Shulou(Shulou.com)06/03 Report--

Recently, Shentong Express announced its annual report for fiscal year 2019. The financial report shows that its total revenue in 2019 was 23.067 billion yuan, up 35.58% year-on-year. Among them, the profit was 1.41 billion yuan, down 31.27% from 2.05 billion yuan in the same period of 2018. The business volume was 7.371 billion pieces, up 44.19% year-on-year, exceeding the industry average growth rate of 18.89%. Overall, this financial report is quite satisfactory.

In 2014, Shentong was still the absolute "express brother" in the "Tongda system," but up to now, Shentong's performance in the domestic express industry can only be said to be more than enough. On the whole, it ranks last in the "access system," which is the truest portrayal of Shentong, and change is naturally due.

In recent years, Shentong's senior management has initiated the stage goal of "returning to the top three," continuously introducing external resources, investing in infrastructure construction, and increasing investment in technology research and development. The attitude of doing a big job is very striking. The equity transfer agreement reached with Ali in 2019 further promoted the binding relationship between the former express delivery "Yige" and Ali, gradually expanded the resource allocation at the capital level, and Shentong did have certain growth.

However, half a year after Ali Holdings, Shentong's performance is still difficult to say amazing, the current state is still not good.

Behind the loss of the title of Big Brother: Direct Sales

Shentong Express was once the "leading brother" in the industry, sitting firmly in the top spot for more than ten years until 2014. Before 2014, it was ahead of the industry in terms of market share, revenue and net profit, but the situation quickly reversed.

From 2015 to 2017, the domestic express delivery industry ushered in explosive growth, and the revenue and profits of many companies increased significantly, but Shentong lagged behind at this stage. Relevant data show that at this stage, Shentong's gross profit margin growth is not as good as Zhongtong, revenue growth is not as good as Yuantong, in the total business volume has also been surpassed by two, and then gradually for Yunda, Baishi and so on. Obviously, Shentong fell behind.

Why did you fall behind? All kinds of signs point to the "franchise system""initiated" by Shentong. Relying on the "franchise system" founded in its early years, Shentong quickly moved from regional express service providers to national service providers. Because of many advantages of this system, it was later imitated by various express delivery companies, and later Yunda, Zhongtong, Yuantong and so on adopted this way one after another.

The difference is that Zhongtong, Yuantong and other express companies have upgraded the franchise system. For example, Zhongtong completed the "direct-sale" transformation of Zhongtong to the large transit center in the form of franchisees 'shares. After the transformation of direct sales, it greatly facilitates the headquarters 'control over express delivery services and improves the timeliness of logistics. In front of companies such as Zhongtong, which is directly operated, Shentong still adopts the franchise system.

First of all, under the Shentong franchise system, the management of agents is loose, and customer service cannot keep up with user requirements. Shentong frequently encounters complaints due to its low degree of direct sales and insufficient constraints on agents, resulting in poor delivery quality, long delivery cycle and other problems. As a result, its performance declines after serious customer service falls behind.

Secondly, although Shentong is aware of the current situation of its direct marketing "lag," the speed of promoting "direct marketing" is still too slow. In 2015, Shentong launched direct sales transformation, but it was not until 2018 that its direct sales transformation was announced. The transformation process lasted for four years, which created opportunities for rivals to catch up.

In fact, the important reason for the lag of Shentong's direct marketing lies in its insufficient working capital. In the face of the large amount of funds needed for direct marketing transformation, Shentong can only be determined and powerless. However, this situation has improved with the listing of Shentong.

Backdoor listing direct sales speed up, but still lag behind

Relevant data show that in 2015, Shentong's working capital (current assets minus current liabilities) was negative 420 million yuan, equivalent to 6.5% of the annual revenue cost. However, Shentong lost its "first" position and the turning point also appeared in 2015.

In 2015, Shentong's market share dropped directly to 12.4%, while its market share was as high as 16.8% a year ago, and its market share dropped by 4.4 percentage points in a single year, which shows the seriousness of the problems it faced at that time.

Since then, its market share has been declining all the way. Data show that Shentong's market share in China's express delivery industry dropped from 16.8% in 2014 to 9.7% in 2017. Shentong's market position fell from the first to the second from the bottom.

At the end of 2016, Shentong borrowed the shell A shares "Aidixi" to go public, opening up the listing channel, and it was convenient for Shentong to raise funds, which laid a foundation for Shentong's subsequent direct-sale transformation.

With funds, Shentong officially started the transformation in 2017, acquired the transfer center under the Group with heavy money and moved towards direct sales, and promoted the strategies of terminal penetration and service quality improvement for six consecutive years.

