Counting from the owners of restaurants and convenience stores playing the role of running errands to deliver goods to customers, the instant delivery (referred to as "instant delivery") industry has stumbled for several years. The scale has grown and the order has improved, but the passing line of profit and loss balance has always been disappointing. Until this summer, the average score was finally pulled up a lot, and the profit inflection point under the scale effect appeared.
On August 28, SF Express released its interim results as of June 30, 2023. During the reporting period, it recorded revenue of 5.749 billion yuan, a year-on-year increase of 28.8%; gross profit margin reached 6.7%, a record high; net profit was 30.314 million yuan , turning losses into profits year-on-year.
Previously, Dada Group, another listed company in the field of instant delivery, which is closely related to JD.com’s retail ecosystem, also gave a profitable financial report. However, SF Express announced its profit in the first half of the year in early July. Judging from the overall profit rhythm, its inflection point may be the earliest in the industry.
In any case, profitability means that since the competition in the instant delivery industry has entered the right track, the diseconomies of scale have finally come to an end, and it has also verified the value of the business model for the entire industry.
Where does the profit from instant delivery come from? How sustainable is it? The semi-annual report of SF Express explained the long-term opportunities of the industry.
High-quality profits, relying on neutrality to expand the circle of friends
Judging from the overall performance in the first half of the year, the revenue growth rate of SF Express in the same city is about 4 percentage points higher. Although there are commonalities in profits, the growth of SF Express in the same city still shows a leading advantage. At the same time, SF Express also achieved a net operating cash flow of 34.326 million yuan during the reporting period, reversing the outflow trend, enhancing the ability to resist risks, and realizing self-healing.
This may need to be traced back to the differences in the businesses of the two parties. Although the instant distribution industry essentially emphasizes time-sensitive performance services, on a key issue, the industry paths are different-the instant distribution industry must answer for whom to "match" question.
Soochow Securities once pointed out in a research report that the neutral open platform has no self-operated business and remains neutral to any customer. SF Express is a representative of the neutral platform, which can provide services to all kinds of customers equally. In iResearch's "Research Report on China's Instant Delivery Industry Trends in 2022", Dada was included in the scope of the platform's capacity, or it may be related to its enjoyment of the support of JD's instant retail resources. It can be seen from this that the three major platforms of Meituan, Hummingbird and Dada have corresponding business flow platforms to provide orders.
On August 28, Meituan Waimai announced that it has reached cooperation with SF Express, Shansong, and UU Errands, and will jointly build an industry ecology for instant distribution. It just includes the capacity of the third party in the picture, which may be because Meituan Waimai, as the initiator, needs to consider competition issues. Huachuang Securities pointed out that an independent third-party platform can avoid "concerns about horizontal competition with the Internet platform behind the same-city delivery service provider." Previously, SF Express also served retail customers such as Tmall Supermarket, and also reached cooperation with platforms such as Douyin and WeChat.
From this point of view, the growth of SF Express in the same city is of great significance from the continuous improvement of profitability over the past six consecutive years to the fact that it has finally passed the threshold of profitability. Because it is different from the "platform capacity + platform" model, SF Express does not directly improve performance by bundling and diverting business flow platforms. Although it is related to SF Express to a certain extent, what it receives is more support at the level of infrastructure resources, such as the integration and coordination of warehouses and distribution to create stronger solution capabilities. From the perspective of business attributes, it is much more independent. We will expand the analysis of this independent value later, but one conclusion can already be drawn: the high-quality profitability of SF Express is achieved by continuously expanding its business circle and circle of friends.
At present, the capacity of the platform has also seen the restrictions brought about by the concentration of business scenarios, and is seeking to expand the scope of business. The diversified and stable business structure of SF Express has already demonstrated its growth advantages. In the first half of the year, its intra-city delivery revenue for merchants increased by 12.2% year-on-year to 2.419 billion yuan, and its intra-city delivery revenue for consumers increased by 25.4% year-on-year to 969 million yuan, attracting customers from various industries.
