International express giants FedEx and UPS are approved on Sept 6 by National Post Office to operate express delivery business in domestic China. It’s the first time for foreign express enterprises to get the rights to be licensed to run domestic express business in China. They can run all kinds of express delivery business except letters.

Though both FedEx and UPS are quite famous even in China, however, due to limits on price and network, they cannot change the current market structure of domestic express industry, according to insiders in the industry.

It was reported that the first open business areas for these two express giants in China are all big cities. For FedEx, they can run their business in 8 cities – Shanghai, Guangzhou, Shenzhen, Hangzhou, Tianjin, Dalian, Zhengzhou and Chengdu; while for UPS, 5 cities are open for them – Shanghai, Guangzhou, Shenzhen, Tianjin and Xi’an. As they have run international business in China for long, it’s easier for FedEx and USP to begin their business in these big cities where they have established branches already. However, as competition in these cities is quite fierce, it’s still very difficult for them to seize market share there.

Different from international express market, in domestic market, which is large as well, quite a number of market shares are taken by low-priced small packages from online shops such as on Taobao.com; while the medium and high-end market shares are quite limited. At the moment, FedEx and USP have only no more than 100 self-owned branches in China and in many cities, they use agents to send and receive packages. If they want compete with Chinese express giants such as SF-Express and EMS, thousands of new branches should be established to reduce average cost, said Xu Yong, Chairman of China Express Consulting Website.

Previously, FedEx and UPS both expanded network of branches through mergers and acquisitions. For example, FedEx bought Tatex while UPS purchased TNT in order to increase their competiveness in Europe. However, in China, it’s join patterns that dominated in express industry, in which, FedEx and UPS, as retail enterprises is difficult to blend, added XU.

Da Wa, Vice President of China Express Association said that the joining in of foreign express giants is just like fresh blood into Chinese market, which will accelerate the growth domestic express enterprises as it will bring in the first-class standardized service.