The pattern of domestic express delivery has changed, and the reshuffle of the industry has begun to accelerate! On October 29, the domestic express delivery company J&T Jitu Express (“Jitutu”) and Best Group jointly announced a strategic cooperation intention. Jitu Express will acquire Best Group China Express for approximately RMB 6.8 billion (US$1.1 billion). business.At present, the two parties are steadily advancing matters related to the transfer. The Best Group stated that the sale does not include any other businesses of Best, namely supply chain management, freight, cargo and global.
Zhuo Yong Securities Times
It is understood that since Extreme Rabbit Express officially entered China in March 2020, it began to quickly occupy the domestic market. Up to now, the daily order volume of Polar Rabbit is between 20 and 22 million. According to Best Group’s financial report for the second quarter of this year, its express delivery business has a daily order volume of approximately 25 million. Insiders predict that the combined daily orders will be more than 45 million, accounting for 14% of the market share.
More importantly, if the acquisition is successfully completed, the pattern of “four links and one delivery + SF Express” that has been maintained for many years in the express delivery industry will be broken and become a new pattern of “three links, one delivery, one rabbit + SF Express”. Some analysts pointed out that with the reshaping of the domestic express delivery pattern, China’s express delivery price war will also usher in an “inflection point.”
The aggressive rabbit and the exhausted hundred generations
Regarding this acquisition, Fan Suzhou, Executive President of Jitu Express, said: “Best Express has accumulated many years of industry experience, has a good infrastructure and excellent franchisee network resources. The complementary advantages of this acquisition can optimize the end of the two parties in the Chinese market. Network layout, promote the refined operation of the network, provide customers with better services, and promote the healthy growth of the industry.”
Zhou Shaoning, Founder, Chairman and CEO of Best Group, said: “This strategic cooperation is to better adapt to the new development pattern and implement the long-term strategic plan of the group. Best will concentrate its energy and resources to further promote the supply chain, express transportation, and international business. The in-depth integration of the company will speed up business development and create an international integrated smart supply chain service.”
It is understood that the transaction between Jitu and Best is expected to be completed in the first half of 2022, and Best will receive a cash of US$600 million in the near future. After the transaction is completed, Zhou Shaoning, the founder of Best Group, will withdraw from the board of directors of Best Express China. In addition, this transaction does not involve Best Group’s express and overseas express services.
Who is the Extreme Rabbit? Jitu Express was established in Indonesia in 2015, the founder is the originalOPPOLi Jie, the head of Indonesia, obtained a domestic express license through the acquisition of China Longbang Express in 2019. In March 2020, Jitu officially entered the Chinese market and quickly occupied the domestic market share with a price war. In just over a year, Jitu has 80 transshipment centers, 1,200+ free trunk vehicles, and 22,000+ outlets in China, with daily orders ranging from 20 to 22 million.
But the acquiree Best Group has shown signs of exhaustion. The stock price of Best Group, which has been listed on the US stock market, has been sluggish in recent years. Its market value has fallen from US$4.33 billion at the time of the IPO to the current US$820 million (as of the close of October 28). According to its financial report, Best Group’s annual operating income in 2020 will be 30 billion yuan, a year-on-year decrease of 7.3%. The net loss for the year was 2.051 billion yuan, and the gross profit dropped 85.5% to 238 million yuan. In the first half of 2021, Best Group has a half-year revenue of 13.871 billion yuan and a net loss of 1.085 billion yuan.
In the first half of this year, the total volume of express delivery services nationwide was 49.39 billion, a year-on-year increase of 45.8%. The growth rate of Best Express’ business volume is obviously lagging behind the industry, and its market share in the first half of the year further dropped to 8.2%.
In fact, since 2017, there have been rumors in the market that Best Group will sell its express delivery business. “The industry has also been circulating this year that Jitu will acquire Best, and this time it finally landed.” The person in charge of a certain express company told reporters.
The industry pattern has changed, and the price war may meet the “turning point”
In recent years, under the background of increasingly fierce competition in the domestic express market, Best Express has been at a disadvantage, and the price war strategy of Extreme Rabbit has intensified the competition in the industry. Although Best Group is at a disadvantage in the competition, its official website shows that Best Express currently has more than 55,000 outlets across the country, reaching 100% coverage in provinces and cities, and 100% in districts and counties. According to the “2019 Corporate Social Responsibility Report” released by Best Group, nearly 700,000 people participate in Best’s daily business operations. In addition, according to its second-quarter financial report, its express delivery business has a daily order volume of approximately 25 million.
According to Jitu’s official website, it currently has “nearly 350,000 service personnel” worldwide. Therefore, after the merger of Jitu and Best, the two companies and their franchisees will employ around 1 million employees in mainland China. Insiders predict that the combined daily orders will be more than 45 million, accounting for 14% of the market share.
Judging from the current market shares of major express companies, according to iiMedia data, in January 2021, the market shares of SF Holdings, Yunda, YTO, Shentong, Best and Jitu were 10.64%, 16.33%, 14.94%, 9.93%, 10.2%, 8%. After the completion of the acquisition, the two will merge to become another express “Big Mac” after Yunda, YTO and SF Express. In other words, the domestic express industry’s “four links, one delivery + SF Express” pattern that has been maintained for many years will be broken and become a new pattern of “three links, one delivery, one rabbit + SF Express”.
In fact, although there have been several waves of price wars in the domestic express delivery industry, almost everyone in the industry believes that this round of price wars is different from every previous round. Some senior express delivery personnel believe that the Tongda system is still the Tongda system for price wars in the past, but this time there are new players entering the market, and they will definitely fight until someone withdraws. The acquisition of Best confirms this prediction in the industry.
Some analysts believe that China’s express delivery price war has ushered in an “inflection point.” Through integration and reorganization, Jitu’s network processing capabilities will be strengthened, which is expected to enhance its market competitiveness and reduce disorderly competition in the industry. After Best transfers its domestic express delivery business to Jitu, it can better focus on the development of express, supply chain, and international businesses, and transform its international supply chain platform.
However, Jitu and Best are both franchised express delivery companies. After the reorganization, whether they can protect the rights of franchisees and maintain the stability of their outlets is also a common problem faced by both parties.