A new story for the courier industry, overseas

Text |Dong 2000.

Edit |Yang Xuran.

In 2005, the turnover just surpassed that of Wal-Mart. At that time, in order to obtain orders from online shopping, YTO took the lead in accepting the conditions of ** and violated industry rules to reduce the express delivery ** to 8 yuan.

Different from the bright battle in the express delivery industry today, this incident was a "backstab" to the industry at that time, which attracted condemnation from peers. However, the business volume of YTO has really soared, and the order volume has quickly become the first in the industry in a short period of time.

And this is also the cruel reality of the development of the express delivery industry in China. Express companies hope to expand the scale of cooperation with e-commerce - the demand for express delivery outside of e-commerce is too little, but from the perspective of e-commerce, in order to stimulate e-commerce demand, what is needed is endless low prices.

Since then, the courier companies have fallen into a long-term ** war that has never looked back. In August 2019, J&T entered China, and soon set off another more fierce low-price competition in the express delivery industry with the slogan of "8 hairs in the country". A year and a half later, the daily order volume of J&T exceeded 20 million, achieving a scale that has only been in operation for more than ten years by domestic counterparts.

I'd rather tire myself to death than starve my opponents", resulting in express delivery companies in the capital market is not pleased. Although in 2023, China's express delivery business volume will be completed by a total of 1320700 million pieces, a year-on-year increase of 194%, but the express (CITIC) sector will fall by 33 in 202351%, which is the lowest performance in the delivery subreddit.

The industry's stock competition has been fully revealed. A typical feature is that although express stocks generally have good profit margins, they are essentially due to cost reduction and efficiency increase. Wang Wenbin, president of Shentong Express, once revealed: the profit margin improved ** due to the continuous decline in the company's operating costs, which fell by 27% in April compared with January.

The industry barriers in the express delivery industry are relatively low, and even after the first battle is cleared, there will be new players who will set off a new first battle, and the cycle is repeated. Therefore, the capital market is not optimistic about express delivery companies at present, but after J&T was listed on the Hong Kong Stock Exchange in October 2023, its share price bucked the trend and quickly exceeded HK $100 billion.

J&T Express share price performance (since listing).

Excellent performance** in the new story of J&T's internationalization, it has found a bigger and more attractive cake for investors around the world, and its prospectus is clear at the beginning:

"We are a global logistics service operator with a leading express business in Southeast Asia, competitive in China, and expanding into Latin America and the Middle East. ”

J&T is operating more than 290 large-scale transshipment centers, more than 22,000 outlets, and more than 350,000 service personnel around the world, and its international logistics business scope covers Asia, Europe, Africa, the Americas, and Oceania.

Based on the performance of its stock price after listing, it can be seen that investors are fully accepting of this international story.

01 The pressure of no goods to transport

Seeing this new cake overseas, in fact, it is far more than J&T.

As early as 2009, SF began to build an international business network in a planned way, with the intention of conquering a wider overseas market through Southeast Asia. In the past few years, SF's international business has covered Malaysia, Vietnam, Thailand, Cambodia, Indonesia and other countries.

In 2018, SF Express established a joint venture with Xia Hui of the United States. Shortly thereafter, SF Express invested another RMB5.5 billion to acquire 100% of the shares of DHL Chain (Hong Kong) and DHL Logistics (Beijing).

Wang Wei, founder of SF, commented on the acquisition: "This agreement will help us achieve our vision of global development. The target company has extensive business experience in the fields of automotive, medical, consumer electronics and semiconductors, which have high barriers and high value-added services. The acquisition will effectively enhance the existing strength of SF Holdings' first-chain logistics business. ”

In 2021, SF Holding spent about 14.6 billion yuan to acquire Kerry Logistics, the largest logistics company in Southeast AsiaThe 5% stake is a big step on the road to internationalization.

SF Express got up early in the morning, but rushed to a late set. One proof is that SF Express disclosed the international express business volume for the first time until October 2020, with the amount of only 3.5 million pieces.

This also made Wang Wei sigh at the 2023 general meeting of shareholders: "Many enterprises are operating fluidly, and SF Express must seize the opportunity in internationalization and not go slower than its friends." If we get the opportunity, we will have a good development, otherwise our pace of development will definitely be slower than that of other friends. ”

In the final analysis, logistics still depends on business flow, and SF's biggest dilemma on the way to internationalization is "no goods to transport", which is a problem that is difficult to solve even if more infrastructure is invested.

An employee said in an interview with "Brand Factory": "The problem is that SF Express has a network first, but there is no goods, so it lost a long time when it started the network. When SF Express was doing business in one of the countries in Southeast Asia, it encountered the problem that the volume of goods could not keep up, so it was equivalent to losing a day when it did not work, and finally it could not move, so it shut down the network. ”

SF's overseas layout has always been difficult to match business flow.

SF's problem is obviously "not a crime of war", but that it has never been able to solve the problem of "business flow": a sufficient amount of e-commerce business is the real support for the development of all express logistics industries.

As an analogy, JD Logistics has relied on the rapid expansion of retail business abroad. In 2022, JD.com will land an independent retail brand business in Europe for the first time, that is, the "super warehouse store" ochama, and after the front-end retail business starts, JD Logistics' ** chain business in Europe has begun to grow at a rate of doubling every year.

02 Dividends for going to sea

Globally, there is a marked shift in business flows.

