Mid-last year, after a prolonged "loss period", the instant delivery industry reached a "profit turning point". SF Same City and Dada announced their first profits, leading industry insiders to speculate that the era of profitability for instant delivery might just be beginning.
On March 11th, SF Same City once again announced good profit news, expecting to turn a loss into a profit for the fiscal year 2023, with an anticipated net profit from continuing operations of no less than about 60 million RMB. This indicates that SF Same City, having been the first to profit in the mid-year, continues its strong development momentum, becoming the first company in the industry to achieve full-year profitability, thus continuously leading the profitability trend in the instant delivery sector.
Previously, the State Council's executive meeting reviewed and passed the "Guidelines for Promoting High-Quality Development of the Instant Delivery Industry", aiming to improve the development level and driving capability of the instant delivery industry, which once again brought widespread attention to instant delivery. Meanwhile, the instant delivery industry is experiencing rapid growth, with iResearch predicting that by 2026, the volume of instant delivery service orders will approach a hundred billion, reaching 95.78 billion orders.
The emergence of overlapping demand with policy support, along with trends such as consumer upgrades and diversified consumption scenarios, signifies that the "second half" of high-quality development for instant delivery is underway. Represented by SF Express Local, a group of instant delivery enterprises continues to focus on personalized new consumer demands, providing meticulous services covering all scenarios to accelerate the high-quality transformation of instant delivery. Simultaneously, this contributes to the robust development of their own business.
Looking ahead, SF Express Local's business model takes the lead in industry profitability
As the new round of financial reporting season approaches, SF Express Local has already released its profit forecast for the full year 2023 ahead of its peers, likely boosting industry confidence. The announcement attributes its growth to stable revenue increase, higher order density, and the enhanced economies of scale in its network. The company's business strategy for high-quality development has proven effective, optimizing its business and customer structure. The application of technology and lean management has also facilitated operational improvement, resulting in increased efficiency of resource input and output. The gross profit margin and expense ratio are maintained at favorable levels, significantly enhancing profitability.
Currently, the upgrade and transformation of instant logistics exhibit a trend towards full-platform, all-scenario integration. This highlights SF Express Local's advantage in third-party instant delivery, as it has been focusing on building businesses in four major new consumer core scenarios since its inception: local dining, local retail, nearby e-commerce, and nearby services. This allows the company to adapt more quickly to market transformation, seize orders in various categories, and achieve scalable high-speed growth – a key factor in being the industry's first to achieve annual profitability.
Breaking down the business model, SF Same-City has adopted a comprehensive business model that deeply cultivates both B2B merchants and B2C consumers in the instant delivery sector.
Under the overarching principle where commerce drives logistics, and logistics in turn feeds back into commerce, upstream commerce is undergoing a restructuring. Merchants of various sizes are exhibiting a strong demand for same-city delivery across multiple categories and channels. Industry insiders have noted that as we enter a new phase, both merchants and platforms entering the local life sector require a more integrated logistics solution that covers the sales chain, supply chain, and logistics chain, allowing for seamless logistics operations at the click of a button.
Consequently, platforms that focus on a single scenario are seeing their competitive edge significantly weakened within the industry, making independent third parties like SF Same-City more sustainable in their development. As a neutral and open platform, SF Same-City is not bound by any specific commerce flow. It flexibly crafts high-quality, customized solutions for different scenarios and channels, taking on a diverse array of massive orders with its industry-leading service capabilities.
From a macro perspective, against the backdrop of anti-monopoly regulations, the decentralization of traffic and the decoupling of platforms, commerce, and logistics are becoming inevitable trends, further accelerating SF Same-City's market penetration.
Reportedly, SF Same-City has developed higher quality, full-chain instant delivery solutions for a wide range of merchants across various scenarios, including food and beverage, fruits and vegetables, groceries and convenience stores, cakes and flowers, medical supplies, 3C digital products, clothing, and auto parts. At the same time, it continues to deepen its collaborative partnerships with major platforms like Douyin, WeChat, and Alibaba.
In the realm of personal consumer services, SF Same-City Express has continuously penetrated the market, leveraging the vast experience of SF to create a differentiated edge. For instance, with a focus on personalized services, SF Same-City Express introduced the "Careful Delivery" option, offering insured products with full tracking, and full, swift claims settlements. This professional, detailed, and heartfelt instant delivery service has propelled SF Same-City Express to high growth in both B2B and B2C sectors. In the first half of 2023, SF Same-City Express achieved a revenue of approximately 2.419 billion CNY from its B2B same-city delivery services, accounting for nearly 42% of its total revenue. The revenue from consumer-oriented same-city delivery services reached 969 million CNY, marking a 25.4% year-on-year increase.
Furthermore, SF Same-City Express has also developed a "Last Mile" service aimed at integrating and accelerating traditional courier services, further extending its service scenarios. According to the financial report for the first half of 2023, the revenue from SF Same-City Express's Last Mile delivery services saw a year-on-year increase of 53.8% to 2.361 billion CNY, with a continuous increase in customer size, capturing peak business scenarios, and consistently generating incremental value.
