原创首发 | 金角财经（ID: F-Jinjiao)
作者 | Chong Lei, CFA
Ten years after its establishment, Flash finally survived to go public.
Recently, Flash sent submitted a prospectus to be listed on the NASDAQ, with China International Capital Corporation, CLSA, Deutsche Bank and UBS Investment Bank as underwriters.
Founded in 2014, in order to avoid competition with domestic and foreign express delivery giants, it chose to provide individual and corporate customers with "one-to-one special delivery service", that is, from the sender's hand to the delivery of the item to the recipient's hand, the whole process is only responsible for one flash delivery person, and a flash delivery person can only take one order at a time.
It can be said that Flash is the first Internet company in China that really "helps errands".
However, in the following 10 years, the "errand" track has become increasingly red. In June 2020, Dada Group was listed in United States and snatched the "first share of instant retail"; At the end of 2021, SF was listed in Hong Kong, known as the "first stock of third-party instant delivery". In the past year, companies such as Lala, Didi, AutoNavi, Haro, and Dongfang Selection have announced the launch of instant delivery services.
Flash delivery can be described as "getting up early in the morning and catching up with a late set", not only losing the opportunity to become the "first stock" in the industry, but also the valuation has shrunk significantly, and now the listing is more like a last resort.
The IPO journey is destined to be full of ups and downs.
Valuations plummeted by 4 percent
In the early days of its establishment, the main scene of flash delivery was "Jianghu emergency", such as forgetting the key, sending business documents urgently, etc., because it was faster and safer, the cost that users need to pay is higher than that of ordinary express delivery.
Subsequently, on the basis of "one-to-one urgent delivery" for individual users, Flash Delivery gradually expanded its business scope, such as providing expedited delivery services for customers of local restaurants, flower shops, and bakeries; Delivering legal documents to clients such as real estate agencies and law firms; Deliver valuable electronics to consumers, etc.
As of June 30, 2024, Flash Express has about 2.7 million registered riders, and its service coverage has been expanded to 295 cities in China.
The rapid growth of market share in the subdivision once made flash delivery sought after by capital.
In the past 10 years since its establishment, Flash has raised a total of 11 rounds. In the first year of entrepreneurship, it completed the angel round and A round of financing, and the investors came from Jingwei China and CDH Investment. In 2017, it even raised money 4 times a year.
But in 2018, the capital winter arrived, and the speed of flash financing also slowed down. Its last round of funding was $125 million, when it closed in March 2021 in Series D++.
At the same time, the valuation level of flash delivery is also on a rollercoaster ride. In 2021, when Flash successfully completed the $125 million D2 round of financing, the company's valuation reached $2 billion, or about RMB 12.903 billion.
However, from 2022 onwards, the valuation of flash delivery has begun to decline. According to the Hurun Global Unicorn List, the valuation of flash delivery in 2022 will be about 10 billion yuan; In 2023, the valuation will decline by 31% year-on-year to 6.9 billion yuan; In 2024, the valuation of Flash Delivery will recover slightly, reaching 7.1 billion yuan, but it will still plummet by nearly 45% compared to the level of more than 10 billion yuan in 2021.
For the valuation collapse, the market analysis mainly reflects the intensification of competition in the industry and the weakening of investment attractiveness.
Some investors believe that "the entry of a number of large platform companies has quickly transformed the market that was originally regarded as a blue ocean into a red ocean of fierce competition." This competitive environment has led to the saturation of market delivery services, weakening the first-mover advantage of flash delivery. ”
In 2022, Xue Peng, founder and CEO of FlashDelivery, pointed out that there are two modes in the city's instant logistics service: one is the B2C model and the other is the C2C model.
The former mainly serves catering merchants, which is based on short-distance distribution in the business district, and the number of merchants in the business district, the time of issuance, and the number of orders can be predicted in advance and match the capacity in the business district, so the service model is easy to build.
However, this leads to a low competitive advantage, as long as there is a certain subsidy on the merchant side and a certain amount of capacity, it can be started, so in this field, the competition is also the most fierce, and new entrants are basically in this field.
