On October 29, Best Group announced a price of 6.8 billion yuan to transfer its Best Express to the largest "dark horse" in the express delivery industry in recent years, Jitu, and in the future, Best will leave the bitter sea of express delivery and focus on express transportation, supply chain, international logistics and other businesses.
Founder Zhou Shaoning wrote an internal open letter and said "this is a difficult decision." Fan Suzhou, president of Jitu, was more pleased with his speech: "This acquisition complements each other's advantages and can optimize the terminal network layout of the Chinese market. ”
Zhou Shaoning, founder of Best Group, wrote an open letter yesterday (October 29).
Zhou Shaoning is not from the "Tonglu family", but graduated from Fudan and Princeton, and was once known as the troika of Google China with Kai-Fu Lee and Wang Huainan, but after 14 years of entrepreneurship, he sold his most core assets, and the taste of this is probably only what he can experience.
The news did not cause surprise in the circle, because Best Express has been operating hard in recent years, the sound of "selling itself" was circulating in the market three months ago, and the speculated buyers included SF, Jitu and even ByteDance, and finally "flowered" Jitu is also reasonable.
Although "cashing out" 6.8 billion, The life of Baishi is not good. Best Group's debt ratio is currently as high as 95.2%, with total liabilities of 17.5 billion yuan, and the sale of core assets is more like "surviving with a broken arm". Therefore, as soon as the merger news came out, Best U.S. stocks fell by 23.7%.
The departure of Baishi means that this round of "the most tragic express price war in history" ushered in the first player to leave, which seems to be a positive signal that the vicious war is about to end. For investors in the secondary market, subtle changes in the landscape often mean inflection points in the industry.
Yuanchuan has long tracked and studied the express delivery industry, and on the acquisition of Baishi by Jitu, our views are:
The departure of Baishi marks the improvement of the industry pattern, and although the fierce battle is not completely over, it has entered the "beginning of the end" stage. In addition, the strength of Jitu continues to increase, and it will continue to have an impact on the "Tongda System" and even SF in the short term.
This article will argue the above conclusions around the following three core questions:
01. What is the impact of the departure of Best on the industry?
02. Why did the "Super Fighting" Jitu acquire Best?
03. Who will be the next outgoing giant?
Now go to the main text section.
01
What is the impact of the departure of Best on the industry?
The causes and consequences of this round of "the most tragic express delivery war in history", we have detailed in the long-form special article "The Last War of Express Delivery", here is a brief summary:
After years of internal volume, the express delivery market reached a "steady state" in 2019, with 6 major oligarchs (four links and one reach + SF, excluding JD.com) sharing more than 80% of the market share, and SF and Zhongtong became the largest leaders in the field of aging parts and e-commerce parts respectively.
At that time, the market believed that the network effect of the head company was becoming more and more obvious, the entry cost of new players was getting higher and higher, small and medium-sized players were out, the intensity of competition in the industry would decline, and 6 companies would slowly evolve to the end game of 3 oligarchs, which is the so-called "6 into 3".
Why did it end up being 3 oligarchs? In fact, this is also a kind of speculation based on overseas mature markets, and there is no strict basis, and express delivery may also form a pattern of 5 oligarchs like the beer industry. Therefore, whether it is "6 into 3" or "6 into 5" is a simple reference, used to describe the process of the industry to the end, do not need to study deeply.
But in 2020, the situation has suddenly changed, and the three companies backed by the giant, Jitu (OV Pinduoduo), Zhongyou (JD.com), and Fengwang (SF), have entered the game.
Jitu started its network in March 2020, Zhongmatsu started its network in Guangdong in April 2020, and in the same month, SF established "Fengwang" to test the waters of franchised e-commerce, and started its network in October 2020. The industry pattern has changed from the previous possible "6 into 3" to the current "9 into 3", and the pattern has deteriorated again.
The reason why express delivery is so "volume", the core is that the product cannot be differentiated, and the competitiveness mainly depends on the price. Constantly reducing costs and expanding the scale has become the only way to live. There is a saying in the express delivery industry, called: I would rather exhaust myself than starve my peers.
Under the fierce competition, Baishi, one of the 6 giants, took the lead in not being able to stand up. In fact, Best Group has not made money since 2015, last year in the fierce price war loss of up to 2 billion, the first half of this year also lost 1.07 billion, leaving is only a matter of time.
Baishi's departure from the market to sell a rabbit will directly change the industry pattern from "9 into 3" to "8 into 3" - without a mouth to eat, people at the dinner table will naturally breathe a sigh of relief.
02
Why did the "super fighting" Jitu buy Best?
An unknown fact is that Jitu is now often called "Pinduoduo in the express delivery industry", but when it first entered the Chinese market, its nickname was "Indonesia's version of SF".
The reputation of Jitu in Southeast Asia is indeed very different from that in China. As we have detailed in the article "Reviewing the Rise of the Pole Rabbit: An Indonesian Sample of Chinese Expansion", the Southeast Asian market has given the Pole Rabbit a steady stream of blood transfusion support.
In addition to the overseas parent company, Jitu has also received the support of top domestic capital. In April this year, Jitu completed a financing of US$1.8 billion, with boyu capital with a deep background leading the investment of US$580 million, sequoia Capital and Hillhouse, which is said to be valued at US$7.8 billion after the investment.
Some people have asked this question: Why would Hillhouse, Sequoia and Boyu invest in the super crowded track of express delivery? One of the above investors revealed to Yuanchuan its simplified version of the investment logic:
Franchise express delivery companies have long been underinvested, and the boss of the terminal outlets can save money. But the rabbit is not the same, franchisees are mostly with the "backgammon system" to make a lot of money dealers, investment ability is very strong, loyalty is also very high, relying on the dealer's capital flow and pinduoduo business flow, the pole rabbit is easy to squeeze into the first echelon.
