As the fourth listed company under Wang Wei, chairman of express delivery giant SF Holdings, SF Tongcheng IPO has attracted market attention.
According to the rough estimate of the average daily single volume, SF Tongcheng's current market share in the instant delivery industry has reached 4.3%, compared with only 1.2% in 2019, and the market share has nearly quadrupled in two years.
At the same time, in the list of "2020 Instant Delivery Comprehensive Ranking TOP 10" released by the authoritative logistics magazine "China Logistics and Procurement", SF Tongcheng ranked third, second only to Meituan and Hungry. This means that SF Tongcheng has become the top three of the instant delivery track.
Why is SF Tongcheng optimistic about the market? Where is its growth space compared with its peers? What will be the end of the instant delivery industry in the future?
With the above questions, 36Kr conducted an interview with Sun Haijin, CEO of SF Tongcheng.
In Sun Haijin's view, a good track, the company's fundamentals, and the overall shareholder strength are the three major selling points that SF Tongcheng is optimistic about by the market.
First, the "infrastructure" of the industry
To analyze a company's future growth space, we must first judge whether the company's track has prospects.
The outbreak of the epidemic has further stimulated the demand for instant delivery markets. According to iResearch, the annual order volume of China's instant delivery service industry increased from 4.6 billion in 2016 to 21 billion in 2020, with a compound annual growth rate of 46.0%. It is expected that the annual order volume of China's instant delivery service industry will further increase to 79.5 billion in 2025, with a compound annual growth rate of 30.5% from 2020 to 2025.
At the same time, with the continuous expansion of service scenarios and the continuous innovation of new formats and consumption models, the instant delivery service industry will continue to grow and develop. This shows that SF Tongcheng is on a track with huge growth potential, and as early as 2016, when SF launched its tongcheng business, SF Tongcheng had already seized a certain opportunity.
At present, in addition to SF Tongcheng, players in this industry also include Meituan, Hungry Mo, Dada, Flash, UU running errands and so on. The reason why SF Tongcheng can rank among the top three in the industry, the market share has quadrupled in two years, and its positioning of third-party real-time delivery service platform, covering four major scenarios of local catering, same-city retail, near-field e-commerce, near-field service, and multi-track layout is not unrelated.
Different from the centralized instant delivery platforms such as Meituan and Ele.me, SF Tongcheng is a typical third-party instant delivery platform.
In the early stages of the mobile Internet era, centralized platforms can attract catering merchants with huge traffic advantages and rapidly increase market penetration. However, third-party platforms are growing more rapidly as merchants increasingly need to establish private domain traffic acquisition channels and personalized delivery requirements increase.
According to Sun Haijin, the main advantage of the "third party" is first of all that there is no traffic competition with other platforms, whether it is WeChat, Douyin and other traffic platforms, or supermarket home, fresh e-commerce, community group buying platforms, can cooperate with third-party distribution platforms, do not have to worry about the transfer of traffic on the centralized real-time delivery service platform; secondly, the third party can return the service definition to customers, for businesses that want to create brand differentiation, conventional distribution is often difficult to meet, SF Tongcheng can be customized with customers as the center Third, the third party can return the pricing to the essence of the service, the services of the third-party platform are mostly priced in logistics, rather than in the percentage deduction point of the overall order, so that more profit margins can be released for the merchant, and the future will be favored by more brand parties and merchants, especially high-value merchants.
In 2016, the number of orders in China's third-party ready-to-place industry accounted for 11.9% of the total orders in the instant delivery industry, compared with 14.4% in 2020 and is expected to reach 20.5% by 2025.
Sun Haijin told the media that in the long run, SF Tongcheng "talks about the entire new retail infrastructure, and our goal is to become a real real real-time logistics company and become a common infrastructure and chassis for the whole industry and the whole scene."
In terms of scenarios, in Sun Haijin's view, the instant delivery industry includes at least four scenarios: local catering, same-city retail, near-field e-commerce, and near-field services, and SF Tongcheng will provide differentiated services for different needs in different scenarios.
