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Race for faster shipping pounds margins at CJ Logistics

Published: 13 May. 2025, 16:41 Updated: 13 May. 2025, 18:34

A CJ Logistics terminal in Gangseo District, western Seoul on Jan. 2 [YONHAP]

CJ Logistics’ operating profit fell 21.9 percent in the first quarter from last year, as costs surged from the launch of its seven-day delivery service.

While revenue rose slightly, growing service competition is fueling concerns that the race to offer faster shipping could lead to profit losses across the logistics sector.

The company said Tuesday that it posted 2.99 trillion won ($2.1 billion) in revenue, 85.4 billion won in operating profit and 41 billion won in net income for the first quarter. While revenue rose 2.4 percent from the same period last year, both operating and net profit declined sharply down at 26.1 percent.

The weak earnings were largely driven by a slump in the parcel and e-commerce division, known as O-NE.

Sales in that segment fell 6.5 percent to 876.2 billion won in the first quarter, while operating profit dropped 35.9 percent to 34.3 billion won.

CJ Logistics pointed to weaker parcel volumes amid a domestic consumption slowdown and added early-stage costs from launching its “Everyday O-NE” seven-day delivery service.

The company processed 377 million parcels in the first quarter, down 6.9 percent from a year earlier.

“Parcel volume decreased due to weaker consumer demand, and operating costs rose as the new daily delivery system entered its stabilization phase,” a CJ official said.

Competition from rivals also likely contributed to the decline.

KB Securities, citing data from market research firm WiseRetail, noted that Coupang saw a 15 percent increase in payment volume in the first quarter, while online transactions fell 4.4 percent at Auction, including Gmarket and G9, and 9.8 percent at 11st, both of which are major clients of courier firms.

Coupang reported a record quarterly revenue of 11.5 trillion won last week.

A year after CJ Logistics began its logistics partnership with Shinsegae Group, results remain limited.

Emart on Monday disclosed operating losses of 18.1 billion won at SSG.com and 12.1 billion won at Gmarket for the first quarter.

Cost pressure from weekend delivery

Logistics companies have scrambled to adopt seven-day delivery as they compete to win over consumers who want faster shipping without weekend interruptions.

CJ Logistics began daily delivery in January, followed by Hanjin Express on April 27. Lotte Global Logistics is still considering implementation.

Employees sort delivery items at the CJ Logistics Gangseo B Terminal in Incheon on Jan. 5. [YONHAP]

As the competition escalates, profitability continues to suffer. Operating trucks and sorting facilities on weekends incurs additional costs, with companies having to pay holiday delivery fees to couriers.

“Logistics firms that lost market share to Coupang are trying to improve service quality to win customers back,” said Ha Heon-gu, a professor at Inha University’s Graduate School of Logistics. “But if parcel volumes don’t grow significantly, this strategy could end up undercutting their own margins.”

Expansion of fast delivery services despite margin squeeze

Despite the earnings setback, CJ Logistics said the launch of Everyday O-NE has “confirmed consumer demand for differentiated delivery services.”

A CJ Logistics terminal in Gangseo District, western Seoul on Jan. 2 [YONHAP]

The company noted that increases in weekend deliveries for home shopping, SPA brands and groceries. Overnight deliveries rose 186 percent and same-day deliveries grew 99 percent compared to a year earlier.

CJ Logistics said it plans to expand its early morning delivery network from the Seoul metropolitan area and major cities to regional areas in the second quarter, with nationwide service by the second half of the year.

It also plans to scale up its express services promising delivery within two or four hours for products like fashion items and books.

The company said it will continue investing in specialized transport and global logistics.

It successfully transported a 28-ton fighter jet simulator in February and aims to strengthen its presence in the defense cargo market.

CJ Logistics also plans to expand cold chain logistics in the United States, using its hub in Georgia to serve both global and local food companies.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY LEE SU-JEONG [[email protected]]