Best Group's supply chain business was the first to turn a profit in the first quarter of this year, earlier than Zhou Shaoning had previously estimated.
At the time of the release of the 2022 annual report, Zhou Shaoning said that it is expected that the express and supply chain will be profitable in the second quarter of this year, and achieve positive cash flow and strong earnings growth throughout the year; The international business will be profitable in select markets.
Moreover, according to the latest public first quarterly report of Best Group, the gross profit margin of Best Express business increased by 6.8 percentage points year-on-year, the operating cash flow turned positive, and it achieved profitability in February and March; Best International's cross-border business volume increased by 60% sequentially; The group's net loss in the first quarter narrowed by 32.2% year-on-year, and the improvement of various financial indicators was obvious, which is a good start.
Previously, the logistics index had discussed the depth and breadth of its corporate moat from the performance of Best Group last year. It is true that "Seon lost the horse and knows that it is not a blessing", and now the "light travel" Best Group has moved towards the direction of taking the supply chain as the core, coordinating express transportation and international business, and improving the global comprehensive supply chain service capabilities, and has embarked on a path that seems different from the old express delivery guys in the past.
First, the supply chain, observe the new wind vane of Best
As the core of Best Group's business development today, to some extent, its supply chain business can also be said to be a vane to observe the long-term business development of Best Group.
According to financial report data, the revenue of Best Supply Chain in the first quarter was 440 million yuan, a year-on-year increase of 7.7%, and the gross profit margin increased to 8.2%; The volume of transported cargo increased by 18.2% year-on-year.
From this performance alone, in fact, there is no explosive growth in the data, the key is the repair of Best's profitability, especially for a track with high-speed growth opportunities, which is undoubtedly a good signal. This is attributed to two points, one is the continuous enhancement of Best Supply Chain's B2B2C service capabilities, and the other is the further expansion of customers in the auto parts and medical industries.
The supply chain chain is very long, is a big concept, the same named supply chain business or called a certain supply chain company, but the actual business model between enterprises is very different, and the capabilities are also different. Best Supply Chain's business is to provide a one-stop solution of B to B to C based on the warehouse distribution system, that is, the supply chain service track. As the market becomes more and more competitive and the overall economic development is facing challenges, the demand for this track will become larger and higher, and the threshold will become higher and higher.
Best said in the financial report that it is continuing to strengthen its B2B2C service capabilities. As of the end of March 2023, Best Supply Chain has a total of 395 self-operated and franchised cloud warehouses, with a total management area of 2.7 million square meters. The service network covers 148 cities in 29 provinces, municipalities directly under the Central Government and autonomous regions.
It is also worth noting that Best Supply Chain added and renewed 32 large customers during the reporting period. From the perspective of the customer industry scenarios served, in the past, Best was known for shoes and clothing, daily chemical (fast-moving consumer goods), but last year began to expand the supply chain service coverage to the auto parts and pharmaceutical markets, and now has formed four main lines of clothing, auto parts, FMCG and medical devices. During the financial reporting period, Best Supply Chain has deepened cooperation with a number of leading enterprises such as footwear and clothing, daily chemicals, and automobiles, and customer stickiness has continued to increase.
Taking auto parts as an example, compared with the whole vehicle supply chain, auto parts supply chain management has the characteristics of multiple types, long chains and wide distribution of suppliers. It is necessary to know that each car company will have hundreds of suppliers, due to the isolation of upstream and downstream information, accessories can not achieve accurate reserve and supply, and due to the asymmetry of car companies, suppliers, logistics and distribution resource information, if it cannot be timely and accurately transmitted, resulting in low efficiency and increased transportation costs.
In order to develop this track, Best Supply Chain has developed a complete set of auto parts solutions, including circular pick-up and transportation, logistics distribution center operation, just-in-time delivery and other services. Since entering this field in 2020, Best Supply Chain has established warehouses in Liaoning, Anhui, Guangdong, Zhejiang, Chongqing and other places, providing services such as circular pick-up, VMI warehousing, line-side instant delivery, and terminal 4S store distribution for many car companies.
Expanding from one scenario to another tests not only the ability to develop customer resources, but also the core capabilities of supply chain service enterprises. This is inseparable from the four core capabilities accumulated by Best Supply Chain: management digitalization, operation networking, service productization and operation quality, relying on those warehousing systems, supplier management systems, intelligent scheduling systems, etc., to achieve efficient operation on the transportation side and efficient transmission on the data side.
