Piled up packages reveal fundamental risks

By Ni Tao
0 Comment(s)Print E-mail Shanghai Daily, February 27, 2017
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"Where has my package gone?"

This is the question hovering in the mind of many online shoppers when they check the status of their orders.

Indeed, many urbanites expected life to return to normal after the Lantern Festival — in other words, after migrants get back to their jobs. One of the benefits associated with having these laborers pressed back into service is the efficient delivery of our online purchases, something we have taken for granted.

But according to media reports, undelivered packages have been piling up in warehouses of courier companies. Some desperate shoppers have even been pictured doing the pickup themselves, sorting through the heaps for their purchases. One such shopper told the media that an item that normally takes no more than three days to be delivered to his door hasn't arrived in a week.

Apart from cash flow problems that occasionally shut down some courier businesses, a main reason for these delays is that a growing number of couriers are leaving the industry for more lucrative trades. Many have reportedly taken the leap into food delivery, lured by the prospect of better pay and easier work.

According to the Paper, a mobile news app, a food deliverer can earn roughly eight yuan (US$1.16) for each trip he makes. When business is good, he can make 40 trips per day, which earns him around 10,000 yuan a month — on a par with some office workers' salaries. Even in a less busy month, a food deliverer's wage can top 7,000 yuan, said the story.

This eclipses the pay of those who deliver parcels, although their work is essentially the same. According to industry sources, the standard commission paid to a parcel courier averages a mere one yuan for each parcel delivered. On a typical business day he may deliver around 100 packages, and make about 5,000 yuan a month.

The contrast in workload and pay naturally has led many to turn their backs on the traditional courier business.

In addition to the pay differential, another motivation for quitting the business is a pervasive lack of entitlement to proper social security benefits. By contrast, food delivery companies typically grant these benefits as an added incentive in recruitment.

Most couriers are in the prime of their lives. One cannot but wonder how they will cope with post-retirement life without a pension when they become old "expendable assets" to their employers.

This appears to be the least of their employers' concerns, many of whom wallow in nouveau riche opulence thanks to China's e-commerce boom, and more importantly, to its seemingly endless supply of cheap labor.

Statistics indicate that the number of packages delivered in China in 2016 totaled 30 billion, compared with nearly 70 billion worldwide. Chinese courier companies posted a staggering 400 billion yuan in aggregate revenues last year.

Yet the mass flight of couriers from the industry has exposed a simmering crisis underneath the surface of prosperity.

The overall increase of labor costs seen in recent years affects every industry. The courier business is no exception.

It's hard to fathom how young couriers in their prime working years can tolerate an income unmatched by the stress and workload. A few courier company proprietors were quoted as saying that it's much harder to hire young migrants these days because, unlike their fathers, these youths are reluctant to engage in back-breaking yet low-paying jobs.

As China's supply of cheap labor is steadily drying up, it's become manifest to all that the prosperity of Chinese courier industry is underpinned by an unsustainable, labor-intensive business model. And this model is further discredited by a new focus on added value.

As such, many struggling courier businesses are left with the choice of continuing to compete on the labor-intensive model or moving up the value chain.

The second strategy is often equated with the scramble for capital. Last year saw a host of established courier brands get listed on Chinese or foreign stock exchanges, with billions raised through initial public offerings. Besides, the industry has become a new component in the investment portfolios for private equity managers and venture capitalists.

According to analysts, the fervor with which many brands seek to go public can be explained by their "pursuit of more lofty development goals" and "coveted high market valuations."

The problem is how relevant these valuations are when fundamentals of the industry are changing. Specifically, when discontented couriers are now offered a way out, it'll be trickier to retain them and perpetuate the industry boom.

In recent years there has been a spate of news reports about couriers being verbally and physically abused simply because they failed to deliver packages on time. Couriers deserve to be treated better, whether with higher pay or more civility. When even dignity is taken from them, what motivation is there for them to stay put?

History is littered with examples of boom times ruined by hidden risks. The high turnover among couriers should alert their employers to those risks.

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