Finance Association, July 17 (Reporter Hu Haoqiong) “The volume of our deliveries since this year has increased by about 30% compared to last year.” Wang Zengfeng, head of the Shanghai Songjiang New Town Company of Shentong Express (002468.SZ), told the Financial Federation reporter that with the increase in service timeliness, more customers are willing to choose Shentong, which has led to an increase in the number of items.

A reporter from the Financial Services Association recently visited Shentong Express Shanghai Songjiang Xincheng Company and saw that there were still quite a few packages entering Hong Kong at around 14:00 on the same day. Each package was sorted into the package through automated network equipment. After automated sorting, several couriers organized the express delivery by region. Wang Zengfeng's branch was the first to use automation equipment among all his peers in the Songjiang area.

In fact, in recent years, Shentong's headquarters has invested a large amount of money in the construction of transit centers and carried out continuous equipment updates, driving improvements in service quality and logistics efficiency at all outlets. The average daily production capacity has changed from 20 to 30 million to 75 million orders.

Wang Qiugui, manager of the Shanghai Transit Center of Shentong Express, revealed that the volume of shipments at the Shanghai Transit Center has increased markedly since the year. The increase in inbound and outbound shipments is higher and steady. Compared with last year, the average daily volume of shipments increased by 40% in the first half of this year. According to the performance forecast announced by Shentong Express on July 12, the company expects to achieve net profit of 0.375 billion yuan to 0.475 billion yuan in the first half of this year, an increase of 71.78% to 117.59% over the previous year.

“Now the headquarters runs with outlets”

“As an 'old Shentong person' who has been working with Shentong for 20 years, I can clearly appreciate the changes in Shentong Express headquarters in the past three years.” Wang Zengfeng said that the automation equipment at its outlets was decided to invest in when it saw changes in the Shentong Express headquarters the year before, especially when the headquarters optimized production capacity projects.

“We have paid for our money in two years. After investing in automated equipment, we can save 0.03 million-0.04 million yuan in monthly labor costs without reducing courier delivery fees. Secondly, the lost shipment rate has also been reduced, which will also save costs.” Wang Zengfeng further explained that the current loss rate of express shipments at its outlets is over 60% lower than before automation equipment was invested, and compensation expenses for lost items can be reduced by about 0.01 million yuan.

“It turns out that the branch is driving the headquarters. The network has grown in size and is driving the restructuring of the headquarters. Now the headquarters is running with outlets, and the outlets will definitely have to keep up with the pace. The relationship between the two parties has changed from a complete relationship between Party A and Party B to the headquarters serving the network.” Wang Zengfeng said.

Wang Wenbin, president of Shentong Express, said in an interview with a reporter from the Financial Federation that starting in 2020, the company will “revive” Shentong, and that the company will invest a lot of money in the construction of a transit center. On the basis of optimism about Shentong's prospects, while investing in the headquarters, outlets will also be willing to invest simultaneously, and he believes they can quickly pay back on costs and make more money in the future. At the same time, in the past two years, the company's policy on outlets was relaxed compared to other peers, which also allowed outlets to “rest and live.”

According to the Financial Services Association reporter, the second phase of the Shentong Express Shanghai Transit Center project was launched in 2021 and delivered on June 19, 2023. Since then, the Shanghai Transit Center has continued to update equipment to improve production capacity and operational efficiency, increasing operating efficiency by an average of 40% per day in the first half of this year. In addition, Shentong Express's transit centers in Hefei, Anhui, and Changsha, Hunan were also officially put into use in the first half of this year.

The increase in production capacity at the headquarters will drive the efficiency of logistics throughout the network. Especially in the context of e-commerce promotion, when the volume of items is clearly increasing, if the efficiency of outlets is improving by increasing supporting resources such as manpower and vehicles, and the transit center is unable to “catch” this volume, it will slow down the efficiency of all aspects. Against the backdrop of a sharp increase in the production capacity of transit centers, within this year, the normal throughput capacity of Shentong Express's entire network will exceed 75 million orders per day, compared to only 230 million orders a few years ago.

The “price war” has taken a regional shape

At the beginning of this month, monitoring data from the State Post Office showed that as of June 30, China's express delivery business had reached 80 billion units this year, 59 days ahead of 2023. Since this year, China's express delivery market has continued to develop rapidly, with an average monthly business volume exceeding 13 billion units. In particular, since entering June, driven by favorable factors such as mid-year promotions on e-commerce platforms, the average daily express delivery business volume has exceeded 0.5 billion units, and the market size has expanded at an accelerated pace.