Individuals, merchants, brands and other types of customers are all available, and SF’s intra-city business is fully blossoming, precisely because it embraces the whole ecology, multiple scenarios, and moves towards long-term sustainability along with demand.
That is to say, it needs to play the "combination boxing" of the scene and technology
The business growth process of SF Express in the same city shows that instant delivery is actually a process of cashing in on business flow. Business flow is always being restructured, and instant distribution naturally has to keep up with the trend. At this time, SF Express's attribute of "the largest independent third-party distribution platform in China" brings a unique advanced advantage.
Huachuang Securities pointed out two bonuses of the latter in a research on SF Express. One is the status bonus of the independent third party mentioned above, and the opportunity to undertake the high growth of non-catering demand; the other is the ecological bonus of SF Express, such as brand reputation and logistics infrastructure. Let's analyze them separately.
The former is the cornerstone of advanced advantages. The ready-made distribution service providers represented by Meituan and Hummingbird are essentially bound to the self-operated business of the platform, so it is inevitable that the demanders who are new to the market will worry about their fairness and neutrality. But first of all, SF Express does not have traffic competition with them in the same city, and then can extensively cooperate with third-party merchants to help them achieve decentralized independent operations and strengthen their voice. In this process, Ruixing, Chow Sang Sang and other high-quality KA merchants with strong demand for decentralized services will bring more outstanding performance growth to SF Express.
But independent value is only one aspect. Why should non-meal opportunities be particularly prominent? After answering the question of who to "match" with, we shifted our attention to the question of "match" what, which is the key to breaking the situation for SF Express.
The obvious difference between catering and other fields is that even if the budget is full, there are only five independent peaks from breakfast to supper. However, once the categories and scenarios are rich enough, the distribution of orders becomes 24/7—this is exactly the case in the full business scenario of SF Express.
In terms of the number of commodities, the SKUs of industries such as supermarkets are not comparable to industries such as catering. Supermarkets are only a part of instant delivery, and there are more high-value, high-demand, and high-standard delivery services that require instant fulfillment. Based on this background, SF Express’s service matrix of all scenarios, all hours, all distances, and all platforms is formed.
At this time, since the platform's capacity itself is bound to the business of the self-operated platform, a fixed part of resources must be invested in the self-operated field. When accepting this kind of support, it also loses a part of the possibility of actively improving the business structure. Meituan's Food delivery and delivery revenue once accounted for more than 90% of the total distribution revenue.
But SF Express is different in the same city. It has established perfect and comprehensive services on the B-side and C-side in different industries, and even includes the ability to proactively penetrate into the advantageous business of the platform. For example, in the field of tea drinks, SF Express’ revenue in the first half of the year increased by 80% year-on-year, and the growth rate of retail categories exceeded 100%, far exceeding the industry average.
This kind of superior ability is inseparable from the technological ability of SF Express. A typical example is the urban logistics system (CLS) of SF Express, which integrates three core functions: intelligent business planning and marketing management, rider integration scheduling, intelligent order distribution, and intelligent operation optimization. When it is used to dynamically adjust order scheduling, shorten delivery time, and reduce delivery costs, it plays the role of technology empowerment and efficiency enhancement.
But at the same time, this kind of efficiency increase starts from the scene human efficiency rather than the average human efficiency. It pays more attention to the operational efficiency in a specific scene and has a deep insight into the business circle. Therefore, it can also be used as one of the technical guarantees for the operation of customer business districts. Focusing on specific business districts, on the basis of insight into data such as orders and delivery conditions, it can customize differentiated operation strategies for different business districts. Differentiated advantages help to feed back the business scale.
This effect is projected on performance. When there are more SKUs, the overall revenue structure will change. Products and services with high unit prices will bring about optimization of profits. The higher the internal value of the business, the earlier the profit inflection point will come. In the first half of the year, SF’s intra-city non-catering scene revenue increased by 19.7% year-on-year to 1.258 billion yuan; the annual active merchants on the platform reached 380,000, a year-on-year increase of 27.2%.
Since the launch of SF Express's intra-city business in 2016, it has been planning this in-depth layout. At a time when the industry still needs to carefully control fees, SF Express has set a record for the shortest establishment and fastest profit in the on-the-go distribution industry.
