March 16, 2017 10:00 am JST

Japan's delivery services are reaching their limits

New prices, new services being introduced as online shopping unleashes flood of parcels

YOHEI MURAMATSU, Nikkei staff writer

Yamato Transport is installing parcel lockers at train stations and other sites.

TOKYO Toward the end of yet another 15-hour day, a Yamato Transport delivery driver in his 40s pushed a trolley full of parcels up to the door of a Tokyo apartment, pressed the buzzer and waited in vain for an answer.

Dejected, he placed a delivery notice in the mailbox so the recipient can reschedule the delivery.

Most recipients choose weekend evenings for deliveries.

If, as is often the case, nobody is home, deliveries can be rescheduled free of charge. As many as 20% of the parcels take more than one call to deliver.

"We cannot go on like this," the man said.

Parcels from businesses account for 90% of the volume of Japan's largest door-to-door delivery company. They include a growing number of online purchases, primarily from Amazon.com's Japan unit.

The parcel delivery industry shipped some 3.86 billion packages in Japan in 2016, up 6.4% from the previous year and 50% from 2000, when Amazon launched its Japanese site.

Delivery companies face a labor shortage. The ratio of openings to applicants for delivery drivers last year stood at 2.33.

"If we do not pass the appropriate amount of costs on, our very existence could be on the line," said company President Yutaka Nagao.

Yamato is negotiating a rate hike with several clients, including Amazon. If implemented, it would be the first rise in base shipping rates in 27 years.

Some companies have already taken the plunge.

Kajitaku, an arm of Aeon that provides housekeeping services, raised its laundry service fee on March 15 to a range of 800 yen ($6.95) to 1,000 yen. It was a painful decision, as the rate hike could turn many customers away.

Other companies are looking for ways to ease the burden on personnel.

Uniqlo tried to expand its next-day delivery service for online customers last fall. The company introduced a highly publicized system designed to make parcel collection more efficient with little manpower at a massive warehouse in eastern Tokyo. However, glitches forced the service to be suspended shortly after launch.

Takeshi Okazaki, chief financial officer of Uniqlo operator Fast Retailing, said during a financial results briefing in January that the company will correct the issue so that it "can provide stable next-day delivery service starting this spring."

Next Delivery Square, Yamato's distribution base in Fujisawa, Kanagawa Prefecture, south of Tokyo, consolidates packages of rivals like Sagawa Express and Japan Post. The collected packages are then taken by Yamato to nearby commercial facilities in one batch.

Another measure under consideration is the installation of lockers where customers can pick up packages at their convenience.

Commenting on a pilot project in Awara, Fukui Prefecture, in central Japan, a Panasonic official said, "The redelivery rate has declined from 49% to 8%."

The test involved setting up lockers for dual-income households.

The development of such joint delivery and locker services may help bring down the number of deliveries that need to be rescheduled. But critics doubt that delivery companies will be able to keep up.

Online shopping accounts for only about 5% of overall product sales in Japan. If the ratio rises to around 12%, on a par with China, the number of delivery packages will exceed 9 billion.

Unless the labor shortage is addressed, the logistics infrastructure could collapse.

Nevertheless, Amazon Japan's President Jasper Cheung intends to expand its service even further. Cheung noted that free shipping and fast delivery are the company's most important strategies.

Nikkei staff writers Kosuke Terai, Hisashi Iwato and Ou Niinuma contributed to this article.

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