For example, for local catering, SF Tongcheng provides instant delivery services for three meals a day; tongcheng retail mainly includes daily and regular purchases of daily food supplies such as supermarkets, fresh foods, medicines, cakes and desserts; near-field e-commerce is mainly based on categories with high e-commerce penetration such as shoes and clothing bags, beauty cosmetics, and digital 3C; near-field services are centered on enterprises and consumers, and SF Tongcheng provides services to meet the work-life-related needs of a certain range of surrounding areas.
At present, most companies only focus on single-scene coupling, such as flash delivery focusing on the C-end, the rider structure is mainly crowdsourcing, some platforms may emphasize supermarkets, medicine, and some platforms emphasize catering, such a growth method is relatively single, and the anti-risk ability under the black swan event is weak.
Sun Haijin introduced to the media that SF is a multi-scene coupling in the same city, and the scenes are richer than those of peers. Compared with the multi-scenarios in SF City, the biggest drawback of a single scenario is that when external conditions change and affect a single business, there is no other business scenario that can save the scene.
Under the coverage of multiple scenes, SF Tongcheng does both B2C and C2C business. In fact, SF Tongcheng has built a complete and powerful open platform, with McDonald's, KFC, Pizza Hut, Heytea and other head KA own platforms on the outside, and almost all internal resources of SF Group such as express transportation, warehousing, medicine and cold transportation on internal collaboration.
According to SF Tongcheng, in the B2C track, the current domestic leading brand merchants regard SF Tongcheng as the first choice for delivery service providers other than Meituan and Ele.me, and also the first choice to help merchants create a closed loop of private domain traffic.
In the C2C track, from the current process of transforming the same city express to the real-time logistics demand, SF Tongcheng is also the most promising instant delivery brand. Same-city instant delivery is different from the planned logistics of traditional same-city express delivery, which is on-demand logistics. In the past, people needed to deliver some personal items in the same city, only through the form of express delivery, which was time-consuming, and wasted some unnecessary packaging materials and transit links, especially in emergency and important demand scenarios, people are more willing to choose instant delivery. Through decades of accumulation, SF Express already has the highest unit price of domestic customers, but also the largest number of high-quality customers, these nearly 10 million enterprise users and 400 million to 500 million ordinary users, are the natural traffic of SF city. This is also the reason why in the long run, SF Tongcheng is more developed and promising than other platforms in the C2C circuit.
As for the weight distribution of KA and C-end retail business, Sun Haijin pointed out that "from the perspective of business focus, the two will go hand in hand", at present, there are relatively few retail businesses, and if you want to do a large retail business, you must first form an ecology through KA to better empower retail business, "The profit value of C-end business will be higher.".
Second, or take the lead in achieving profitability
Not yet profitable is a major concern in SF City. In fact, this is the norm for the industry as a whole at the moment.
According to the relevant financial report data, as the representative of instant retail, Dada Group had a net loss of 1.35 billion yuan in the first half of 2021, a loss of 83% year-on-year. As a representative of fresh distribution, the loss of daily excellent fresh and Dingdong to buy vegetables is also continuing to expand, the net loss of daily excellent fresh in the first three quarters was 3.017 billion yuan, the loss increased by 196.66% year-on-year; the net loss of Dingdong buying vegetables in the third quarter was 2.011 billion yuan, and the loss increased by 142.58% year-on-year.
In contrast, due to the rapid growth of revenue, the scale effect of SF Tongcheng began to appear, and its net loss ratio, adjusted net loss ratio and gross loss ratio continued to narrow.
In terms of revenue, SF Tongcheng increased from 993 million yuan in 2018 to 2.107 billion yuan in 2019 and 4.843 billion yuan in 2020, with a compound annual growth rate of 120.8%.
