Transport Industry Overview
11, 01. 2004
Yamato Transport, Nippon Express and Sagawa Express Engaged in Fierce Competition over Door-to-door Parcel Delivery Services
The domestic volume of cargo transported in Japan has been declining since around FY1997. In FY2001, it fell 3.3 percent as compared with the previous year, dropping again in FY2002 by 4.3 percent from the year before. It is thought that there was negative growth in FY2003 as well. As a reflection of such circumstances, the overall land transport industry in Japan has been forced to post sluggish growth.
The exception, however, is door-to-door parcel delivery services. In it consolidated financial results for the first half of the fiscal year ending March 31, 2005 (six months ending September 30, 2004), Yamato Transport Co., Ltd., which is the industry leader in the number of parcels handled as well as in net sales, posted a year-on-year growth of 6.1 percent in net sales. Net income was also roughly 2.6 times that of the same period the previous year. The favorable financial results were brought about by healthy growth in its core service, with the number of parcels handled increasing by 5 percent from the same period last year. Kuroneko Mail, a delivery service for documents, product catalogues, etc., also increased by a large margin.
Antagonism between Japan Post and Yamato Transport
Japan Post (the state-owned operator of postal services and financial services), is trying to break into the aforementioned battle for parcel delivery services that is taking place between three companies. In September 2004, the Japanese Cabinet endorsed a basic policy to privatize Japan Post in April 2007 by creating four separate companies under a holding company. In preparation of its privatization, Japan Post is aiming to expand its operations in a variety of fields. In June 2004, it launched a tie-in with two convenience store chains for the handling of its Yu-Pack parcel delivery services, which competes against Yamato Transport's delivery services. Furthermore, Lawson, Inc., a major convenience store franchise, announced in August 2004 that it would also begin handling Yu-Pack services. Yamato Transport objected to this move by Japan Post saying that it would place a squeeze on private-sector companies. It filed a complaint against Japan Post to the Tokyo District Cour, and it has sparked a debate on the nature of the privatization of the government-backed entity.
Ticket machines of JR Shinjuku Station
Net sales have also been sluggish, and there are many companies that are experiencing low profits. The Japan Railways (JR), in contrast, is doing well in terms of profits. The consolidated financial results for each of the three JR companies in Honshu (the main island of Japan) - namely East Japan Railway Company (JR East), Central Japan Railway Company (JR Tokai) and West Japan Railway Company (JR West) - all showed record current income in FY2003 through a reduction of labor costs and decreased interest rate burdens.
In the 1980s, Major Transport Companies All Launched Door-to-door Parcel Delivery Services
It was in January 1976 that Yamato Transport began services to deliver parcels door-to-door to homes and company offices. Up to then, it had been very inconvenient for individuals to send parcels. The only available methods were to send such items by parcel post or to use a system called "Check" that utilized railways. This meant that people had to go to post offices or train stations to send parcels. The new door-to-door service launched by Yamato Transport was named Takkyubin (literal translation: express home delivery), and use of the service grew rapidly after it started. By FY1983, the number of parcels handled by Yamato Transport exceeded 100 million. Major transport companies all launched similar services in the 1980s, making it a growth sector in a stagnating industry.
The road that led to the growth of Yamato Transport's Takkyubin service was not an easy one. In order to expand its service area, Yamato Transport filed a license application for new routes with the Ministry of Transport (the current Ministry of Land, Infrastructure and Transport) in the early '80s. However, it was neither turned down nor granted and was left untouched for several years. The company suffered the passive obstruction of the Ministry of Transport. It was not until the 1990s when deregulation became the catchword that barriers to market entry disappeared.
It was in April 1987 that the ailing JNR, which was in a critical state because of massive debts, was split-up and privatized resulting in the birth of six regional railway companies (Hokkaido, East Japan, Tokai, West Japan, Shikoku and Kyushu) and a freight railway company. While the government-owned JNR was debt ridden and passenger fares were raised almost every year, after privatization fares have not been raised much by JR East, JR Tokai and JR West, and they have erased their chronic deficits. Strikes, which were frequent during the JNR age, are now virtually unknown.
Three Key Points towards the Future