The Competition Among Express Companies Has Intensified Under The Condition Of Price For Quantity: The Market Share Of Zhongtong Increased Last Year, But The Net Profit Decreased

On March 18, China Express announced its financial report for 2020, and its business income and market share have been improved.

According to the financial report, Zhongtong express will achieve an operating revenue of 25.214 billion yuan (RMB, the same below) in 2020, an increase of 14% compared with that in 2019. However, its revenue did not increase profits. Last year, it achieved a net profit of 4.326 billion yuan, down 23.7% year on year.

However, from the perspective of price for volume strategy, Zhongtong express achieved its expected goal last year. "In 2020, our business volume will be more than 17 billion pieces, exceeding the upper limit of the business volume target range." Lai Meisong, chairman of the company, said. According to the data released, the market share of China Express reached 20.4% last year, 1.3 percentage points higher than that in 2019.

It is worth mentioning that the price for volume will still be the main business strategy of the company at present. Yan Huiping, chief financial officer of Zhongtong express, said, "accelerating business growth and gaining market share is the most important goal in our current development stage."

Gains and losses of express leader 2020

In the past year, the biggest change brought by the epidemic to the domestic express industry is that it has accelerated the price competition of the industry.

It is not difficult to understand the reasons that drive the "price war" among express companies. Express enterprises reactivate the production capacity after the epidemic by means of price means. At the same time, with the new entrants such as Jitu and Zhongyou joining the competition, price means have become an effective means to clear the supply of the industry.

How fierce was the price competition last year? This can be seen from the National Energy Administration's recent announcement of the national urban express business volume and revenue ranking in 2020.

Statistics show that in 2020, Yiwu will achieve 9.011 billion express business, ranking first in China. But the city's express industry revenue last year was only 28.357 billion yuan, the average price of a single ticket was 3.15 yuan. Last year, the price war of express delivery industry began in Yiwu.

"After the peak of the epidemic, the rapid recovery of production capacity of express enterprises is the direct reason for the outbreak of the price war in Yiwu, and behind it is the pursuit of share by express enterprises." According to the analysis of the research team of Anxin securities transportation, in Yiwu market, the share gap of major express companies is not large, and the relatively homogeneous competition makes one company adopt the price reduction strategy, and the others have to choose to follow up in order to ensure the share.

China Express has also joined the ranks of price competition. In 2020, the company's single ticket price decreased by 20.2% compared with that in 2019, but the package volume increased by 40.3% year-on-year.

Financial data also further shows the gains and losses of China express in the past year.

Due to the decline in single ticket prices, the company's profits were affected to a certain extent last year. Its net profit decreased from 5.671 billion yuan in 2019 to 4.326 billion yuan in 2020. The net profit margin was 17.2%, 8.5 percentage points lower than that in 2019.

Despite the loss of net profit, Zhongtong Express has made some achievements in cost control in 2020.

Financial data show that the company's operating costs last year was 19.377 billion yuan, an increase of 25.1% year-on-year. Among them, the single ticket sorting cost is 0.31 yuan, which is 9.4% lower than that in 2019; the single ticket trunk transportation cost is 0.51 yuan, which is 17% lower than that in 2019. However, it is worth noting that in the past year, China Express's labor cost has increased by 760 million yuan.

"The increase in wages and the relatively slow increase in the number of employees relative to the volume of business led to an increase in labor costs." Zhongtong explains why, and the deeper reason is that the company has increased capital expenditure and expanded production capacity in the past year.

"Capital expenditure increased by 76.2% year-on-year, reaching a record 9.2 billion yuan." Yan Huiping said that China Express's current capital investment strategy has been extended to a wider range of infrastructure construction.

Some analysts told the 21st century economic reporter that the capital expenditure of express enterprises has gradually increased in recent years, and the major goal is to greatly increase the production capacity.

According to the capital investment direction previously disclosed by Zhongtong express, the construction of distribution center is the main investment direction. This is also the main reason for the rapid increase of operation cost of Zhongtong express sorting center last year. With the expansion of the sorting center, the depreciation cost of automatic sorting equipment has also increased. In 2020, this cost has increased by 274 million yuan compared with that in 2019.