After the success of shell borrowing, Shentong invested more than 6 billion yuan in Luoyang, Fuzhou, Hefei, Ningbo, Harbin and other 25 cities to establish transit sites for reconstruction and expansion, and built more than a dozen transit centers in Wenzhou, Xi'an, Zhongshan, etc. At the beginning of 2018, Shentong even acquired transit assets in several major cities with heavy money, such as 413 million yuan to acquire Beijing, Wuhan and other transit centers, 350 million yuan to 240 million yuan to acquire Guangzhou and Shenzhen centers. By the end of 2018, there were 60 self-operated transit centers, with a self-operated rate of 88.2%.

With great efforts, in the second half of 2018, Shentong's operating conditions gradually improved, and revenue growth rate and business volume increased significantly. At the same time, its annual report also shows that the operating costs of the Group are rising steadily under heavy investment, and the cost growth rate is higher than the revenue growth rate. Before Shentong Express, it also raised funds by issuing bonds and ultra-short-term financing bonds.

For Shentong, this direct-sale transformation seems to have become a "double-edged sword." On the one hand, the business did improve, on the other hand, costs rose again, which was obviously unexpected. Looking around, all major logistics enterprises have begun to increase investment in technology research and development in terminal logistics and other logistics links, reduce costs, and develop rapidly, but Shentong is standing still.

Shentong "a fierce operation as a tiger," but the result is still unsatisfactory, 2018 Shentong is still at the bottom of the express peer. Obviously, the difference between Shentong and several other companies is not only the problem of direct transformation and backwardness.

In fact, logistics enterprises are experiencing a new round of change. Nowadays, logistics enterprises are not only fighting for operational efficiency and infrastructure, but also for technology. For Shentong, which lacks money and technology, cooperation with Ali, who has money and technology, has undoubtedly become the best choice. In fact, it has long been an industry practice for "Tongda" to cooperate with Ali.

The decline continues.

In June 2015, Ali invested in Yuantong with its Yunfeng Fund, holding 11% of its shares. In October 2016, Yuantong went public, and this proportion further rose to 17%. Ali has become the second largest shareholder of Yuantong.

In May 2018, Ali invested US $1.38 billion in Zhongtong and held 10% of its shares, becoming the third largest shareholder of Zhongtong. In addition, Ali has also participated in the six rounds of financing of Baishi successively, holding nearly 28% of its shares, becoming the largest shareholder of Baishi. With the support of huge amount of capital, each family has expanded on a large scale, all running to the front of Shentong, and the challenges faced by Shentong after listing have obviously not decreased.

After Shentong went public, Zhongtong, Yuantong and other express companies also went public one after another, each of which widened its own fund-raising channels. In this way, Shentong and has been deeply bound to Ali other "access system" companies compared, Still appear powerless. However, the reform of express delivery industry is accelerating. Shentong, which is "flying alone," is obviously not enough to meet the current challenges.

At this time, abandoning the strategy of fighting alone and choosing to ally with Ali was undoubtedly the best way out. In March 2019, Ali spent 4.65 billion yuan to acquire 14.6% of Shentong shares, becoming the second largest shareholder of Shentong. At this point, Shentong and Ali alliance completed.

After the alliance, Chen Xiangyang, the new president of Shentong, set the target of "50 million daily orders and the top three in the industry" in May 2019. By June 2019, Shentong had completed 597 million business volumes, achieving a year-on-year growth of 47.5%, leading peers in growth and achieving remarkable results.

However, Shentong's industry ranking in 2019 is still at the bottom of the industry, still behind the loss-making Baishi Huitong. Obviously, although the marriage with Ali has helped Shentong reverse the problem of weak growth, the long-term backward situation cannot be changed in the short term.

On the contrary, Shentong is still at a disadvantage in the competition with several other Ali enterprises because of its "slow step by step."

Write to the end

As far as Shentong is concerned, although the top three goals of the industry are more pragmatic, it is not easy to really realize them. After all, Yunda, Yuantong, Baishi, etc. are far ahead of Shentong in terms of business volume. Zhongtong has outstanding profitability performance in profitability. Under the support of Ali technology,"Tongda System" competes on the same stage. Shentong needs to spend more time and energy if it wants to win.

With strong rivals such as Shunfeng and Jingdong cutting into e-commerce parts one after another, the domestic logistics field will inevitably set off a new "bloody storm". Given the strength of other express delivery companies, under external shocks, perhaps the most vulnerable to injury is more likely to be Shentong. It can be seen that Shentong wants to return to the top three, still road resistance and long.

Wen/Liu Kuang public account, ID: liukuang110

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