He believes that, in contrast, C2C is a person-to-person city-wide instant distribution model, once this model forms a scale, it will form a strong competitive advantage, the entry threshold is relatively high, and it is difficult for late entrants to survive;
Flash delivery focuses on the C2C model with scale advantages, technical advantages and brand advantages, due to the earlier layout, flash delivery took a longer time to build a brand, with nearly 3 million delivery staff, covering more than 290 cities, and continuous iteration on the system, which has become the "differentiation" of flash delivery in the track.
However, the first-mover advantage of "having nearly 3 million delivery personnel covering more than 290 cities" is being eroded.
According to public information, in 2023, there will be 1.2 million active riders on the Dada Group platform, covering 2,700+ cities and counties across the country; The number of active riders in SF Express is about 950,000, covering 2,000+ cities and counties across the country. Meituan and Ele.me have 7.45 million and 3 million active riders respectively, covering 2,000+ cities and counties.
The barriers established in the early stage are slowly disappearing, which is the key reason why Flash has been treated coldly by capital in recent years.
Riders take 9% of the income
In addition to causing valuations to plummet, the increasingly tough competitive environment has also put Flash's performance to the test.
From 2021 to 2023, the revenue of flash delivery will be 3.04 billion yuan, 4.003 billion yuan and 4.529 billion yuan respectively, and 2.285 billion yuan in the first half of 2024. However, the growth rate is declining, with revenue growth exceeding 30% in 2022 and only slightly more than 10% in 2023, and as low as 7.6% in the first half of this year.
At the same time, revenue per order is also declining. From 2021 to 2023, the order volume of flash delivery will be 158.6 million, 213.4 million, and 270.7 million. In the first half of this year, 138.1 million orders were completed. Based on this calculation, in the past three years and the first half of this year, the revenue of a single order was 19.2 yuan, 18.8 yuan, 16.7 yuan and 16.5 yuan respectively.
Jiang Han, a senior researcher at Pangu Think Tank, said that the main reason is the improvement of users' sensitivity to "price", "At present, the market demand is diverse, and the demand for instant delivery services has gradually expanded from urgent documents and small items to daily commodity delivery, so there are many similar services in the market, such as Dada, SF City, and UU errands."
"In many cases, users may not have high requirements for 'one-to-one' express delivery services for items such as flowers, delicacies, and fresh retail, and then choose cost-effective services instead of simply pursuing speed."
In terms of profits, although Flash has just turned a profit, its sustainability remains to be seen. From 2021 to 2022, Flash will lose 291 million yuan and 180 million yuan respectively, and in 2023, the net profit will turn positive to 110 million yuan, and 120 million yuan in the first half of this year.
The reason why it remains to be seen is that on the one hand, behind the positive profits, government subsidies account for a relatively heavy weight.
The prospectus pointed out that the profitability in 2023 was mainly due to the increase in government subsidies determined by the relevant government departments at their discretion. According to the financial report, in 2023, the other income of Flash will be 74 million yuan, compared with the operating profit of 11 million yuan, and other income is close to 7 times of the operating profit.
On the other hand, the business model of flash delivery determines that the gross profit margin will not be high. From 2021 to 2023, the gross profit margin of flash delivery will be 6.2%, 6.5% and 8.7% respectively; In the first half of this year, it was 11.3%.
It seems to be improving year by year, but in fact, it is hovering around 10%, which is really hard money.
According to the prospectus, all of Flash's revenue comes from the fees charged for providing on-demand delivery services to customers. Flash offers a flat pricing model, with a floating rate per order calculated based on formulas such as city, delivery distance, package weight and volume, and night-time surcharges. In the event of a shortage of supply due to inclement weather or other reasons, a "peak price" may apply.
The distribution network of Flash Delivery mainly recruits riders through the crowdsourcing model, most of them are crowdsourcing individuals, and a small number are recruited from outsourcing distribution agencies in a few cities, and the riders become Flash Riders after back adjustment and training. The prospectus points out that with high-value services and crowdsourcing models, it is possible to maintain an asset-light business model, reduce fixed costs and maintain high scalability, and can quickly enter more cities.
The biggest advantage of the asset-light model mentioned above is that it does not require large capital investment in the early stage, and the fixed cost is not large; However, the flip side of this is that the floating cost is too high, resulting in the scale effect having little effect on the gross profit margin even if the scale is expanded.
In the past three years, the floating costs of compensation and incentives paid to Flash Riders accounted for 90.5%, 90.3% and 87.8% of total revenue, respectively, and 85.4% in the first half of this year. According to Flash, the relationship between the rider and Flashsend is not an employment relationship, but a crowdsourcing form.
