Last few days, three out of the six major Chinese ecommerce logistic companies have issued stern letters to their networks of agents. In the letters, they have explicitly ‘banned’ the agents from delivering for J&T Express, which has made a big splash in China

Fines will be imposed if they are discovered violating the ban. 

It is worth noting that these three – Yunda Express, STO Express and YTO Express – all count Alibaba as a major investor

The gang of five

They, alongside ZTO Express and Best Express – are all invested by Alibaba. More interestingly, the founders of all five companies come from the same county (Tonglu) in the mountains of Zhejiang province (and not far from Alibaba’s headquarters in Hangzhou): 

Tonglu’s location
Tonglu is beautiful too

The only exception amongst the top players is S&F Express, whose founder is a Shanghai-born Hong Kong businessman. 

Unlikely to succeed

Will the blocking of J&T succeed? We think unlikely – there is no way this ban can be enforced, and there are so many ways to circumvent it. 

For example, as an agent of ZTO Express, you can easily get a relative to sign up as an agent for J&T Express. “He is just leasing my warehouse” or “we are poor so we rent the same warehouse”. 

At the end of the day, these agents are voting with their feet. Whichever platform giving the biggest economic benefits will get people working for them – J&T is in the stage of burning to secure market share, so of course their incentives are higher. 

But even if you give the best incentives, you can’t prevent these agents from working for other people. They will just ‘prioritise’ your parcels. 

Exclusivity? That only exists when you are too important in market share that they will be really scared if you block them. Apparently, none of the five Alibaba-invested players has that kind of dominance. 

Collectively they do have some sway over the market – but again the enforcement of such things will be quite difficult once you are on the ground. 

In a way, J&T is smart to leverage existing agent networks from other players, knowing that those players have no full control over the network. 

It will be able to grow fast this way – but it is costly growth. Just like Pinduoduo, its alleged patron, has achieved. 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].