With Indonesian blood transfusions on the outside and consortium support on the inside, the pole rabbit looks unstoppable. But shortly after the April financing, regulators intervened in the intensifying price war of express delivery, which is bad news for the pole rabbit that has reached close to 30 million orders per day in the form of "price slaughter".
With businesses tied, mergers and acquisitions are clearly a more effective approach. In the context of the recent "anti-monopoly", the timing of this merger and acquisition is also cleverly chosen. Specifically reflected in the following three aspects:
01. The complementarity between Baishi and Ji rabbit is strong
An expert in the express delivery industry commented on the transaction as follows:
Baishi is too overlapping for zhongtong, Yunda and other head enterprises, no value, but for the pole rabbit to start late, Baishi still has some value, acquisition is equivalent to directly obtaining a large number of transshipment centers, hardware and software, personnel team, network and other resources, market share will also increase.
However, in the first half of 2021, the business decline of Best was serious, the share fell to about 8%, and a large number of executives left, such as Zhou Jian, the former general manager of Best Express, who jumped to SF and served as the general manager of Feng.com. According to the current state of Jitu, $1.1 billion is not cheap.
02. The price war is not allowed to be fought, and mergers and acquisitions have become the only means to increase the share
With the heavy blows of local regulatory authorities in the first half of 2021, the express delivery price war has shown signs of easing, which has put shackles on the back row players who rely on the price war to burn money to grab the market. As a result, mergers and acquisitions have become the only means to quickly increase market share.
As of now, the daily single volume of polar rabbits is between 20 million and 22 million. According to the second quarter financial report of Best Group this year, the daily order volume of its express delivery business is about 25 million. Some insiders expect that the daily order volume after the merger of the two will be more than 45 million, accounting for 14% of the market share, and Jitu will leap into the top three/four of the e-commerce parts market.
03. The acquisition of Best is equivalent to cutting into the Tao system
For e-commerce express delivery, in addition to price, business flow is undoubtedly another important lifeline. Although it relied on the support of Pinduoduo's business flow in the early stage, the ceiling of Jitu was obviously not high enough. The rookie network belonging to Ali has previously turned away jitu.
This time, Jitu directly acquired Baishi, which was already in the rookie system, which was equivalent to the "curve" entering the Ali system - in the context of anti-monopoly and strict crackdown on "two choices", Ali had almost no reason (nor did he dare) to exclude Jitu from the rookie.
Alibaba's Taoshi e-commerce is the largest source of orders for Baishi, and the shareholding of Baishi is as high as 37%, and the voting rights are 46.2%, which is slightly higher than that of founder Zhou Shaoning. The reason why Ali was able to release this acquisition case should be related to the current anti-monopoly background.
Therefore, the strategic leverage of Jitu's acquisition of Baishi is of great significance. But for the members of the "Mastery Department", a rabbit with increasing strength will only bring them more trouble and impact.
03
Who is the next express delivery giant to leave?
The market is speculating: after the departure of Baishi, who will be next?
Both the "Tongda System" and SF have suffered serious blood loss in the vicious price war. From the perspective of profit data, Shentong Express (formerly known as Shengtong), the earliest big brother established in the four links and one reach, is currently relatively difficult, with a small profit in 2020 and a loss of 237 million yuan in the third quarter of 2021.
Veteran players are often helpless in the face of fierce back waves. For example, in reaching the threshold of "the average daily order reaches 20 million", Shentong spent 25 years, while Jitu Express only took 10 months. This is also an important basis for many investors to feel that "the express delivery industry has no moat".
At present, it is relatively calm to zhongtong and Yunda, and their market share ranks first and second. After the merger of Baishi, the market share of Jitu is close to that of Yuantong, which currently ranks third. From the perspective of the profitability of a single ticket, Zhongtong, Yunda and Yuantong can achieve profitability.
The Ali department has invested in the "four links and one reach", but what is more embarrassing is that Baishi and Shentong, which have the highest shareholding ratio (Ali even parachuted senior executives to Shentong), are currently the most difficult to operate; while Zhongtong and Yunda, which have the lowest shareholding ratio, have gradually won.
It can be seen that under the pepper noodle investment method, the shareholding ratio of "Dad" is not so important, but the binding with dealers is more important. Before the IPO of each express delivery company[1], the shareholding of executives, employees and franchisees of Zhongtong reached 26.5%, Yuantong and Yunda only 2.25% and 2.19%, and Shentong was 0.
SF's huge loss in the first quarter "showed the world" the inner volume of the express delivery industry, and the departure of Baishi opened the prelude to the final game, but it is clear that there will not be only one company that withdraws from the game.
04
Epilogue: The finale has begun
Few people are aware of the problem that when shopping online, although the courier fee is paid from themselves, consumers do not have the right to choose the courier company.
Which courier to send, the choice is in the hands of the seller and the platform, but the person who pays the money does not have the right to decide. For sellers, the starting point for them to choose express delivery is to minimize logistics costs, but for consumers who actually pay for it, the experience is as important as the cost performance.
Therefore, the relevant departments did a thorough survey in early 2021 to study whether to let the platform open up the power of consumers to choose express delivery companies. Once this opening is released, the importance of the brand will be greatly enhanced, and the concentration will be further improved.
Therefore, there are still many ways for players to clear out. And it is ironic that the express delivery industry is one of the few industries that has been actively stopped by the state from vicious competition. The well-being of tens of millions of logistics and courier buddies is a top priority for policymakers, not a return on capital.
Therefore, the habits of consumers themselves, the laws of the industry itself, and the will of regulators will all promote the clearance and concentration of the industry at the same time, forming a resonance. The departure of Baishi is only the beginning and rehearsal of the final stage.