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The tempting "cake" of the same city freight is not easy to nibble
Written by Meng Huiyuan
Editor/Lee Ha-lin
Recently, the news of the second delivery of the table by fast dog taxi to the Hong Kong Stock Exchange has given the same city freight market great attention.
What is surprising to the outside world is that an enterprise that has lost nearly 2.8 billion yuan in four years and is expected to lose money until the end of 2024, why did it impact the "first share of freight in the same city"?
In fact, in the fiercely competitive same-city freight track, it is not uncommon for a long-term loss of money like fast dog taxi. As Fast Dog Taxi explained the loss in the prospectus, "The logistics business in the same city is still in its infancy, and it needs to promote growth with a large amount of investment, and to achieve business growth, it must establish a strong competitive advantage." ”
After the "Hundred Regiments War", the same city freight market has formed a fast dog taxi, cargo lala, full of transportation, Didi freight four-way tug-of-war, but seeing its large market demand, low market penetration, low market concentration, is a huge incremental market potential prospects, Meituan, Harrow and other new players have also entered the field, undoubtedly aggravated the "conflict" of this track.
Surrounded by strong enemies, Fast Dog Taxi will be used to expand the user base and enhance the network effect of the platform through the listing, but the "burning money for the market" has lost so many years and still cannot see the inflection point of profitability, even if it is really successful in the IPO to obtain a sum of funds, it is not easy to win this "roll king" battle.
Is seeking an IPO to continue to fight the "price war"?
Fast Dog Taxi has never hidden that its intention to seek an IPO is to "burn money" and fight a "price war".
According to its prospectus, "this listing is mainly used to supplement supplementary funds to increase user subsidies and advertising placement; to seek strategic cooperation, investment and acquisition, as well as technology research and development investment and daily operations." At the same time, however, there is no guarantee that the company will be able to recoup the cost of sales and marketing activities, or that such activities will be effective in developing new users.
To put it bluntly, money must continue to "burn", but the effect is not guaranteed. Judging from the actual effect of "burning money" in the previous few years of fast dog taxi, it is very frank.
According to the financial report data, from 2018 to 2021, the sales and marketing expenses of fast dog taxis remained high, with 524 million yuan, 296 million yuan, 195 million yuan and 335 million yuan respectively. This part of the fee accounted for about 50% of the total revenue of the corresponding period, and even as high as 115.7% at one point, of which about half of the marketing expenses were spent on user rewards for shippers, and the company spent a lot of effort to exchange subsidies for market share.
The marketing cost of fast dog taxi is still high (Source: Prospectus)
Unfortunately, the result of the huge investment of 1.35 billion yuan is that its market share of 3.2% in the mainland is still quite different from the industry's apex - as of 2021, Lalala still has more than half of the market share (52.8%), and the market share of fast dog taxi has fallen from 5.5% in 2020 to 3.2%, ranking third after Didi Freight (5.5%).
So why is it that even if the fast dog taxi "burns money" is not effective, and the fight for "bloody listing" must continue to raise funds to continue to "burn"? This brings us to the pure platform positioning of fast dog taxis that basically have no self-operating ability.
From the perspective of the business model of fast dog taxi, in terms of transportation capacity, fast dog taxi mainly aggregates independent drivers and logistics companies to provide dispatch services for them. Since there is no self-operating power, Fast Dog Taxi is very dependent on third parties (including human resources agencies and fleet operators that send drivers to the platform to complete consignment), and the stability of transportation capacity depends entirely on the interests of Fast Dog Taxi and these institutions;
On the demand side, Fast Dog Taxi also radiates B-end small and medium-sized enterprises and independent C-end users to provide logistics services. Among them, B-side customers are relatively stable, but with the increase in the frequency of demand for transportation capacity, customers have higher requirements for price and experience, and there will be an impulse to bypass the platform for trading at any time. The C-end is relatively more uncontrollable, different from the demand, higher frequency of the travel market, personal same-city freight belongs to the low-frequency consumption scenario, in the face of diversified and homogeneous freight platforms, users are usually more difficult to cultivate brand loyalty.
Based on this, platform services, enterprise services, and value-added services have become the three main businesses of Fast Dog Taxi. According to the data of the prospectus, in 2021, the total revenue of Fast Dog Taxi was 660 million yuan, an increase of 24.53% year-on-year. Among them, the revenue of platform services (logistics services for C-end users and some small and medium-sized enterprises) was 260 million yuan, the income of enterprise services (customized services provided for small and medium-sized enterprises) was 370 million yuan, and the income of value-added services (providing various value-added services such as fuel cards, vehicle maintenance and repair and referral for drivers) was 0.3 billion yuan, accounting for 39.1%, 56.4% and 4.5% of the total revenue respectively. In general, the proportion of pan-C-end and B-end is basically four or six, while the value-added income is basically negligible.