Li Jie, the founder of J&T, once attributed the reasons for J&T's success to two points: one is OPPO and the other is Lucky. The so-called lucky is J&T catching up with the take-off period of Indonesian e-commerce.

In 2015, J&T was established just in time for Indonesia to vigorously develop e-commerce, and Shopee also entered the Indonesian market in this year. After cooperating with JNE, a traditional logistics company in Indonesia, Shopee found that this traditional company did not pay attention to the construction of digital systems at all, and had no willingness to improve, which could not meet Shopee's ultimate pursuit of efficiency.

Therefore, Shopee turned to J&T for cooperation. According to the early employees of J&T, "that time was very difficult, because we had to bear the mistakes and costs in the process of trying the new model, and it was not until later that the cooperation was run through, and Shopee boldly increased the volume."

In 2017, Shopee officially launched the first-class service and conquered the B2C market in Southeast Asia, and its GMV increased by 257 year-on-year in the same year5%, and J&T also got a big piece of the cake and determined the strategy of e-commerce express delivery, and J&T later became a partner of other Southeast Asian head e-commerce platforms (such as Lazada, Tokopedia, etc.).

At present, domestic express delivery companies may also stand at a similar node.

In 2023, SHEIN and Temu are disrupting the entire cross-border e-commerce industry, and by the end of the year, they will have become the most popular apps in half of the world's fifty largest economies. Even Amazon CEO Andy Jassy admitted: "We are both rivals and partners with SHEIN, and we compete fairly." ”

Amazon CEO Andy Jassy.

According to ** disclosure, SHEIN's GMV target in 2025 is $58.5 billion, and Temu's GMV target in 2024 is $30 billion. According to rough statistics, in a year or two, only the GMV of the head e-commerce platform will quickly exceed one trillion yuan, and this is enough to give enough support to express delivery companies, just like ** for YTO and Pinduoduo for J&T.

According to the calculation data of Yangtze River**, the air traffic sent to Europe and the United States by the two platforms of SHEIN and TEMU will double year-on-year in 2023, accounting for more than 40% of the total air traffic of Europe and the United States, while the proportion was less than 20% in the previous year.

However, it is difficult to adapt to the current development of cross-border e-commerce due to the strong service and high-fee model of traditional logistics giants such as UPS and FedEx in North America. With the model of temu new users 1 cent wallet mail, it must be adapted to low-cost, large-order, high-efficiency express delivery services, which is what Chinese enterprises and logistics practitioners are good at.

03 Roll out bonuses

Today, China sends about five times as many express packages throughout the year as the United States. Taking Zhongtong as an example, its business volume in 2022 will be 243900 million pieces, more than the sum of the world's three major express UPS, FedEx, and DHL.

In the capital market, China's express delivery companies are far from UPS and FedEx in terms of market capitalization. This means that the outside world looks at the two types of companies completely differently: large express companies in Europe and the United States are sitting on more profits on the basis of doing less terminal distribution work, and capital remains optimistic about their continued profitability in the future.

Before J&T went public, Chinese express companies were generally bearish, and the reason is not difficult to understand - doing more work but earning less profit. The logic of the low market value given by the capital market lies in the fact that in the case of e-commerce as a strong upstream and even a rule-maker, the profitability of express delivery companies will not change much.

Combined with the strong contrast between the high market capitalization and high price-earnings ratio of J&T and the situation of A-share express companies, we can better understand the intention of capital: China's express delivery market cannot make money, but if the business wisdom of the Chinese market is exported overseas, it will have a better chance to win profits and enjoy the favor and recognition of capital.

UPS and other European and American express delivery agencies have enjoyed high premiums for a long time.

In fact, the massive single quantity feeds the special ability of China's express delivery industry, and the scale has brought about an all-round improvement in the level of science and technology, operating efficiency, and management methods, such as the franchise model, the logical experience of the amount of capital and profit. It can be said that all the survivors of China's express delivery market must have their own unique features. Bringing these advantages into play in the international market is where the opportunity lies in the express delivery industry.

For example, Cainiao has very advantageous digital intelligence capabilities, intelligent order consolidation, automatic distribution and other technologies to reduce costs and increase efficiency. Cai Chongxin, chairman of Cainiao, also believes that China's logistics technology, which has undergone large-scale parcel combat training, has global competitiveness.

More importantly, the significance of express delivery to the sea is not only to find new growth points for the industry, but also to help enhance national competitiveness.

Toshiaki Tamaki, a professor at the Faculty of Economics at Kyoto Sangyo University in Japan, once said: "The study of globalization can be said to be the study of the history of the development of the logistics system. The most important factor in the formation of British hegemony was not the Industrial Revolution, but the navigation laws formulated by Cromwell in 1651 and the importance that Britain attached to logistics. ”

At the end of the 20th century, when the international express market was not yet mature, UPS, FedEx, DHL and other giants followed the trend of globalization of American brands and expanded the international blank market; In the early years of the 21st century, China did more about the globalization of goods than the globalization of brands, but the transformation has arrived.

E-commerce represented by temu will change the global express delivery industry.

In 2015, Sebastian Ganningham, then Amazon's senior vice president of marketing, wrote in an internal email: "Chinese factories that have been making goods for Walmart and others for the past 20 years have now realized that they can build their own brands and sell directly to the world without the use of middlemen." ”

At present, SHEIN and Temutiktok are the driving force of this process, and J&T is an important help to help them achieve this process. The next decade will be the tide of Chinese brands going to sea, and it is also the era of exploration of China's express delivery.