Harbour Business Watch, Yu Jinlan
Recently, Lalala submitted a prospectus on the Hong Kong Stock Exchange under the name of "Lala Technology", and investors included Hillhouse, Sequoia Capital, Concept Capital, Shunwei and Qingliu, etc., and the speculation about its expected listing was finally realized.
The positioning of "leading technology-enabled, data-driven logistics trading platform with global operations" and the name of "Lala Technology" seem to imply the ambition of Lala.
According to the data of the first half of 2022, as the pioneer and main driving force of digitalization in the road freight industry, Lalala, with a market share of 43.5%, held the throne of the intra-city freight industry, and broke the status quo of continuous losses in the industry for the first time, which attracted attention for a while.
Intra-city freight, that is, the transportation of goods weighing more than 30 kg on a point-to-point basis in the same city, and Lalala seems to be no longer satisfied with the first in the intra-city freight industry, expanding cross-city freight in 2021 and adding errand business in 2023, Lalala is constantly improving the service chain and seeking business diversification.
But what exactly is LalaLa's profit model? And why are they repeatedly interviewed by relevant departments?
01
Lalala's profitability and "model" exploration
From 2020 to 2022, Lalala's revenue was US$529 million, US$845 million and US$1.036 billion, gross profit was US$204 million, US$333 million and US$556 million, gross margin was 38.5%, 39.4% and 53.7%, respectively, and adjusted profit (loss) was -US$155 million, US$631 million and US$53 million, respectively.
Observing the performance of Lalala in 2022, it will be found that the revenue increased by 22.60% year-on-year, the gross profit increased by 66.97% year-on-year, and the gross profit margin increased by 14.3%, that is, the revenue grew steadily, the gross profit and gross profit margin were greatly boosted, and the good performance was also reflected in the first positive profit.
It should be noted that loss-making operations are common in the intra-city freight industry. In the same period when Lalala turned losses into profits, Kuaigou Taxi, which has the name of "the first stock of freight in the same city", has not yet got rid of consecutive years of losses.
In its prospectus, Lalala said there can be no assurance that monetization strategies or business initiatives will be successfully implemented or generate expected revenue and profits.
For the turnaround of profits in 2022, Lalala explained that the gross profit generated by Chinese mainland increased due to the increase in the realization rate of Chinese mainland's freight platform business from 7.6% to 9.7% in terms of revenue, as well as the reduction in the size of the field operation team in terms of costs, resulting in a decrease in wages and related expenses. In other words, Lalala has increased the monetization rate of the freight platform business of Chinese mainland, while at the same time laying off employees internally, that is, both at the revenue level and at the expense level during the period.
First of all, Lalala's value is mainly obtained by providing freight services to merchants and matching orders for drivers. The three main businesses extended are: freight platform services, diversified logistics services and value-added services.
During the reporting period, freight platform services were US$229 million, US$409 million and US$566 million, accounting for 43.3%, 48.5% and 54.7% of revenue, respectively, accounting for an increase year by year. Diversified logistics services were US$165 million, US$268 million and US$301 million, accounting for 31.1%, 31.7% and 29% of revenue, respectively, with their share falling by two points; Value-added services were US$71 million, US$75 million and US$69 million, accounting for 13.4%, 8.9% and 6.7% of revenue, respectively, and the proportion further declined.
It can be seen that the growth of revenue in 2022 mainly comes from freight platform services, and this service mainly relies on collecting driver membership fees and commissions.
Lalala believes that in the future, the monetization potential will be enhanced with an effective hybrid monetization model. Hybrid monetization model, i.e. driver membership fees and commissions. This model is closely related to the freight platform services, which contribute about 50% of the revenue among the three main businesses.
In this regard, Liang Zhenpeng, a senior industrial economic observer, said: "At present, the competitiveness of Lalala is its profit model, which relies on collecting membership fees and higher and higher commissions from drivers. In the future, Lalala can look for some diversified ways to make profits, for example, Lalala can also be advertised on the body, in addition to the logo of Lala, the body of Lalala can play some other advertisements, automobile real estate and food and beverage various advertisements, can also obtain a certain profit. In addition, its mobile Internet software can also push more advertising space, which is also a way to make money. ”
However, Liang Zhenpeng believes that the proportion of Lalala's commission to drivers can be moderately reduced, and membership fees can also be reduced, which can increase the development of some enterprises' freight business for large and medium-sized enterprises. In this way, drivers have stable income expectations, because the freight business for individual consumers is actually relatively fragmented and unstable.