During the “618” period this year, the production capacity of the entire Shentong Express network reached 75 million orders per day. “With '618' this year, I feel that the express delivery industry is still growing rapidly, and e-commerce express delivery is not as quiet as I had imagined.” Wang Wenbin said.

Judging from data from Shentong Express Shanghai Songjiang Xincheng Company, during the “618” period this year, the number of items at this outlet increased 15% to 20% compared to normal, and began to fall back to normal after June 21. E-commerce changed from focusing on promotions on the same day of June 18 to a pattern of dividing and lengthening the time line, which greatly reduced the pressure on the courier side.

“However, judging from the profits of the outlets, it can be said that they are very large and the profits are very thin.” Wang Zengfeng put it bluntly.

According to financial news agency reporters from many sources, industry competition is one of the main causes of poor profits in the express delivery industry. Wang Wenbin said that if market price competition is no longer so intense in the future, the profits of outlets will also increase. “I think the current 'price war' is more dotted or regional; it is not an all-out 'price war'. At the same time, the impact of the 'price war' is relatively small. With the arrival of the traditional peak season for express delivery in September, if express delivery prices can be raised, it may have a certain effect on repairing profits.”

At the same time, in response to the production capacity issue, according to Wang Wenbin, the current increase in the company's production capacity is lower than the company's current business volume growth rate. The company is more interested in quantifying production and predicting production capacity conditions in various regions through the company's internal models to decide when to expand capacity and when to invest in new sites.

However, since this year, it is easy to see from Shentong Express's interim report that profits have increased dramatically. At the same time, the announcement also stated that in the first half of the year, the company achieved the goal of a higher business volume growth rate than the industry's growth rate, and its market share has steadily increased.

Wang Wenbin believes that in the context of falling single ticket costs, the improvement in profits has benefited from the company's improvements in timeliness and service quality in recent years. Market pricing has actually also improved, enabling the company to better generate profits. Furthermore, by controlling operating costs, the company has reduced costs and increased efficiency. At the same time, the company is also thinking about how to better balance scale, timeliness, service quality, and profit.

“Volume” service, profit margins are expected to increase

“When choosing a courier company, customers pay special attention to the complaint rate and link length. Many customers will choose multiple express delivery companies at the same time. If one of these express delivery companies has a low complaint rate for goods carried by them, the link time is fast, and the service quality is high, the customer will consider increasing cooperation with this courier company.” Wang Zengfeng said.

This also means that if express delivery companies want to further increase their market share in the express delivery industry, they need “volume” services on the basis of achieving large volumes.

In terms of service, during the opening day of Shentong Express customers in 2024, Shentong Express announced a full upgrade of service products such as the high-end customized service “First Class”, the on-demand delivery product “Shendong Dong”, the warehousing product “Huixuan Warehouse”, “Preferred Warehouse”, and “Smart Customer Service” based on multi-modality and AI.

“In fact, the value-added products we have launched, such as 'Shendongdong', are comparable to the service levels of middle and high-end express delivery companies. Customers can choose an economical model or choose this type of value-added service. Value-added services are more cost-effective than high-end express delivery companies.” Wang Zengfeng said.

In response to current market competition, Wang Wenbin believes that the “price war” is indeed one type of market behavior. If companies all choose to return to rationality, prices will be within a manageable range. “I think the current price competition for express delivery is not due to capacity issues, but rather that all companies have to seize market share. One day in the future, the growth rate of express delivery will slow down to single digits. However, it will maintain double-digit growth for at least the next 1-2 years.”

Wang Zengfeng also said that currently there is relatively little growth in the express delivery market, and customers are basically stock customers. If express delivery companies want to gain a higher market share among existing customers, only by continuously improving their services and value to customers can customers choose Shentong. The higher the market share, the lower the company's operating costs. “When we make customers subconsciously think that Isshentong is safe, our service will be valuable, and can we increase the price of a single ticket, thereby increasing profit margins.”

According to data provided by Shentong, in the first half of this year, Shentong's express delivery service exceeded 0.69 billion consumers, and the number of 10,000 single-level customers increased by 240%. Both merchant customers and consumer users have grown.