We announced this month a new venture with a Chinese logistics company to deliver parcels from China to Europe, including the UK. Mark Thomson, managing director of our International business, tells us more…
So, what’s the deal in China, Mark?
Our European parcels business GLS has joined forces with a leading national Chinese company called ZJS Express. We will trade in China as Euro Business Parcel, offering Chinese businesses a competitively-priced, fully-tracked, business-to-business delivery proposition enabling them to reach a huge number of customers across Europe.
Why China in particular?
China’s logistics market is growing at around 11% a year, whereas in the UK and Europe it’s much slower. Stats show that China has surpassed the US to become the EU’s largest trading partner. Chinese exports to the EU have grown almost 50% in the last five years, according to trade data from the European Commission. Revenues are expected to grow by around 20%, according to state predictions. We’re targeting emerging markets and have to have a presence in China or we will be missing a trick.
Tell us about ZJS...
They have invested in a nationwide pick up and delivery system that reaches places where competitors struggle to go. Together with GLS’s reach into 42 European countries – it’s a powerful combination. Parcelforce Worldwide will act as the UK delivery arm. With established networks, we don’t need huge capital investment.
But isn’t the Chinese market really competitive? How will we stand out?
We’ve spotted a niche market. Customers want reliable delivery to Europe within 3-5 days without paying a premium price for a faster service. We’re targeting small to medium-sized businesses in China with the catchphrase “the speed you need at the price you want.”
Why is this move important to Royal Mail?
The alliance between GLS and ZJS is part of our overall parcel strategy. As letter volumes continue to fall, we are focused on generating profitable revenue streams in parcels and marketing mail. In the last financial year, our parcels business grew by 6% and accounted for 48% of Group revenues, generating £4.2 billion. Our projections see China as helping to push that revenue beyond 50% in the next few years. Developing our business in this way will also make us attractive to potential private investors, looking to explore growth opportunities.
How long has the deal taken and what’s been involved?
It has taken some time. China is a large and complex country, and doing business there requires patience and perseverance as well as being sensitive to cultural issues. Building relationships is crucial to doing business in China. Our relationship with ZJS was carefully nurtured over many months. We underwent a programme of cross-cultural training led by a specialist to help better understanding and effective working for everyone. They were very interested in how Royal Mail operates, for example adopting a reward and recognition scheme similar to Watch & Win.
Where next after China?
We see this move as the start of much bigger activity internationally, looking to grow our business in other emerging markets in a similar way, using our existing network and partnerships.
Mark is pictured with Zheng Ruixiang, president of ZJS.