For each express company, with the continuous increase of capital expenditure, the competition of financing ability will become an important competition.

According to the financial data, by the end of 2020, the cash balance of Zhongtong express reached 14.36 billion yuan, an increase of 172.12% year-on-year.

The competition is intensifying

"Express enterprises may maintain the strategy of" light profit, heavy share "in the short term The above-mentioned analysts told the 21st century economic reporter that, in the case of the industry price competition has not yet ushered in an inflection point, to continue to expand market share has become the first choice of leading companies.

This year, China Express has set the forecast range of its annual package volume from 22.95 billion to 23.8 billion, an increase of 35% to 40% over last year's forecast, maintaining a level above the average growth rate of the industry.

In January this year, the state post office had predicted the volume of postal (express) business in 2021. Data shows that throughout the year, the volume of postal (express) business across the country is expected to complete 121.9 billion pieces, with a year-on-year increase of about 12%. Among them, the business volume of express delivery industry completed 95.5 billion pieces, with a year-on-year growth of about 15%.

Based on this calculation, Zhongtong express hopes that its market share this year will reach 24% to 24.9%.

Under the priority of share strategy, the competition for the leader of domestic express industry is entering into the oligarchy competition.

In 2020, due to the impact of the epidemic situation, the competition pattern of domestic express industry has changed.

First of all, the growth rate of internal business volume of leading enterprises is differentiated.

Last year, due to the operational advantages of direct marketing network, SF quickly seized the market share of e-commerce products such as time sensitive express delivery and ex gratia transfer. According to the financial report, the company completed 8.137 billion pieces of business last year, a year-on-year increase of 68.5%, far exceeding the industry level. Among them, the annual business volume growth rate of economic products with preferential transfer as the main factor reached 155.86%, boosting the company's overall market share to 9.76%, an increase of 2.16 percentage points compared with that in 2019.

Shunfeng's strength has exerted pressure on Tongda express enterprises. At the same time, the growth rate of internal business volume of Tongda express enterprises also began to show a gap.

According to the public data, Zhongtong express and Yunda shares maintained a business volume growth rate of more than 40% last year, but Shentong express and Baishi group's business volume growth rate was less than 20%, lower than the industry level.

In terms of express business revenue, Zhongtong express and Yuantong Express respectively achieved 14% and 6% growth, but lower than the industry level. However, the revenue of Yunda, Shentong express and Baishi group decreased to varying degrees last year.

"Tongda express delivery service products are homogenized as a whole, and the customers are highly price sensitive. In the case that the market share is not fully opened, leading enterprises are difficult to ease the competition by raising prices." The research team of Anxin securities transportation expects that the short-term industry price competition will remain, and the fierce market competition is expected to accelerate the industry liquidation.

It is worth noting that the internal and external factors from e-commerce will also bring new variables to the industry competition.

With the rise of pinduoduo, the e-commerce customer choice of express enterprises is no longer single. On March 17, pinduoduo released the fourth quarter and annual financial report of 2020, with 788.4 million active sellers throughout the year, surpassing the 779 million of Taobao tmall, becoming the largest e-commerce platform for users in China. This also means that express enterprises are expected to get rid of the excessive dependence on a single platform. The diversity of the platform makes express enterprises enter a new round of user competition.

In addition, in the past year, with the help of its rookies, Ali has increased its investment in Tongda express enterprises and strengthened its penetration.

On March 16, Zhongtong express completed the change of the board of directors, and Liu Zheng, CFO of rookie network, joined the board of directors of China Express. Up to now, in addition to Yunda shares, the board of directors of other Tongda express companies have Ali's shadow.

Some analysts say that rookies may promote the integration of express delivery industry in the future. "Considering that there are many express logistics enterprises in which it shares shares, which are distributed upstream and downstream of the industry, and there are great differences in the endowment and operating conditions of each enterprise, we do not rule out that rookies can realize the strong combination of express logistics enterprises and enhance their comprehensive competitiveness by means of integration." Anson securities transportation research team said.

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