Obviously, most of the revenue is in the C-end and B-end business, and Fast Dog Taxi has to make a fuss about it if it wants to achieve profitability. More important than this, the premise is that to solve the problem of low stickiness at both ends of supply and demand, the platform must constantly leverage traffic growth through marketing.
Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University International United Business School, believes that for fast dog taxi, which is not strong technical support and does not have research and development strength, the barrier of the freight industry in the same city lies in the familiarity with the business ecology of the local market, "Fast dog taxi needs local marketing to build channels, recruit drivers, and cultivate user habits, which are the barriers to fast dog taxi." ”
In short, "burning money" to do marketing to expand market influence is the key, "in the case of the market pattern is not yet clear, even if you invest huge amounts of money to improve the user experience, to build high technical barriers, you still can't distance yourself from competitors." Therefore, the key at this time is to build market share first, and then use technology to optimize the user consumption experience. ”
Disorderly competition has long been the norm in the freight industry
External competitive pressure is also accelerating the pace of fast dog taxis to the road of "burning money". In the two versions of the prospectus updated before and after Fast Dog Taxi, the fierce market competition was listed as the first of the seven major risks of the platform.
Previously, the reason why Didi Freight gained a firm foothold in the same city freight market was to adopt a price subsidy strategy, which improved the attractiveness and viscosity of users and drivers by giving high subsidies to both drivers and users; later, there was a new Meituan Zhuolu, with the killer skill of "main transparent pricing" (no information fee, management fee, membership fee) successfully broke into the track, verifying the superiority of playing "price war" in market competition.
The counter-example is fast dog taxis. In 2019, the sales and marketing expenses of Fast Dog Taxi were 296 million yuan, down 43.5% year-on-year, the market rate fell from 115.7% to 54%, and due to the sharp reduction in marketing expenses, its related business data also fell on a large scale: in 2019, the average MAU of fast dog taxi users fell from 691,000 in 2018 to 667,000, and the average MAU on the enterprise side also fell from 1802 in 2018 to 1751. It was not until 2021 that fast dog taxis resumed the burning cash trend, and the market rate rose from 36.7% to 50.7%.
The main operating data of Fast Dog Taxi (screenshot from Fast Dog Taxi Prospectus)
Whether it is Didi Freight's 30-day platform service fee waiver for drivers, as well as various coupon reductions and preferential activities; or Lala's 500 million subsidies to open the "Pulling Goods Welfare Month"; or Fast Dog Taxi has also launched a single reward of 20 yuan on the driver side, and launched "99 minus 10", "338 minus 30", "1288 minus 100" and other offers on the user side... Under the general trend of the "burning money" industry, all entrants can only be wrapped up and moved forward.
Loss has long been the norm for fast dogs to take a taxi. In the four years from 2018 to 2021, the total loss of Fast Dog Taxi reached 2.786 billion yuan, almost exceeding the total revenue of these four years.
Judging from its relatively weak market share in 2021 and the fact that the inflection point of profitability may not be seen until the end of 2024, if you want to impress investors in the secondary market and successfully list to obtain a "blood return" fund, fast dog taxi will have to make some hard materials.
Therefore, in the new story of fast dog taxi, it can be seen that it will turn its attention to new energy freight: on the one hand, accelerate the landing of new energy trucks on the platform, provide new energy car purchase discounts for the driver side, reduce the threshold and competitiveness of capacity expansion, on the other hand, open up the upstream supply side of new energy vehicles, form a multi-party collaborative network, and provide more value-added services to OEMs, dealers, and drivers.
However, the story is told beautifully, the "cake" is painted no matter how big, and only by holding on to the present can there be a future. In the short term, fast dog taxi still has to rely on the current same-city freight basic disk. In particular, the rising cost of compliance development in addition to "burning money" has put forward higher requirements for major platforms.
In February this year, the Shanghai Communications Commission's Law Enforcement Corps interviewed the Three Platforms of Didi Freight, Fast Dog Taxi and Lala, and explicitly required the platform to conduct a comprehensive review of registered vehicles operating in Shanghai to ensure the authenticity of vehicle personnel information, prohibit unqualified vehicles and personnel from entering the platform, and formulate a plan for the withdrawal of illegal vehicles. If the correction is not made within the time limit, the circumstances are serious, and the fine will be up to 500,000 yuan. In addition, the Shanghai Municipal Traffic Law Enforcement Department also issued a notice of order for rectification of these three platforms.