In summary, by leveraging its flexible positioning as an independent third party, SF Same City has adapted to the current industry trend of diversified traffic and high-quality service development. It has taken the lead in meeting the diversified demands of complex scenarios, empowering the entire industry to upgrade and transform while achieving high-quality development itself. This approach has also provided a "paradigm" for the profit-making of the instant delivery industry.
Showing active performance and digging into "non-food" high-value orders to build a solid profit model
A company's entry into profitability is generally boosted by multiple factors such as market demand, order size, business performance, and cost control. However, at its core, it is the continuous upgrading and optimization of the company's business structure that can precisely target market growth demands and capture high-quality growth opportunities. SF Same City's profit model has verified this point. In the past one or two years, it has deeply focused on non-food immediate delivery scenario demands, seizing a massive and stable flow of high-value orders, laying a good foundation for profitability.
With the deepening trend of "everything to your home," non-food and non-standard delivery scenarios continue to expand. Compared to traditional food delivery, non-food and non-standard delivery scenarios can bring higher average order value and added value to immediate delivery companies. With the same operation and fulfillment delivery costs, the proportion of costs decreases, naturally strengthening profitability. Non-food categories come with more high-value, high-demand, and high-standard delivery services needs, and SF Same City's all-category, refined non-standard delivery capabilities are more adaptable than those of its peers.
Furthermore, the continuous optimization of non-standard service capabilities has allowed SF Same City to "smoothly" deepen cooperation within the ecosystems of major platforms like Douyin (TikTok) and Alibaba. It delves into the entire process of sales chains and supply chains to build one-stop solutions, continuously exploring diversified orders. For example, to further deepen service empowerment within the Douyin ecosystem, SF Same City opened the "SF Same City Life" account to create a new form of "live-streaming with goods delivery + instant delivery." This approach constructs a full-link closed loop of traffic and delivery, broadening the sales channels for platform merchants while bringing additional volume to its own business.
Financial reports indicate that non-dining scenarios have gradually become a strong pillar for the profit growth of SF Same City. In the first half of 2023, its revenue from non-dining services accounted for over 60%, with income from tea beverages increasing by 80% year-over-year. Additionally, revenue from retail categories such as pharmaceuticals, beauty products, maternity and baby products, pet supplies, and jewelry saw a year-over-year increase of over 100%.
Expanding business beyond the dining scene highlights its value in effectively utilizing the logistics network to achieve diversified and profitable business coupling within a well-defined business district. Generally, the traffic within a business district is led by a group of prominent merchants, covering various categories such as chain supermarkets, dining establishments, clothing stores, and beauty shops. Shunfeng Same City strategically enters the economic loop of business districts through collaboration with these key top-tier customers, handling high-value orders while also extending its reach to include more mid-level key account customers, thereby expanding user base and revenue.
As the scale grows, the need for "cost reduction and efficiency improvement" becomes more apparent, considering the increasing number of managed scenarios. On one hand, the efficiency of delivery personnel is crucial for controlling costs in the logistics industry. It is widely recognized that, when it comes to food delivery, it generally covers only five distinct peak periods, ranging from breakfast to late-night snacks. The expansion of non-dining orders allows for a distribution of orders throughout the day, enabling the rational utilization of courier time, not only boosting their income but also further optimizing business efficiency and courier effectiveness, triggering economies of scale.
On the other hand, SF Express is continuously strengthening its technological innovation capabilities and implementing refined management to reduce costs and overcome scale bottlenecks. Through the integration of multiple scenarios, diverse business models, and the comprehensive delivery ecosystem of drones, four-wheel vehicles, and couriers, supported by the in-house developed CLS intelligent real-time logistics dispatch system, SF Express transforms its scale advantage into a cost advantage. In terms of cost, efficiency, and customer experience within effective business districts, SF Express is rapidly catching up with larger competitors.
Looking at the outlook, the continuous improvement of operational capabilities is expected to sustain profitability.
Overall, the full-scene matrix forms a solid foundation for SF Express, and its unique third-party positioning allows it to maximize market orders, maintaining a significant lead over competitors in sustained high growth. The stable service quality is gradually increasing customer loyalty. Through the operation of multiple scenarios and diverse business models in recent years, coupled with the iterative development of the intelligent dispatch system, its scale effect has been fully activated, bringing about structured increments and entering a comprehensive profit trajectory.
In addition, the instant delivery market in which SF Express operates is currently experiencing positive growth. Policy support, the enhancement of digitalization and fulfillment technology capabilities, and the increase in the value of instant retail models are contributing to continuous growth. With the upgrade of new consumption scenarios and the trend towards high-quality transformation in instant delivery, there will be even greater business growth opportunities.
Recently, SF Express has also expressed confidence in its business performance. Earlier, the company initiated a share repurchase of nearly a billion Hong Kong dollars, showcasing a robust financial foundation with ample cash flow. The advance announcement of achieving annual profitability indicates that SF Express has officially entered a profitable positive cycle, leading the race in achieving a qualitative change in profitability, and its potential in the second half of the race should be even greater.