From 2018 to 2020, the company's gross loss ratio was 23.3%, 16% and 3.9% respectively, and as of the end of May this year, the gross loss rate has narrowed to 0.9%, and the gross profit margin is about to turn.
For profitability, Sun Haijin is very confident. He attributed the continuous narrowing of the loss ratio to three key points: the revenue side, gradually enhancing the high unit price business, shrinking the high discount; the cost side, the scale effect appeared, the incentive system was changed to equity and non-cash incentives; and the organizational management level was improved and refined management was carried out.
Among them, the effective control of the cost side is mainly reflected in three aspects. The first is that under the scale effect, the sharp increase in revenue has offset the rising cost to some extent. Secondly, SF Tongcheng "originally" launched a non-cash incentive form for riders to have points rights, and riders can earn points by volunteering to offset complaints or penalties caused by some force majeure. This is a win-win way for both parties, on the one hand, it can effectively alleviate the anxiety of riders, and on the other hand, it can reduce the platform's spending on cash incentives.
In addition to the issue of profitability, there is also a strategic way to pay attention to.
According to iResearch, the combined market share (in terms of order volume) of the top six third-party instant delivery service providers in China in 2020 and the first quarter of 2021 was about 35.6% and 36.6%, respectively.
The fragmented market structure means that every player has the opportunity to become the "king" of the industry in the future, so the company's long-term strategic play is crucial.
Sun Haijin believes that there will be three stages in this industry, the first is the weaving stage, similar to the networking stage of express delivery companies; the second stage is that by 2025, each company will form its own brand mentality in this industry, which is relatively speaking a stage of competing for product strength and operational efficiency; the third may be a larger integration stage.
He further said that the companies that have basically survived have completed the weaving of nets and entered the second stage. At this stage, most companies are paying attention to two things, the first is whether they have a foothold in their own base area, and the second is whether this base can support their own operational efficiency. That is to say, in the instant delivery market, do you have a clear market positioning, target customer groups, and base areas. We're also doing these things, on the one hand, looking for our own business role, and on the other hand, creating a profit point.
As for next year and the following year, should we focus on more profits or expand a little more? Sun Haijin said: "The next step will be to raise the profit priority and make the expansion more stable." ”
Third, be friends with "business flow"
The introduction of Taobao China (a wholly-owned subsidiary of Alibaba) and Hello Travel as cornerstone investors is also a point of considerable concern to the market.
Sun Haijin revealed to the media that at present, SF Tongcheng has cooperated with Alibaba, "They have a lot of strategic ideas in local life, and they need partners to supplement them in terms of performance, as a third party, we are obviously the best choice." And for us, there is a more stable customer, why not enjoy it."
In addition, Sun Haijin further told 36Kr that the cooperation between SF Tongcheng and Taobao China is mainly in the new retail sector, including Hema Fresh, as well as cooperation in the field of e-commerce.
Cooperation with many "business flow" platforms such as e-commerce and retail can obviously bring more orders to SF in the same city, thereby increasing market share and expanding growth space. This is mainly due to the "third-party" attribute of SF Tongcheng. SF Tongcheng has no business flow gene, and there is no traffic competition relationship with other related platforms, which is why SF Tongcheng has the possibility of cooperating with most commercial flow platforms.
At the same time, SF Tongcheng said that with the deepening of anti-monopoly market policies, a dominant business flow platform has become a history, merchants gradually have more independent choices, the demand for building an exclusive distribution closed loop is increasing, and the importance of third-party independent instant delivery platforms is becoming increasingly prominent. More and more head brands regard SF Tongcheng as the first choice for delivery services, and some commercial flow platforms are also willing to hand over delivery to SF Tongcheng as a capacity supplement during peak hours.
In terms of opportunities and challenges in the industry, Sun Haijin believes that consumers will extend the scene of needing a faster sense of acquisition to all aspects of life, which is a common opportunity for the industry, the imagination of this industry is still quite large, and it is definitely not just a distribution in the future, healthy operation is the current challenge facing the entire industry.