How has the delivery workplace changed since COVID 19 and public consensus? 

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Dong-Heon Kang(Cargo Union Headquarters)  

APR 24 2021


Changes in the delivery industry after COVID 19

2020 was harsh for the delivery workers. The overwork death of the delivery workers became a social issue and people paid attention to their poor working conditions. COVID 19 changed consumption patterns and made the delivery industry expand rapidly.

The volume of delivery in 2020 increased by 20.93% (total of 3.37 billion) compared to the previous year. It is the most explosive increase in the last 10 years. Even before COVID 19, the delivery industry has increased an annual average around 10% for 10 years. Compared with other years, the overall volume of delivery has increased sharply in 2020. On the contrary, the average unit price of delivery in 2020 fell to -2.1% compared to the previous year. The average unit price decreased from 2,269 won in 2019 to 2,221 won in 2020 which is the lowest price in the last 10 years.

 

Delivery workers who collapse while working in the profit making of delivery companies

Delivery companies have made great profits around COVID 19. In 2020, CJ Logistics, Hanjin Logistics, Lotte Global Logistics, and Losen Logistics all recorded 10-20% increase in delivery sales compared to the previous year. Their operating profit increased from a minimum of 20% to a maximum of 130% compared to the previous year. The delivery companies are conducting cutthroat competition with low prices to secure a market share in the delivery industry. The decline in the average unit price of delivery shows that their business strategy has not changed before and after COVID 19.

There are the overwork deaths and poor working conditions of delivery workers behind the profits of delivery companies. Delivery workers had the only option to deliver large quantities in a low fares system. Since COVID 19, the exploding delivery volume worsened the working conditions in which the delivery workers collapsed and died while working.

 

Distribution industry reorganization led by Coupang

Coupang acquired the qualification as a delivery service provider in January 2021. In March, it received great attention when it was listed on the New York Stock Exchange. Coupang will use an aggressive market share strategy in the delivery industry as well, as it has a history of dominating the online distribution industry by the deficit operation and flexible labor to monopolize the market.

Coupang announced its policy of direct employment when attempting to re-enter the delivery industry. However, after it acquired the delivery service qualification recently, it turned to the position suddenly to choose direct employment and consignment labor contracts.It may think that it is advantageous to form flexible employment in order to quickly dominate the delivery market. That is why we should keep an eye on Coupang's advance into the delivery business.

 

Coupang’s impact on the whole logistics industry

Coupang made a full-filment system called 'Rocket Delivery' based on the distribution warehouse and delivery center secured by aggressive investment. In the industry, a movement is underway to follow Coupang's model. CJ Logistics and Naver exchanged shares worth 300 billion won last year and recently announced their plan to build a full-filment system called 'Fast Delivery'. It means to combine Naver's dominance of the online market with CJ Logistics' warehouse and delivery system.

It can be seen as a movement to pursue Coupang's model that there is the fierce competition between Shinsegae, Lotte, SK and MBK(a parent company of Homeplus) for the acquisition of eBay Korea (a parent company of Gmarket, Auction and G9). In particular, Shinsegae, Lotte and Homeplus are trying to integrate online and offline in preparation for the decline of the offline distribution industry(such as supermarkets). To this end, they are betting their lives and deaths on the acquisition of eBay Korea. They are reorganizing existing supermarkets into distribution warehouses and building online malls and direct delivery systems. Competition within the industry is intensifying to take the lead in the last mile delivery market.

 

The reality of delivery workplace after public consensus

In 2020, as the overwork death of delivery workers became a social issue, a 'Social Consensus Organization' centered on the ruling party's public welfare conference was formed at the end of the year. In January 2021, it also announced a social agreement. How has the delivery workplace changed since then?

It seems that it is still too early to confirm the practical effect, but there is no dramatic reduction in working hours in the field yet. According to an investigation of Cargo Union, it was found that the sorting operation time decreased by an average of 1.5 hours. Except that, it was difficult to confirm a significant difference in other working hours. Compared to a total of 14.5 working hours from the survey in the second half of 2020, it is clear that the working hours have decreased, but there is still a considerable level of long working hours. The input of sorting manpower is effective as a short-term countermeasure. However, it will be difficult to solve the long working hours of delivery workers without general improvements such as the introduction of an automation sorting system, an increase in delivery fees and calculation of an appropriate workload.

 

Safety fare system in the delivery and distribution industry

For a long time, Cargo Union has demanded the legislation of a 'safety fare system' in order to correct the chronic low fares structure in the freight transportation market. From 2020, the road safety fare system began to be implemented for import and export containers and cement items. The safety fare system started from the idea that fares of freight workers are deeply related to working conditions and road safety. As can be seen from the declining trend of the average delivery price, a drop in delivery fees for delivery workers is also the root cause of long working hours. In order to shorten working hours by raising fees, it is necessary to expand the safety fare system including the delivery and distribution industry.

 

(Full-fillment system: doing it in a consistent process of storage, picking, packing and delivery for goods.)