Anniversary of SF Express's listing in the same city: profit margins continued to improve for 6 consecutive years, and revenue growth remained high

There is never a shortage of opportunities in China's ready-to-go market. It has a population of 1.4 billion, innovative business formats and business models, and people yearn for a better life. However, before entering the racetrack, companies need to think clearly about how to participate in the market, how to meet demand, and how to respond to changes. This determines whether they can achieve corporate value and obtain monetization returns after value is recognized.

On December 14, SF Tongcheng, the “first third party instant delivery share,” celebrated its first year of listing. According to officially disclosed data, SF Tongcheng's profit margin has continued to improve for 6 consecutive years since the establishment of the business, and revenue growth has remained high. In the first half of this year, SF Express's revenue in Tongcheng was 4.48 billion yuan, up 20.8% year on year. External revenue growth rate reached 28%, and achieved gross profit of 180 million yuan and gross margin of 4%. The net loss ratio continues to improve and is close to breakeven.

As a latecomer in the ready-to-go market, it is really surprising that SF Express Tongcheng was able to achieve the “5 years after establishment and high growth for 6 consecutive years” in the context of no commercial flow binding. However, what is more noteworthy behind the data is that SF Express Tongcheng has been integrated into various industries as a basic service facility and continues to create value for customers, industry, and society. This kind of monetization return generated through the realization of corporate value has great potential and is also more sustainable.

Build basic service facilities to help reduce social distribution costs

In recent years, with the development of new models such as near-field e-commerce and instant retail, and the upgrading of the consumer experience, the distribution industry has ushered in a golden period of development. According to iResearch data, the order scale of the instant delivery service industry in 2021 was 27.90 billion orders. In the future, as the instant delivery service industry develops in the direction of full scenario, full distance, and full time period, it is expected that in 2026, the industry order scale will approach 100 billion, and the compound growth rate will remain above 20% from 2021 to 2026.

The surge in market demand has led to the prosperity of the industry, but due to multi-level constraints, the industry still has pain points such as insufficient supply and low concentration, which cannot meet the actual needs of consumers in terms of delivery time and service quality. In particular, in a market dominated by ready-to-match platforms that rely on commercial flow, capacity between platforms cannot be integrated and shared, which often results in a situation of “riders being penalized for arriving late, poor consumer experience, and declining merchant reputation” during peak periods.

In other words, behind the imbalance between supply and demand in the distribution industry is a deep-seated social problem. It is a development dilemma caused by changes in people's lifestyles combined with industry centralization, and solutions need to be found at the infrastructure level.

Since its establishment, SF Express Tongcheng has established the position of an independent third-party instant delivery service provider. It is committed to providing large-scale, open, and all-weather infrastructure support to all participants in the ecosystem. Through multi-scenario integration, multi-business model operation, and iteration of intelligent scheduling systems, SF Express Tongcheng has improved overall efficiency and delivered a high-quality contract fulfillment experience.

The infrastructure to become an industry requires at least two characteristics: non-competitiveness and positive externality. On the one hand, SF Express Tongcheng is not tied to commercial distribution platforms, and its “third party” positioning is not competitive with other market-dominated platforms. On the other hand, SF Express Tongcheng is making efforts in multiple dimensions such as model innovation, technological research and development, and personnel management to continuously improve supply capacity and service levels, so as to better adapt to customers in various fields, help customers solve delivery problems, improve the closed loop of commerce, and further promote the efficiency and upgrading of the entire ready delivery industry.

Specifically, in response to problems such as the high cost and difficulty of merchants and brands to build their own capacity, increasingly differentiated delivery requirements, increasing demand for private channel distribution, and difficulties in unifying multi-platform docking service standards, SF Express Tongcheng can quickly access and efficiently meet differentiated requirements, and help brand merchants complete the closed loop of online orders and offline contracts.

At the same time, SF Express Tongcheng is also actively applying modern information technology, building full-scenario, full-time, full-distance, and full-platform service capabilities, and continuously consolidating service capabilities. For example, the CLS intelligent real-time logistics system launched by SF Express Tongcheng can achieve optimal matching for order riders in different industries, scenarios, and complex distribution networks. SF Express also combined four-wheeler capacity innovation to create a “two-wheel+four-wheel” transfer capability, and launched a new drone capacity to create a complete “Tiandi Man” delivery ecosystem of “drones+four-wheelers”, bringing the stable and efficient contract fulfillment service system to the next level through collaborative distribution.

According to statistics, the current overall time delivery rate of SF Express Tongcheng has reached 95%, and the average delivery time for food and beverage categories is 26 minutes. Based on innovation in technology and distribution models, SF Express Tongcheng has not only consolidated its ability to fulfill contracts, but also uses stable, reliable, and cost-effective ready-to-use services to help customers save costs and improve user satisfaction. As this model is further promoted, it will also effectively reduce delivery costs for the entire society in the future.

Understand customer needs, understand the industry better, and work with merchants to seize the opportunities of the times

Currently, the scale of China's consumer market is expanding steadily, new business formats and models are booming, and consumer demand and consumption scenarios are becoming richer and more diverse. However, in the face of an ever-changing market, how to seize the opportunity to achieve leapfrog development has become a difficult problem for most merchants. For merchants, the homogenization of products themselves is becoming more and more serious, and traffic is solidified on channels and platforms. They need to constantly spend money to buy them, and the profit margin left for themselves is very limited.

In this context, SF Express Tongcheng helps customers develop a competitive advantage in products or services by providing differentiated delivery services, thereby feeding back channels and traffic and achieving a breakthrough in misalignment.

