Small service hike worked for Hyundai Logistics

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Small service hike worked for Hyundai Logistics

Hyundai Logistics Company (HLC), the nation’s leading parcel service provider, said raising its delivery service fee has not negatively impacted its business and that they will also attempt to pursue the same business strategy during the second half of this year.

The affiliate of Hyundai Group announced in January that it would raise its delivery fee per package by 500 won ($0.44) in order to enhance its business profitability and secure enough funding for its delivery drivers. It was the first such hike among major ground shipping firms.

HLC said that although it was only able to raise the fee by 250 won after negotiating with its customers since the announcement, it is still a promising result.

“The fee raise in January was an inevitable move for those in the parcel industry to survive together,” Noh Young-don, the president and CEO of HLC said in a press meeting yesterday in Seoul. “The market reaction was actually positive toward our raise and other companies are also encouraging us that our company has moved to solve big problems in the parcel industry.”

According to data from the Korea Integrated Logistics Association, the average delivery fee per unit was 4,000 won in 1997, but last year it fell to under 2,500 won as competition in the ground shipping industry overheated. It eventually created a vicious cycle for the logistics firm, worsening its earnings.

According to Noh, Korea’s average delivery service fee per unit is nearly one-third that of Japan and one-fourth of the United States.

He said that average delivery fee per package should be 4,000 won in the future in order for parcel companies to stay healthy.

Noh said that the company’s business hasn’t been affected much since the service fee raise. As of the end of May, 2,326 corporate customers agreed for the raise, which is 61.8 percent of its total corporate customers that were eligible to renew their contracts with HLC.

“In the second half, we will negotiate with 7,485 companies regarding the delivery fee raise,” Noh said. “Of course, some customers did leave, but we think our service quality has retained our customers and some are also coming back even after the raise.”

HLC officials said that profits made from the fee raise will enhance the working environment of its 6,000 delivery men. The company currently supports health checkups and insurance fees as well as scholarships for their staff’s children.

The company also has been limiting large size packages such as 40-kilogram (88-pound) rice bags, in order to help deliverymen. As a result, HLC’s delivery drivers’ service start time has been 90 minutes faster than before.

“Co-living management and the creative economy is essential for the country’s parcel industry to grow,” Noh said.

HLC said that it is also considering using hybrid vehicles as delivery cars in order to save fuel and be environmentally friendly. Most delivery cars now use diesel.

Noh, meanwhile, urged the government to legislate “parcel law” to help struggling ground shipping firms. Currently, parcel companies are managed under the cargo transportation law.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]

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