Exclusive interview: what will express companies do in the future? CFO of Zhongtong gives these answers

Source of the following article / China business





In May this year, Zhongtong express announced the financial results of the first quarter of 2022, which showed that the company's first quarter revenue was 7.904 billion yuan, a year-on-year increase of 22.1%; The adjusted net profit was 1.055 billion yuan, a year-on-year increase of 34.9%. Since the beginning of this year, the overall growth of the express industry has slowed down, and the epidemic has also had a great impact on the express industry. However, the parcel volume of Zhongtong express in the first quarter still increased by 16.8% year-on-year, the market share expanded to 21.6%, and the single ticket price of the core express business also increased by 8.5%. In fact, since its listing in the United States in 2016, Zhongtong has always ranked first in the industry in terms of market share. For a long time, the domestic express delivery industry has been an industry with fierce competition and difficult profits. In 2021, Zhongtong express not only continued to increase its business volume, but also led its peers in terms of profit and profit margin. "In terms of profitability, I mainly look at the gross profit, especially the gross profit rate of the main business. In this indicator, Zhongtong is obviously higher than its peers." Recently, Yan Huiping, CFO (chief financial officer) of Zhongtong express, revealed the secret of the counter trend growth of Zhongtong express in an exclusive interview with China business news.



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Management is "squeezing out the last drop of lemon juice". In Yan Huiping's view, the higher gross profit rate than that of the peers is due to the combined effect of income and cost. "The development of express enterprises depends to a large extent on the business scale and operational efficiency. At present, Zhongtong has more than 30000 outlets, 99 sorting centers, and more than 70000 terminal stations, covering more than 99% of the districts and counties in the country. In 2021, the average daily order volume will exceed 60 million. In 2022, it is expected that the annual business volume will increase by 12% - 16%." Yan Huiping pointed out that only when the service network covers enough depth and breadth can it become the first choice of merchants that pay attention to consumer experience and continuously maximize the platform's operating efficiency. Yan Huiping told the reporter that the premise of achieving network stability and coverage is inseparable from the corporate culture of China Tongtong Tongjian. Zhongtong is the first franchised express enterprise in the industry to implement and complete the "whole network integration" strategy and carry out the joint-stock reform of the whole network. The joint-stock reform has solved the problem of how to distribute the interests in the business development, realized the transformation from multiple interest subjects to common interest subjects, and thus stimulated the entrepreneurial vitality and innovation potential of all franchisees. It is understood that the "Tongda" private express enterprises, which currently occupy the majority of the express industry, have developed rapidly through the franchise system. Franchisees buy outlets in a certain region, organize human and vehicle resources by themselves, use the brand of express headquarters to expand business, and have the final pricing power. It can be said that the express headquarters and franchisees are network partners. Since 2010, Zhongtong has started to carry out shareholding reform. First, the provincial-level companies have been recovered at a price slightly higher than the market price, and the franchisee bosses of the provincial companies have become part of the shareholders and professional managers of Zhongtong. It is not easy for the joint-stock reform to succeed. At that time, Lai Meisong, chairman of Zhongtong express group, released two principles: first, do not let franchisees suffer losses; The second is to take the initiative to give up 20% of the management shares held by itself and merge and replace with the shares of the franchisee. With such a fair and generous plan, the joint-stock reform of Zhongtong was also smoothly promoted, and the subsequent results were also immediate: first, the company was able to concentrate its efforts on major issues and squeeze ten fingers into fists; Second, we have achieved ideological unity, step in step, strengthened executive power, and unimpeded government orders; Third, it ensures the stability of franchisees and networks, and concentrates financial resources, decision-making, human resources and materials to the headquarters to better invest in capacity building. Yan Huiping told reporters that in the past five to ten years, Zhongtong has continuously invested a part of its revenue in infrastructure construction. At present, Zhongtong has the largest number of self owned sites and fleets in the industry. "The cost is based on the scale effect to give play to the leverage advantage. For example, with limited land resources, the land price today is much higher than that ten years ago. From the perspective of depreciation and amortization, our base will be relatively low in the same depreciation and amortization year, and our cost advantage will be further highlighted, and our contribution to the overall profit margin will be more advantageous." "In the past two years, we have also focused on cost from the aspects of refined management and straight chain end," Yan Huiping further revealed, "A metaphor I often make is that if we squeeze out the last drop of lemon juice, the degree of refined management will determine whether there is more space to obtain cost advantages in the future. The stability and coverage of the network are also the premise of stable service quality, which makes us have higher bargaining power than our peers and thus improve our income."