It is worth noting that Lalala will increase the membership fee and commission fee charged to drivers? Can the corresponding freight platform business monetization rate be maintained continuously? Haven Business Watch contacted the company about the matter but was unable to receive a response.
By collecting driver membership fees and commissions to monetize, Liang Zhenpeng is frankly not optimistic about this profit model of Lalala. "Because now Lalala is on the mobile Internet side of the delivery, doing early, there are still some monopolies, but if you continue to rely on charging high driver membership fees and extracting higher and higher commissions, you will only blindly squeeze drivers." If you squeeze the driver, there will be a consequence, that is, the driver's service attitude will decline, and eventually the customer's experience of the user who uses the Lalala software. Liang Zhenpeng explained.
Of course, Leung also said: "It is okay for Lalala to charge drivers a reasonable membership fee and an appropriate and appropriate percentage of commission, but it cannot be higher and higher, because it involves the core elements of ecosystem services between platforms, drivers and consumers." The company should listen to the opinions of some drivers, negotiate friendly, and find a profit point acceptable to both parties. ”
Secondly, at the expense level during the period, in terms of Lalala's statement that "the size of the field operation team has led to a decrease in salaries and related expenses", combined with the financial report, the proportions of general and administrative to revenue were 14.6%, 21.6% and 19.7% respectively. Among them, the proportion of general and administrative to revenue in 2022 declined, but increased by US$22 million.
In the long run, layoffs may have a positive impact on Lalala to reduce costs and increase profit margins, but they do not appear to have made a significant contribution to the 2022 performance - after the layoffs, personnel-related expenses increased by $22 million compared to the previous year.
It should be noted that in addition to the company's disclosed layoffs, Lalala also reduced sales expenses.
02
2022 big open source throttling, test the water rider sword point?
2022 is destined to be a year of changes in the freight industry in the same city, fast dog taxi and cargo lala choose to slow down "burn money" at the same time, both sides reduce sales expenses, but the performance trend is completely different: one continues to lose, the stock price evaporates by ninety percent; A turnaround, solid market share.
(Image source: Lala Technology prospectus)
Fast dog taxi and cargo lala belong to the same city freight industry, and they also charge commissioners to drivers, so where is the fork in the road?
In 2022, Kuaigou taxi is busy reducing the sales expenses of 335 million yuan, which accounted for 50.68% of the revenue in the same period in 2021, to 321 million yuan, which accounts for 41.53% of the revenue in the same period, which is slightly effective, but obviously, the sales expenses of fast dog taxi are still a huge expense. If you want to make a profit, the sales expense will only decrease by 4.2%, which will drag down the pace of fast dog catching up with the industry to some extent.
In the same period, Lalala's sales expenses decreased by 70.58% year-on-year from US$673 million to US$198 million.
(Image source: Lala Technology prospectus)
In the three years from 2020 to 2022, Lalala's sales expenses accounted for 45.1%, 79.7% and 19.1% of revenue, respectively. It can be seen that sales and marketing accounted for 79.7% of revenue in 2021, equivalent to 673 million US dollars, and in 2022 it fell sharply to 19.1%, equivalent to 198 million US dollars, and sales expenses were largely controlled and reduced.
Lalala's sales and marketing expenses were mainly used for marketing and promotional expenses, as well as a smaller proportion of staff costs and others.
It is worth noting recently that Lalala has begun to lay out the rider business, and its claim of cash rewards and "0 commissions" is the familiar money-burning marketing back?
Lalala said that riders can receive cash rewards of 5 yuan or more after completing the first order from March 27 to 29, and stressed that before July 31, all errand orders in Lalala errand are "0 commission", that is, all the income from errand orders goes to the rider.
However, this cash reward is only 3 days, and the "0 commission" is only about 4 months. Is this a shallow test of the waters? Or continue to increase the code after testing the waters?
Zhang Shule, a commentator in the Internet industry, said: "The future of intra-city distribution is still to expand service content and scenarios, and simple moving, delivery or errand-running business is not enough to support it to become a small giant, and it lacks a real industry moat, which is easy to be crushed by e-commerce platforms and express giants that are attacking intra-city distribution." ”
Perhaps it is precisely because of this pain point that Lalala is no longer satisfied with the intra-city freight market, lays out cross-city freight, and expands overseas markets.