Operational challenges brought about by strong supervision have forced relevant platforms to make changes, such as data security and employment compliance, which can prevent data leakage through technology, protect user data security, and also use technology to audit the operational qualifications of its drivers.
Fast Dog Taxi also illustrates this in the prospectus. It is facing the inherent risks of processing large amounts of data and protecting the security of such data, facing a number of challenges related to data such as platform transactions, and failure to comply with the relevant regulations "may expose the company to significant penalties and negative public opinion, change business practices, increase costs and seriously disrupt the business." ”
Burning money is cool, technology and service is a protracted battle
"Burning money" for the market is not enough, and the attractive "cake" of the same city freight is actually not so good to nibble.
Many pain points in the industry have become a shackle that inhibits the further development of the industry and related enterprises.
First of all, the same city freight market has long had the problem of opaque price information, the lack of unified charging standards, and the situation of random charging occurs from time to time; secondly, the B-end demand is complex and difficult to scale, the C-end demand is low-frequency dispersed, and the supply and demand matching problem has always been a major difficulty in the industry; finally, the service is not standard, the platform reputation is poor, and the safety problems caused by the imperfect driver training and management system are also stubborn diseases.
It is more intuitive to use data to show the negative impact of these pain points. Data related to illegal acts involving online freight platforms show that since 2019, the number of illegal freight cases involving unauthorized use of online freight platforms has totaled 186 cases, and the number of related cases last year reached 67, and most of the cases used platforms are Lala, Didi Freight or Fast Dog, accounting for nearly 60% of the number of cases.
The first in the market share of the goods Lala
Among them, fast dog taxi can be said to be a frequent problem.
According to the APP Notice on Infringement of Users' Rights and Interests published on the website of the Information and Communications Administration of the Ministry of Industry and Information Technology (the third batch in 2020), Kuaigou Taxi was required to complete the rectification and implementation work by July 30, 2020 due to its private collection of personal information, private sharing with third parties, frequent application for permissions and excessive request for permissions. In the APP notice on infringement of user rights and interests (the fifth batch in 2020), it is shown that fast dog taxi has not yet been rectified, and there is still a problem of illegal collection of personal information.
From April 2021 to March 2022, Kuaigou Taxi was also interviewed six times by the Ministry of Communications, the Shanghai Transportation Commission and other departments, mainly involving public safety, driver rights and interests protection and other issues. But even so, the average commission rate of fast dog taxi's platform services in the Chinese mainland market has been rising for four consecutive years. After all, the monetization ability of the same-city freight platform service depends largely on the commission rate, and reducing the commission rate means reducing revenue.
When the fast dog taxi is still struggling with how to balance and use the double-edged sword of the commission rate (the draw rate is too low to lead to insufficient platform monetization ability, and the continuous rise in the commission rate will lead to a large loss of drivers to reduce the activity of the platform), competitors such as Cargo Lala, Yunman and other competitors have thought of fundamentally solving the problem in order to improve freight efficiency and service quality.
That is, digital transformation, such as the use of AR and deep learning technology to identify and dimension three-dimensional objects, improve the level of digitalization of goods, and efficiently match consumers and drivers based on big data algorithms, optimize transportation routes, and solve the problem of insufficient transportation capacity during peak periods.
Correspondingly, Lalala has invested 1.5 billion yuan in it, mainly for recruiting R&D personnel in big data development, algorithms, intelligent scheduling, etc., as well as carrying out technological innovations such as artificial intelligence and big data. In the third quarter of 2021, Manbang Group, the parent company of Yunmanman, showed that its investment in research and development reached 202.9 million yuan, accounting for 16.34% of total revenue, an increase of 75.22% over 115.8 million yuan in the same period last year.
As we all know, price wars are an effective means to quickly gain market share, but they are not a long-term solution, especially after new and old players have joined the subsidy war, the advantage of "burning money" is more difficult to maintain. The same city freight track will be a protracted battle of technology and services, and only by making sufficient efforts on this can we build real industry barriers.
From this point of view, even if Fast Dog Taxi successfully wins the name of "the first share of same-city freight", it does not mean that it has taken a step ahead of all competitors. On the contrary, for Fast Dog Taxi, which has been negative in net cash used in operating activities for consecutive years and has repeatedly declined in research and development expenses, it is necessary to ensure sales and marketing expenses to stabilize the existing driver capacity pool and user stickiness, and then there will be a chance to play around digital technology services.
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