The South Korean domestic express delivery market is heading for more consolidation after a seriesof deals over the last year, according to experts. Large conglomerates are entering the market,
resulting in tougher competition and falling profits for medium-sized players.Although the four largest parcel carriers are estimated to have 60% of the market, there arestill a large number of smaller players. However, recent moves by industrial conglomerates to enterthe market have intensified competition, the Korea Times newspaper reported recently.
“The market is overflowing with players in addition to conglomerates launching deliverybusinesses,” Kim Sung-churl, an analyst of Hyundai Securities, was cited as saying. “Everyone,including the Big Four, is going through rough times.”
The Big Four are Korea Express, Hyundai Express, Hanjin Express and CJ GLS. Korea Expressregained leadership of the domestic express parcel market from Hyundai Express in 2007, closelyfollowed by the other two major players.
The biggest transaction in the market recently was the acquisition of Korea Express by theKumho-Asiana group. Hyundai Express is part of Hyundai Logistics, the logistics division of theinternational automotive group, while Hanjin Express is part of the Hanjin Group, owner of KoreanAir and the Hanjin container shipping company.
CJ GLS, owned by the CJ Group conglomerate of food manufacturing and service companies,recently merged with its sister company, CJ HTH, the Korea Times wrote. Other conglomerates uppingtheir presence in the sector are Dongwon, which bought Aju Logistics and KTLogis last year, EugeneGroup, which acquired Logen, and department store group Shinsegae, which launched a new operatorcalled SedEx. Retail group Lotte Group is also reportedly interested in the sector.
The common factor is that the large Korean conglomerates see the parcel sector as a growthmarket, especially for home deliveries of consumer products bought via the internet or TV, whilethey also believe they can reduce their internal logistics costs by owning a delivery company.
One consequence is that market players are reducing prices to try to keep or grow theirvolumes, leading to lower profits. This, in turn, is creating more potential for marketconsolidation.
