Little room to maneuver for striking delivery men

The recent strike by delivery drivers working for CJ Korea Express signals that the local ground shipping business is in trouble, as their financial stability has weakened due to overheated competition.

For the past two weeks, about 400 couriers from CJ Korea Express have gone on strike and caused delivery problems in some areas.

The strike occurred after CJ Korea Express, which merged with CJ GLS in January to become the nation’s largest ground logistics firm, decided to change the commission calculating system for its delivery drivers.

The drivers claimed that its commission fee per unit was lowered to 800-820 won ($0.73), compared to the previous rate of 880-950 won.

Although the strike officially ended yesterday after the company persuaded drivers to come back to work with the promise of improved working conditions, industry insiders said that this incident could be the tip of an iceberg for the logistics industry.

According to data from logistics companies, the ground shipping market in Korea was estimated at 3.5 trillion won as of last year.

It has grown 8-10 percent annually, thanks to expansion of online shopping and TV home shopping.

However, behind the growth, the companies and delivery drivers have been crying out for financial stability.

According to data from the Korea Integrated Logistics Association, the average delivery fee per package was 4,000 won in 1997, but last year it fell to under 2,500 won, far below other countries like Japan and the United States.

There were attempts from some shipping companies to raise the unit price. Hyundai Logistics earlier this year announced that it will raise its price per unit by 500 won but is reportedly going through difficult times, considering the relationship it has with customers due to the price hike.

“The shipping industry itself is suffering because as many companies enter the business, the price has been going down to win orders,” an official from CJ said. “Most customers first look at the price in this difficult economy, so it is difficult to raise the fee.”

The lowered unit fee has put a burden on delivery drivers. According to the logistics association, the average unit price per package from a corporate body, which accounts for 95 percent of the entire logistic volume, was 2,200 won.

From that price, delivery drivers get 880 won as their commission, but when factoring in fuel, insurance and telecommunication costs, they actually collect around 670 won per package, industry insiders said.

According to data from the Korea Chamber of Commerce and Industry, a driver on average delivers 110 packages, working 13 hours a day.

As their revenue decreases along with tough working conditions, logistics companies have been dealing with a shortage of delivery drivers.

Industry insiders estimated that about 52,000 delivery drivers are needed in the business, but only 37,000 are currently working.

The shortage of delivery drivers apparently dented the shipping companies’ service quality.

According to data from the 1372 Consumer Consultation Network, an organization run by the Fair Trade Commission and other consumer agencies, the number of complaints it received from customers regarding shipping service was 10,660 last year, which was a nearly 10 percent increase from what it was in 2010.

The next-day delivery rate from shipping companies also plunged to 70 percent this year, compared to 90 percent in the past.

Not only deliver drivers, but some shipping companies are also suffering from a decrease in profits. Excluding commissions and logistics costs, companies on average collect only 70 won per package, according to industry data.

“Shipping is different from cargo transportation, so there should be a law only for the shipping industry,” a CJ official said. “If the law is created, it will boost the shipping market and enhance service quality.”

By Joo Kyung-don [kjoo@joonang.co.kr]