At present, SF Express Tongcheng has created customized delivery solutions for various industry scenarios, such as hourly delivery, half-day delivery, cold chain terminal delivery, and department store delivery services in the 3C industry; in the 3C industry, it has launched services such as express delivery for new product launches, offline single store to C-end consumers, and online repair and return. At the same time, it has also launched comprehensive delivery solutions such as Maotai ice cream, prepared dishes, and nucleic acid detection reagent delivery.

SF Express Tongcheng's ability to solve practical problems for customers in many segments stems from a keen perception of users' pain points, but essentially a deep understanding of the customer's industry and emerging business models. Based on its own innovative exploration in the consumer field and years of experience in serving customers in the industry, SF Express Tongcheng is gradually developing into a multi-service platform spanning various industries, creating solutions for customers from a top-level perspective, while also providing them with application-level infrastructure to drive customers to change their business models and seize the opportunities of the times.

For example, in the field of live e-commerce, SF Express Tongcheng has created a comprehensive live e-commerce logistics solution for live e-commerce platforms such as Douyin and Kuaishou. It can automatically match the corresponding delivery model according to different logistics scenarios and order volume size, and also automatically import orders and automatically return waybill numbers. Recently, SF Express Tongcheng also reached a group purchase and distribution cooperation with Douyin Life Service to gradually implement the “city-wide average 1 hour delivery” group purchase package, creating a new instant, instant local lifestyle experience.

Thanks to its high-quality ready-to-go service and professional knowledge in the vertical field, SF Express Tongcheng won the favor of leading brands in various industries such as McDonald's, Hi Cha, and Millet. By the end of June this year, the number of annual active SF Express merchants in Tongcheng had increased by 31.2% year-on-year to 299,000, serving more than 2,900 brand customers.

Adhere to the consumer experience drive and increase the added value of ready-to-serve services

For a long time, delivery timelines have been the focus of competition in the ready delivery industry, but from the perspective of consumer experience, the delivery speed of about 30 minutes can already meet general demand. Shortening the time period not only reduces marginal benefits, but also brings problems such as riders' traffic safety. The delivery industry is entering a new competitive stage of competition for integrated service experiences.

At the same time, with the rapid development of the “lazy economy and home economy,” consumers' demand for ready-to-serve services is also gradually showing a trend of personalization, diversification, and non-standard. Their demand has gradually evolved from takeout delivery to “deliver everything”, and from simple errands to surprise experiences that create emotional value. These non-standard scenarios have greatly tested the service capabilities of ready-to-serve platforms.

It is worth noting that while most ready-to-ship platforms are still mainly focused on basic services such as delivery, SF Express Tongcheng has launched a service system covering business types such as pick-up, purchasing, agency, express delivery, and business functions. At the same time, it has built a dedicated capacity network to serve C-end users to ensure overall delivery and compliance, and has achieved uniform high standards in the Knights operation process, rhetoric, and equipment to ensure a high-quality customer experience during the service process.

Based on strong service capabilities, SF Express Tongcheng has broken away from scenario constraints and taken on more user scenarios with customized services, further inspiring the diversified needs of consumers. At the same time, it also focuses on multiple dimensions such as customer interface expertise, customer experience, service stability, and after-sales experience, continuously improving the added value of ready-to-use services, and occupying the minds of users with a comprehensive service experience higher than the industry average. These will all become its core competitiveness in the second half of the ready-to-use industry competition.

According to statistics, SF Express Tongcheng's C-side business revenue has been growing rapidly at a rate of over 150% for three consecutive years. In a user survey conducted by iResearch, SF Tongcheng ranked first in the three categories of reputation, satisfaction, and recommendation, leading other brands in the industry in terms of brand health.

Maintain healthy and sustainable growth in performance and effectively safeguard shareholders' interests

From empowering industry customers to optimizing C-side services, SF Express Tongcheng continues to make progress in improving user experience, helping partners grow, and creating social value. While achieving corporate value, it has also gradually turned a “flywheel” of its own business growth, and has continuously achieved breakthroughs in the capital market.

According to the 2022 interim results released by SF Express Tongcheng, SF Tongcheng's revenue for the first half of this year was 4.48 billion yuan, of which the same city's distribution service revenue increased 29.2% year-on-year to 2.93 billion yuan, accounting for 65.4% of total revenue. The non-food delivery scenario continued to gain strength. Revenue reached 1.05 billion yuan, an increase of 32.4% over the previous year. Demand for high-value-added scenarios such as near-field e-commerce and near-field services continued to be high. Furthermore, SF Express Tongcheng has abundant cash flow and sufficient net cash reserves. Cash plus financial management is close to 2.3 billion yuan, and the overall financial situation remains healthy.

Huatai Securities previously released a research report stating that it initially gave SF Express a “buy” rating in the same city, with a target price of HK$19.1. SF Express Tongcheng's revenue is expected to increase from 8.18 billion yuan to 17.46 billion yuan in 2021-23, with a compound growth rate of 46%. Assuming that the company's market share expands, it is expected to turn a loss into a profit in 2023.

Although in the year since its listing, SF Express Tongcheng has been hit by huge waves caused by the epidemic, macroeconomic changes, and increased market competition, the stock price has been under tremendous pressure due to many internal and external factors, such as the fact that circulation has not yet been opened. However, at present, the demand for instant delivery from merchants and users is constantly being activated. At the same time, more and more Internet platforms are beginning to increase investment in the field of local life. Both demand and investment have increased, forming a virtuous cycle, and third-party instant delivery platforms will usher in greater opportunities.

Seen from a certain perspective, internal and external “uncertainty” in recent years has also provided enterprises with a time window to improve efficiency and service. Whoever can stick to their advantages and continue to accumulate energy during this period can win the initiative in the next competition. In the face of a more promising and more competitive ready-to-go market, SF Express in the same city is clearly ready.

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