According to Wei Yongqiang, vice president of Best Group and deputy general manager of Best Supply Chain, "As consumption scenarios become more and more complex. Customers will feel that the supply chain is becoming more and more difficult, the warehouse distribution system is becoming more and more difficult to operate itself, and they will be more willing to outsource these logistics services. For us, we will also help customers solve data silos, integrate difficult problems, and build a digital intelligent supply chain system. "This is the value of Best Supply Chain and the long-term opportunity of Best Supply Chain.
Second, express and international, the road of synergy
Since the sale of the domestic express delivery business in 2021, Best Group's business model has been further focused, and the performance development path has also entered the synergy of supply chain, express transportation and international business.
In the first quarter, Best Express' total cargo volume increased by 5.1% year-on-year and maintained an upward trend. Best Express' operating income reached 1.05 billion yuan, with gross profit margin increasing by 6.8 percentage points year-on-year; freight volume reached 1.77 million tons, a year-on-year increase of 5.1%, of which e-commerce accounted for 21.5%. As the business recovery accelerated, Best Express achieved profitability in February and March and maintained its upward trend.
Express is actually the largest business of Best Group, and the express industry is often the off-season season of the industry due to the seasonal characteristics of domestic road freight, and the cash flow is positive in this quarter and the recovery of profitability is still showing the network strength of Best Express. As an established express network brand, Best Express has underestimated evaluation, and through measures such as strong operation, stable quality and efficiency improvement, Best Express has been able to continue to grow.
As far as its network franchise model is concerned, after the entire Best Group went to the express delivery business, the confidence of the franchisee network is indeed more precious than gold. What makes the author sigh is that just recently, I saw that a Best Express franchisee shared the "Best Express Cup Basketball Friendship Tournament" in the circle of friends, and the teams in the photo looked full of vitality.
This may also be reflected in the performance, in April this year, Best Express cargo volume further increased, surging 20.3% year-on-year. Best Express said that the next step will be to continue to promote digital transformation and collaborate with Best Supply Chain to improve operational efficiency and customer service capabilities.
Another synergy is the international business with high growth potential, with Best International's revenue of 197 million yuan in the first quarter and 27 million parcels in Southeast Asia, and parcel volume rebounding rapidly. During the quarter, with the further improvement of B2B2C and cross-border business networks in Southeast Asia, Best cross-border business volume increased by 60% sequentially, and SME customer coverage in Southeast Asia increased by 15% year-on-year, and parcel volume began to recover rapidly.
In the Southeast Asian market, with the rapid recovery of the local economy, e-commerce business and cross-border demand have increased significantly, and Best International has unknowingly gained a foothold in the Southeast Asian market by adjusting its strategy and optimizing its organizational structure, and has built advantages in service quality, operational efficiency and network stability.
III. Conclusion
Looking forward to the whole year, Zhou Shaoning said that he will continue to promote the focus and synergy strategy, continuously deepen digital capabilities, enhance the overall competitiveness of the group, and promote sustainable business growth. Among them, this includes continuing to shrink some unnecessary businesses, focusing on express and international business with supply chain as the core coordination, and taking a lighter pace.
"Achieving the overall profitability of the group by the end of 2023" is only a small goal for Best in stages, a new starting point, not an end point.
In the book "Re-understanding Entrepreneurship", Zhou Hang, founder of Yitocar, mentioned that he often discussed strategic issues with Professor Zeng Ming of Lakeside University. His view is that the current strategy is definitely not planned, such as the strategy for the next three years, it must not be planned, because the market environment changes too quickly, the time has been greatly compressed, and an industry may go from birth to death in three years. The real strategy is to run out, only by running first can you know what your strategy is, and then keep iterating.
I believe that in the past three years, we have a deep feeling of the great changes in the business and macro environment, and the development strategy of enterprises is becoming more and more difficult to plan, and returning to the competitive nature of logistics and supply chain services, we hope to see how the competition can improve efficiency, reduce costs and optimize experience for the customers served, so as to further recreate value for the entire industrial supply chain. In this regard, it is gratifying to note that Best has never deviated from its pursuit since its founding.
With the recovery of consumption and the improvement of the macro environment in the post-epidemic era, backed by China, the world's largest consumer market and the world's strongest manufacturing base, we look forward to those enterprises that uphold their original intentions, have resilience and adhere to innovation, and truly benefit from it. (Source/Logistics Reference)