Company says network 'broke down because investors did not make necessary payments'

Shanghai-based CCES Co Ltd, one of the top 10 express service providers in China, is on the verge of bankruptcy and may become the second courier to quit the market this year.

Stars Express Co Ltd, the Beijing-based courier established in 2008 by Chen Ping, the founder of ZJS Express Co Ltd in Beijing, ceased operations in March.

CCES stopped operations on Friday, according to Southern Metropolis Daily.

"CCES's operating network partially broke down because our investors did not make necessary payments on time as they had promised. We have passed all undelivered items to local post offices and these will be delivered to clients soon," CCES said in a statement released on its website on Monday.

Media reports said last month that CCES had signed a deal with Jiang Xiaogen, general manager of Huitong Express' Guangdong branch, to develop business opportunities in the express industry.

According to the deal, Huitong, a courier brand owned by Hangzhou-based Baishi Web Technology Co Ltd, gained a majority stake in CCES.

However, Jiang and his management team decided to cease cooperation with CCES in late June after they found it was in a worse financial state than they had envisaged.

CCES denied the claim.

Experts said competition in China's express delivery industry is intense and price wars should not be adopted as a long-term strategy.

It was revealed by industry insiders that express service providers need to deliver more than 350,000 items a day to break even. However, CCES only delivered an average of 200,000 items daily.

Chen Linhua, secretary-general of Shanghai Express Trade Association, warned that some low-end companies would go under as a result of intense price competition.

Chen did not disclose the average profit margin that can be generated by small delivery companies. However, some industry insiders said it may be around 3 to 5 percent, lower than annual fixed-term deposit rates in China. "Meanwhile, companies that expand too fast may experiences difficulties in generating good returns," Chen added.

To broaden its consumer base, CCES invested heavily to expand its operating network around China and also developed a franchising business model to achieve quick expansion.

Mo Daiqing, an analyst with the China E-commerce Research Center, said the franchising business model meant that the company was unable to control the quality of its service.

Cao Yin and Zheng Jinran contributed to this story.

tangzhihao@chinadaily.com.cn