SF Express, one of China’s biggest couriers, hit a home run in January keeping operations open over the Lunar New Year holiday when most businesses closed for one of the country's most important festivals while the spread of the novel coronavirus gathered pace.
While mainland China’s express delivery sector suffered a 12 per cent dive in revenue last month, the company posted a 14.4 per cent increase to 11.6 billion yuan (US$1.6 billion) on the back of a 40.4 per cent jump to 566 million bills in transaction volume, according to data from the State Postal Bureau and the company.
The demand for express delivery for everything from daily necessities to medical supplies has been on the rise in China as the coronavirus keeps people holed up at home.
As the virus has spread from the central Chinese city of Wuhan, authorities across the country have imposed sweeping restrictions on transport, curbed shop hours and locked down entire cities home to tens of millions of people.
Some companies have introduced “contactless delivery” and even started using robots to drop off orders to consumers, cutting out human-to-human contact.
Yet SF Express’ double-digit revenue growth in January is hardly representative of the industry going forward – at least in the short term.
An industry survey conducted early this month showed that 53 per cent of respondents said it was difficult to resume normal operations in the short-run, and it was especially hard for small and medium-sized enterprises (SMEs).
Large operators faced higher management costs to implement virus-control measures required by authorities to resume operations, the findings showed, while an estimated one-fifth of firms would suspend business until the outbreak tapered off. The online survey, which received 159 responses from mainly senior logistics executives, was conducted early this month by Log Research and Lenovo Logistics, a unit of China’s biggest computer maker.
But 42 per cent of respondents also expect the fallout to extend to a shake-up of the industry over the next three years, with SMEs to be hit hardest.
Some 65 per cent of the respondents forecast losses this year, with just 11 per cent predicting marginal growth or earnings on par with 2019.
“The impact on the industry in the short-term is obvious, mainly because of the controls imposed to contain the outbreak in different cities and provinces, and conditions facing workers trying to resume work, as well as drivers’ turnaround time,” said Frank Hu, strategic development manager of Five Star Holdings, which operates an e-commerce platform.
“But breaking down into sub-sectors, such as the last mile service (or delivery of the goods to the end user), we also see a rise in volume in the cities.”
The impact on the industry in the short-term is obvious, mainly because of the controls imposed to contain the outbreak in different cities and provinces, and conditions facing workers trying to resume work, as well as drivers’ turnaround time
Hu said the industry’s well-being hinged on the health of the broader economy, where an existing slowdown has been exacerbated by the impact of the outbreak.
The new coronavirus, which is China’s most severe public health crisis in decades, has so far killed more than 2,700 people and infected more than 78,000 in the mainland.
Its toll on the economy is also growing, with manufacturing output and supply chains still severely disrupted across the country.
Although Beijing has ordered economic activity to resume, many businesses are far from operating at full capacity. Only one third of small businesses are estimated to have operations back to normal.
In a separate survey by the China Federation of Logistics and Purchasing this month, findings indicated that 76 per cent of the warehousing sector had resumed operations, with more than half of storeroom utilised.
But more than half of warehouse providers who responded to the survey expect earnings to drop by 30 per cent in the first quarter of the year due to depressed consumption. Businesses said goods were stacking up as consumers were spending less amid the outbreak and economic downturn.
The federation said 40 per cent of surveyed firms had been granted government tax breaks and subsidies to tide them over in the tough times, but it urged authorities for faster implementation to take some of the heat off businesses, particularly the SMEs.
With no sign of the outbreak tapering off soon, economists have revised down China’s gross domestic product growth for the first three months of 2020.
Natixis’ economists Alicia Garcia Herrero and Jianwei Xu have projected a growth range of between 2.5 to 4 per cent.
The economists said improved March data was needed to reach 4 per cent growth – which would be 240 basis points lower than first-quarter 2019.
“In other words, even in the best of circumstances, the coronavirus outbreak has already constituted a big shock for the Chinese economy,” they wrote in a note over the weekend.
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This article Coronavirus: China’s courier sector braces for losses as outbreak snarls supply chains first appeared on South China Morning Post