High price to pay for cheap courier delivery

February 19, 2021

© Provided by Free Malaysia Today The ongoing price war could be self-defeating for many companies. They have to sacrifice salaries and quality; and the company in the viral video has seen its business plummet.

PETALING JAYA: A viral video, showing workers tossing parcels around at a courier hub in Ipoh in an apparent strike has led to concerns about the business as a whole.

The rise of e-commerce and free shipping on orders above a certain amount, combined with the popularity of online shopping during the movement control order (MCO), has seen an explosion in parcel volume – with Pos Malaysia alone estimating it handles up to 800,000 parcels a day during peak season.

However, with 109 courier firms in the market as of last October, the ensuing price war has seen some players struggling to cover costs – with labour costs the biggest outlay.

Calling the incident an “embarrassment” for the industry, Association of Malaysian Express Carriers (Amec) president Teong Teck Lean said it can be directly linked to the rise of e-commerce giants.

Teong noted how some e-commerce companies which have come to dominate the market give a lot of business to certain courier companies – who are then pressured to lower their prices.

“These e-commerce companies are so powerful… if you complain to them today, you won’t have any business tommorrow,” he told FMT.

“So that’s how this whole thing evolved. People (courier companies) think that if they continue to sell at a low price, they will be able to kill competition off and eventually take over – and there will be a monopoly.

“Once they have the volume, it’s easy to make up the numbers… just deduct from workers, especially since they know there are so many people who have no jobs now.”

Noting that a price war has been ongoing for years, Teong, who is also the managing director and group CEO of courier company GD Express Carrier Bhd (GDex), said that the entry of international shipping companies – several now have their own e-commerce courier businesses – has only made the industry even more competitive.

However, Teong stressed that while the price war has resulted in some companies taking advantage and cutting corners, it would be unfair to paint all the companies in the industry with the same brush.

Gandhi, a Puchong-based agent for courier companies, notes how companies have come in to “break the market” with little regard for long-term sustainability.

He told FMT that the companies bank on their low prices to attract customers but do not provide an adequate level of service, a factor which price-conscious consumers often overlook.

“Some companies… They’re here today but they’re gone tomorrow,” he said.

“They have so many orders but they cannot maintain profits as there are many costs involved… manpower, fuel, transport.”

An industry insider who wished to remain anonymous admitted that courier companies have been dropping prices until they went into the red as their minimum price point is not enough to cover costs.

Customers, he said, needed to be aware that lower prices deprive companies of the resources they need to pay their workers a fair wage, commission or bonus, The industry also has to examine how it can provide services at an acceptable quality despite low prices.

“Companies in this industry will usually pay their employees minimum wage without other benefits. Workers are forced to work overtime in order to get higher pay,” he said.

The Malaysian Trades Union Congress has also raised the problem of low salaries in the industry to the human resources minister, stating that the sector is plagued with issues such as the absence of service contracts, annual salary increments and late payment of wages.

“What happened was really shocking and has opened our eyes… We need to do something to make sure the industry is sustainable,” said the insider.

“If companies sacrifice on price, they may be sacrificing worker welfare as well,” he pointed out.

They could also be putting themselves on the sacrificial altar. The company involved in the strike has seen its business plummet after the video went viral.

While industry regulators Malaysian Communications and Multimedia Commission (MCMC) implemented a floor price for letters or documents below 500 grams in 2015, there is no such equivalent for parcels.

That only served to make things spiral out of control in the industry.