‘FedEx China is losing money to grab market shares by lowering its prices of domestic express service in China by more than 70% in a year to the level set by domestic private companies.’ The ‘losing money’ part seems a bit strong as it is still more expensive than the Chinese opposition. But there is no doubt it is cutting its way into that market.
Chen Ping, former president of the ZJS Express, a private express company in China, expressed these sentiments to Xinhua. Chen Ping is one of the many executives of China’s private express companies grumbling over the foreign rival’s price cuts as they planned to raise service prices to offset rising cost pushed up by oil and labor prices hikes.
Together they accused FedEx of conducting unfair competition, or dumping, as they said FedEx’s cost was much higher than theirs.
Chen Ping said, ‘FedEx China is losing money to grab market shares by lowering its prices of domestic express service in China by more than 70% cent in a year to the level set by domestic private companies.’
Experts said FedEx’s move had caused great pressure to the domestic private express companies.
However, Chen said there were also other factors that could be blamed for their troubles such as institutional restrictions and their own defects.
FedEx China slashed its prices for domestic delivery service four times between October 2007 and August of 2008 to a much lower level nearing, but not below, the prices set by the domestic private companies.
Xinhua reported many domestic express firms suffered from the shrinking market share and rising labor cost.
An analyst told Trading Markets that laws, regulations and industry standards in the sector failed to keep pace with the rapid development of the express industry, which hampered the healthy development of the private companies.
China vowed to open its express market after joining the World Trade Organization. Therefore, it is certain that foreign express companies will come and share the market of domestic delivery service.
A wisely unnamed analyst said, ‘Domestic companies should upgrade their equipment. They should also learn from their foreign peers about management.’