Returning to the core advantages of Lalala, the prospectus shows that in 2022, the total global freight transaction volume (GTV) of the Lalala platform reached 6.715 billion US dollars, completing more than 427.5 million orders, accounting for 43.5% of the market share. During the same period, Lalala averaged about 11.4 million monthly active merchants and about 1 million monthly active drivers.
According to Frost & Sullivan, freight forwarders and middlemen participated in about 80% of the total cross-city segment transactions in 2022, compared with 10% of intra-city transactions. The large number of freight forwarders and middlemen means that there is still huge room for improvement in terms of efficiency, user experience and cost savings, and if the platform allows drivers to transact directly with merchants rather than through middlemen, the profitability of the platform will have a lot of room for improvement.
03
Interview professional customers, Lalala's stubborn diseases and hidden worries
In the risk factors of the prospectus, Lalala details a number of factors related to drivers, merchants and users.
"Our continued growth depends on our ability to attract, retain and recruit merchants and drivers in a cost-effective manner. If new merchants and drivers are not attracted or retained, or if the participation of merchants and drivers declines, the Company's business, results of operations and financial condition and prospects may be harmed. Lala said.
To live and prosper and get better and better, for Lalala, the challenge is not small. On November 16-18, 2022, some urban drivers boycotted Lalala, which attracted great attention from the outside world at that time.
On November 17 of the same year, the Office of the Inter-ministerial Joint Conference on the Collaborative Supervision of New Transportation Formats conducted an interview with Lalala, and the issues focused on in the interview mainly included that the company used upfront price orders and launched "special preferential and smooth" products to maliciously lower freight rates, seriously damaging the legitimate rights and interests of truck drivers and disrupting the order of fair competition in the market.
In fact, interviews have become "commonplace" for Lalala. In January, July, August and September 2022, Lalala was interviewed by the Office of the Inter-ministerial Joint Conference on the Collaborative Supervision of New Transportation Formats.
Three feet of ice is not a day's cold. Interviews come even after the submission of the form seeking listing. On the afternoon of April 7, 2023, the Office of the Inter-ministerial Joint Conference on the Collaborative Supervision of New Transportation Formats conducted an interview with Lalala and reminded Manbang Group, Didi Chuxing, Cao Cao Chuxing, etc.
The interview pointed out the outstanding problems existing in Lalala, and required all platform companies to deeply reflect, draw inferences from one case to another, conduct in-depth investigations, and seriously rectify and reform. First, effective measures should be taken in a timely manner to safeguard the legitimate rights and interests of all parties and ensure the safe and stable development of the industry; Second, we should continue to implement the requirements of the "Sunshine Action", further study and reduce the platform's excessive commission ratio or membership fees, put an end to malicious price competition, and ensure the reasonable labor remuneration level of employees; Third, we must strictly perform statutory duties, operate in compliance with the law, strengthen qualification review, and ensure the authenticity and reliability of the source of goods; Fourth, it is necessary to improve the complaint and reporting handling mechanism, and promptly solve the demands and problems reported by the majority of drivers.
In addition, from the external complaint side, as of April 9, 2023, Lalala has accumulated 23,328 complaints on the black cat complaint platform, and 21,774 have been completed, with a completion rate of 93.34%; In the past 30 days, the number of complaints was 795, and 123 were completed, with a completion rate of 15.47%; In the same period, the number of complaints made by fast dog taxi on the black cat complaint platform was 4320, and 3546 were completed, 82.08%; In the past 30 days, the number of complaints was 42, and 6 were completed, with a completion rate of 14.29%.
In contrast, although the completion rate of lalala complaints is higher than that of fast dog taxi, it still needs to be improved. The complaints against Lalala mainly include: consumers react that they cannot contact customers, and they are arbitrarily judged by the platform to deduct the punctual rate and the on-time deduction rate; Lack of after-sales service, no orders for membership fees, and a large number of internal drivers compete; Privately freeze the driver's account; The platform indiscriminately deducts points for behavior; False publicity, inducing joining, etc.
Are the problems reported by these complaints true? With consumers and drivers complaining about the intensity, does it still need to be continuously improved in terms of operation mode and after-sales service? Coupled with repeated interviews with regulators, the answer is self-explanatory.
Liang Zhenpeng said: "Lalala urgently needs to enhance its service awareness and solve the current difficult and complicated diseases, otherwise the company's business risks will undoubtedly intensify." ”
Can the goods of professional customers be successfully listed? Is there huge uncertainty and multi-dimensional risk behind the profit model? This may determine whether the company can be more robust. (Produced by Harbor Finance)