery firms mostly originated in Tonglu County in Zhejiang province, and most were established by the same family, according to the Southern Weekly. The companies are Shentong Express, YTO Express, Yunda Express and ZTO Express, as well as Best Express and Tian Tian Express. When the Pudong district in Shanghai was established, trade companies whose goods needed to travel back and forth between Shanghai and Hangzhou faced obstacles, as their customs declaration forms often did not arrive on time and shipping might take three days.In 1993, Nie Tengfei, who worked in a dyeing mill, along with his colleague Zhan Jisheng, began to help companies deliver declarations and later founded Shentong Express.

After one year in business, Nie allowed his wife’s brother, Chen Dejun, to take over Zhan’s Shanghai business and Zhan left Shentong to start Tian Tian.

Five years later, Nie Tengyun left Shentong, after his brother Nie Tengfei died in a car accident, and created Yunda. Shentong was then taken over by Chen Xiaoying, who was Nie Tengfei’s wife and her brother Chen Dejun.

In 2012, Shentong acquired Tian Tian and Chen Xiaoying’s second husband, Xi Chunyang, served as chairman.

Later, Zhang Xiaojuan, Chen Dejun’s classmate from high school, asked her husband, who had been suffering losses in the timber business, to create YTO in 2000. Two years later, their friend Lai Meisong founded ZTO.

Statistics show that Shentong, YTO, Yunda and ZTO controlled 55% of the nationwide market in 2012.

Their similarities were not only that they began operating in the same county, but that the four companies made the same business decisions at around the same time and same place.

In and around 2010, the four companies moved their headquarters to Shanghai’s Qingpu district.

On Singles’ Day, China’s equivalent of Cyber Monday, this year, Alibaba’s Taobao and Tmall ecommerce marketplaces set a record with total transactions reaching 35 billion yuan (US$5.74 billion), as the number of orders was estimated at more than 150 million.

Nearly 80% of Alibaba packages prepared that day were delivered by four express delivery companies — Shentong, YTO, Yunda and ZTO.

The online shopping business has been a boon to the express delivery industry in China.

In May 2005, Taobao and YTO signed an agreement on May 1, 2006 for 386 deliveries, but that number surged to nearly 40,000 in the second half of the year.

The weekly reported that Taobao did not only provide an increasing number of packages, but also created growing demand in the delivery sector.

Express deliveries were mainly performed using business mail in the past, but Taobao accounts for 60%-80% of business for Shentong, YTO, Yunda and ZTO.

Taobao’s large contribution led to price competition among express delivery firms. Therefore, their income did not grow as substantially as their business volume.

According to statistics compiled by the State Post Bureau, business volume among major delivery companies soared by 60% during the first three quarters of 2013, though income only rose by 30%.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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