Although a distant third among Japan's package delivery companies, Japan Post is closing the gap with the country's leading parcel shippers thanks to a surge of cost-conscious customers, the Nikkei Asian Review reported.
While no longer a purely public entity, the postal service has been increasing its current less than 20% of the home-delivery market, thanks to rate hikes and introducing volume caps by its
nearest competitors Yamato Transport and Sagawa Express, which respectively have close to 50% and roughly 30% market share.
The explosive growth in e-commerce has forced the understaffed industry leaders to raise rates and limit package volumes, the Nikkei Asian Review report said, adding that, based on package totals for fiscal 2017, Yamato Transport handled 1.83 billion home delivery packages, 2% fewer than in fiscal 2016, while Sagawa defended its position, handling 1.26 billion packages for a 3.6% rise in volume. However, Japan Post's home-delivery total surged more than 25% to 875 million parcels.
Turning down unprofitable shipments
Yamato last year capped the number of parcels it would handle in order to ease the growing burden on its delivery and pickup staff and has started turning down shipments that would be unprofitable.
Rates for retail customers were raised last October, and the company renegotiated prices for corporate clients such as Amazon Japan throughout 2017. Sagawa took similar steps to improve profitability.
In contrast, semi-public Japan Post is still charging the discounted rates set under government control after it debuted on the Tokyo stock market in 2015.
JP relies increasingly on subs
As a consequence, business ironically "has grown more than we expected," an executive said. He added that while the postal service in March increased retail and corporate rates by an average of 12% against the 30-40% hikes by its nearest competitors, the postal service has picked up a significant number of cost-conscious clients such as small and midsize businesses. Due to the surge in e-commerce-related package deliveries, however, even Japan Post is facing rising costs as it hands off more of its business to contract couriers.
This fiscal year, Japan Post expects roughly 9% volume growth, while Yamato is facing a 4% reduction and Sagawa expects business to be "about the same" as in fiscal 2017.
Nol van Fenema