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The industry is changing from a price war to a value war. However, Yan Huiping also pointed out that although the concentration of the industry has been increasing in recent years, the market share of several head express enterprises is still small. The homogenization of products has caused many enterprises to receive goods at a price lower than the cost. In particular, the new capital "burns money for quantity" has once intensified the low-price competition in the industry. It is worth noting that the relevant departments of the state have started to intervene in the supervision of the disordered price war to protect the interests of the grass-roots express workers. For example, on September 29, 2021, Zhejiang Province issued the regulations on the promotion of the express industry, which will be formally implemented on March 1, 2022, requiring express enterprises not to receive goods at a price lower than the cost. "The industry will change from a price war to a value war. The pricing ability of leading enterprises will be more based on its capacity, service quality assurance and stability, excellent cost control and the ability to continuously enhance infrastructure, which are the core of the competition of express enterprises," Yan Huiping told the reporter. Under such a background, Zhongtong will continue to improve the premium ability of the company. "The premium ability comes from the stability of network breadth and service quality. At the same time, we are also launching diversified product matrices to accelerate the realization of product stratification and ecosystem construction. For example, we have launched the" Zhongtong standard express "with time commitment. In the future, we will launch high value-added products such as" express "to meet diversified customer needs." At the same time, optimizing cost and improving quality and efficiency are still one of the sustainable strategies of ZTE. "In terms of cost, we should pay more attention to promoting digital management and operation, accelerating terminal construction, increasing direct links with couriers, and reducing the frequency of distribution. In the long run, we should pay more attention to supporting and empowering outlets, so that they have confidence to invest in construction and improve production capacity, and enhance the profitability and confidence of network partners." Yan Huiping believes that in the future, the competition situation of express delivery enterprises will be more centered on the end competition, and the layout of Zhongtong at the end will also maintain a leading position in the industry. As early as 2019, Zhongtong encouraged franchisees to open express supermarkets. In 2021, the company formally established the rabbit XI team to expand the business model of the terminal post station stores, enabling franchisees to accelerate the opening of rabbit Xi life + stores and upgrade some of the original express supermarkets to become rabbit Xi standard stores. "We have always emphasized with our partners that the resources within 1km from the end of the community are very limited. If we don't open it, the competitors will open it. You need to put the express delivery to other people's post stations and pay for it," Yan Huiping revealed, "The construction of our own post station may take 3-6 months at the beginning, but it takes up scarce resources. Therefore, at the beginning, we will give some subsidy schemes to the franchised outlets to help them tide over the climbing period." Yan Huiping said that in the future, the competition of express delivery must be the competition of the whole link, and the competition of the whole ecology. Therefore, since 2015, Zhongtong has successively laid out the ecology, established international, express, cloud warehouse, star link, cold chain and other sectors, and also provided support and services for the business sector, such as finance and double color. Therefore, in 2021, Zhongtong proposed to spend 3-5 years to build an ecological competitive advantage and form a moat of integrated logistics. "The construction of ecosphere is an important aspect of our long-term profitability improvement, and the ecosphere of Zhongtong is naturally derived from the development of its main business. We will not suddenly buy aircraft and expand the international market. Instead, we will maximize the resource efficiency and generate more synergy effects according to the existing customer resources and site resources," Yan Huiping said. For example, the comprehensive logistics park invested and built by Zhongtong is large in area, There will be express, express, cloud warehouse and cold chain teams to jointly design the site construction. "There are express delivery and express transportation on the first and second floors, and cloud warehouse on the third and fourth floors to provide customers with warehouse matching services to form the advantages of zero distance delivery and delayed delivery." "Zhongtong's ecosystem construction has always been gradual and orderly, doing the right things at the right time to form a higher input-output ratio", Yan Huiping further cited, "For example, our express business is the largest ecological sector, and now it has an average daily scale of 26000 tons. It is also based on the fact that at the beginning we relied on the express network and customers, and even the site can be supported by express. In the future, in the cold chain and any other emerging business sectors, we will adhere to such a strategy, give full play to the synergies and maximize resource efficiency on the basis of existing resources."



Source: China business