Moreover, this change spanning several years is not only due to SF Express’s continuous exploration of scene potential and deep mining of industry value, but also can be traced back to the second dividend, the advantage of SF Express’s synergy with SF Group – through infrastructure and logistics Collaboration and integration of capabilities expand capabilities and business scenarios to address customer needs.
On the one hand, based on the resources and scheme collaboration with SF Express Group, SF Express City has jointly created an integrated supply chain solution of "front-end warehousing + mid-end trunk lines + intra-city real-time delivery", which has improved the end-of-supply chain service capabilities. The financial report shows that in the first half of the year, the monthly account customers jointly served by SF Express and SF Group brought an external incremental income of 105.7 million yuan, a year-on-year increase of 21.9%, which shows that customers' recognition of the value of integration continues to increase.
On the other hand, at the level of "last mile delivery", the business model of SF Express can help make up for the efficiency shortcomings of SF Express Group and other traditional logistics companies . Highly flexible capacity pool effect.
Based on this synergy, SF Express has enriched the delivery time of riders in the same city, and riders can increase their income. At the same time, due to the double increase in rider efficiency and order volume, unit costs have been reduced, and the chassis efficiency and scale effect of its business have been optimized. In the first half of the year, the revenue of SF’s intra-city last-mile delivery service increased by 53.8% year-on-year to 2.361 billion yuan. Not only did the customer scale continue to increase, but also derived more customized services such as “hourly delivery” and “half-day delivery” to seize peak business Scenarios to continuously create incremental value.
The geese are flying together, that is, there are many stories about the rivers and lakes
When the semi-annual report of SF Express was released, the news of its cooperation with Meituan Waimai was also widely circulated. Before this news, in the first half of the year, SF Express continued to form an alliance with the outside world. Douyin, Ali, WeChat, and Didi Kuaisong have all opened their doors to SF Express.
This directly benefits SF Express to continue to optimize the distribution structure and expand profit margins. The continuity of its profits is worth looking forward to. However, when SF Express established the status of the third-party delivery platform as the "head goose", some new growth values are being verified.
For example, the expansion of user scale and the opportunity of sinking the market. The more platforms, the more users. In the first half of the year, SF Express’ revenue related to the sinking market increased by 20.2% year-on-year to 1.244 billion yuan, and the number of active consumers in the past 12 months as of June 30 also increased by 50.3% year-on-year to 18.5 million. With the help of the consumption scenarios created by the platform, SF Express can efficiently complete business expansion, allowing more consumers to experience high-quality instant delivery services and cultivate consumption habits.
For example, further shifting from fixed traditional business scenarios to exploring opportunities for emerging business scenarios. The semi-annual report of SF Express mentioned that the "hourly delivery" and "half-day delivery" services provided to Tmall Supermarket doubled their revenue year-on-year in the first half of the year, and met the peak demand during the e-commerce festival. On platforms such as WeChat and Douyin, the demand of a similar scale is still in its infancy, and the future space is considerable.
In the final analysis, the growth of users, the growth of scenes, and the growth of consumption are synchronized. The total retail sales of social consumer goods in the first half of the year was 22.8 trillion yuan, a year-on-year increase of 8.2%. Online retail sales of physical goods increased by 10.8%, accounting for about a quarter. The huge base means that every percentage point of penetration will bring huge value to the industry. The current instant distribution platform is gradually becoming profitable, which is a manifestation of the increase in penetration rate.
Therefore, when consumption opportunities continue to germinate and various distribution platforms continue to flourish, the cake is still growing. The only thing that deserves special attention from the instant distribution platform is that in today’s multi-polarized traffic and sufficient supply of transportation capacity, the instant distribution track must take a more in-depth operation path to highlight the advantages of differentiation. The profitability of SF Express in the same city proves this point.
This will be a long-term process that goes hand in hand with society and the economy, and the outcome is uncertain. But now, the geese are flying together, and SF Express is still at the front of the team.
Source: Songuo Finance