Forwarders fight to recapture e-commerce market lost to Post

Japan’s largest international freight forwarder, Nippon Express announced a new deal to handle China-bound shipments originating in Japan for Alibaba’s TMall.com platform.

Volumes of Japanese cosmetics and other consumer goods moving from Japan into China via e-commerce channels have never been greater – yet freight forwarders control only a sliver of this market. Japan Post maintains a near-monopoly, handling 90% of the cross-border express parcels moving outbound from Japan with its EMS services. But this could soon change as Nippon Express muscles in at the same time as Japan Post implements its recently announced 30% fee-hike on small parcels weighing less than 500 grams.

With the agreement, Nippon Express becomes the first Japanese company to partner with Cainiao, the Alibaba-backed e-commerce logistics platform. As it integrates order and shipping information into the Cainiao platform, Nippon Express believes it can match Japan Post’s original rates by consolidating orders for bulk outbound shipment to China by air or sea. Upon arrival at the destination airport in China, packages are consigned to local delivery partners, and transported onward to their final destination – all with the same tracking number. By linking directly to Cainiao’s platform, track-and-trace progressions, and customs clearance no longer require additional data exchanges. Like Japan Post’s EMS, the service will takes about 4-6 days.

Given that the value of Japanese goods purchased online by Chinese consumers is expected to triple between 2015 and 2019, to US$22.8 billion, such an agreement should come as a boon to Nippon Express. Oddly, however, the company is not expecting much of an increase to its bottom line. In a note to shareholders about the tie-up with Cainiao, Nippon Express said: “the effect of the business alliance on the financial results of the Company is insignificant.”

Similarly, even though Japan Post’s e-commerce parcel volumes have ballooned, there is not much indication in the company’s most recent financial results that the increased volumes did much to increase profitability. Net income for the company’s Postal Unit grew 113.1% to US$462 million in the fiscal year ending on 31 March, but this growth was attributed to Japan Post’s acquisition of Toll Holdings becoming accretive, increased domestic parcel volumes, and “operating initiatives in cooperation with Japan Post Bank and Japan Post Insurance.”

In a report published slightly before the rate-hike, Japan Post said, “While the delivery market for small-size goods such as courier service is expanding due to expansion of the mail order and the e-commerce markets, there is severe competition as companies work to improve the quality of services in response to growing customer needs for service quality.”

This all leaves us wondering whether, even if forwarders manage to capture a greater share of the of cross-border parcels currently handled by postal services around the globe, they can find a way to earn healthy returns.

If you are interested in the impact that e-commerce is having on the air freight and express industries, join us at the Cargo Facts Symposium in Miami, 10 – 12 October, where senior industry from leading companies will share their views on the subject. To register, or for more information, go to www.cargofactssymposium.com.