According to some practitioners, the fulfillment cost of crowdsourcing riders is lower than that of hiring full-time riders, but they are often not loyal, and they often receive orders from multiple platforms at the same time, and the personnel turnover is large. In order to ensure sufficient capacity, flash delivery needs to be competitively paid, otherwise the rider will move elsewhere. According to iResearch, the revenue per order of flash delivery riders is higher than the average income of other riders in China's on-demand delivery service market.
This means that it is extremely difficult to reduce the floating cost of flash delivery accounting for nearly 9% of revenue in a short period of time, even if the gross profit margin increases year by year, it is actually very close to the ceiling.
The low gross profit margin of about 10% also makes the sustainability of Flash's turnaround further doubtful, because the "safety cushion" is too thin, as long as the price is slightly lowered in a highly competitive environment, or the cost of the passive business model rises, FlashSend will immediately turn into a loss.
The story of the future is not easy to tell
From the point of view of timeliness, the business carried out by flash delivery belongs to the instant distribution category in the logistics industry, which is close to the popular sense of "errands", and is becoming increasingly red-sea.
On the one hand, this one is constantly being cut in by new players. In 2023 alone, companies such as Lala, Didi, AutoNavi, Haro, and Dongfang Selection will announce the launch of instant delivery services.
On the other hand, the original core players have strengthened the integration of resources and sought more stable increments. For example, in May, JD.com integrated hourly delivery and home delivery services, and upgraded the original instant retail business to "JD Second Delivery", promising the fastest delivery in 9 minutes; In July, Cainiao announced that it would upgrade its intra-city express delivery service, provide half-day delivery service, and reduce the price of the first weight to 6 yuan, and the price of the additional weight is only 1 yuan/kg, which is equivalent to a 5% discount on the original price.
In order to alleviate the capital market's concerns about the red sea of the track, Flash has added two words of "independent" and "special line" to its own subdivision, called "independent on-demand special line express market", and emphasized in the prospectus that the market share of the subdivision is 33.9%, ranking first.
The so-called "special line" means that flash delivery will deliver each package to a special delivery person, who is responsible for the fulfillment process from beginning to end, and no longer merges orders, which is more timely and secure than traditional intra-city express delivery; "Independent" means that Flash Delivery is an independent service provider that allocates resources according to market demand, rather than an "exclusive dedicated line express service provider" that relies on the needs of the associated e-commerce platform.
But the problem is that the more definite words, the smaller the pie.
According to a research report by the Mob Research Institute in 2022, among the instant delivery services, the takeaway delivery business is the most important scenario, showing a dual-leading competition situation between Meituan delivery and Hummingbird. The main "one-to-one" distribution of flash delivery accounts for a small market size.
According to CICC's "Instant Delivery: Blue Ocean Market Empowered by the Digital Economy", among the application scenarios of instant delivery, food and beverage takeaway orders account for 70%, fresh home delivery accounts for 12%, supermarket convenience accounts for 10%, flowers and cakes account for 5%, and C2C delivery ("one-to-one" delivery) accounts for only 3%.
This means that in order to tell an attractive growth story to the capital market, Flash must slowly remove the qualifier and expand the scope of business.
Flash delivery does do this, such as in December 2022, among the cooperative institutions officially announced by Douyin Takeaway, flash delivery is included. However, in these areas, flash delivery does not have a clear advantage. Du Shangbiao, vice president of flash delivery, once admitted frankly that flash delivery also has B2C business, but in the fields of catering takeaway, supermarket distribution, etc., "competition is not as good as others".
One of the reasons for the lack of advantage is the weakening of service differentiation. In the past, flash delivery shouted the slogan of "1 minute response, 10 minutes door-to-door, 60 minutes delivery", which became the reason why many users chose to use it.
But now, such slogans have become not only the standard for opponents, but even more "volume". For example, the former JD Hour Delivery, renamed "JD Second Delivery" in May this year, and its delivery is known as "the fastest 9 minutes to hand", which is based on the integration of JD Hour and JD Daojia services to achieve rapid response.
Another reason why there is no advantage is that the price is on the expensive side. Under the price war in the industry, the service advantage is slowly weakening, and the cost performance problem begins to emerge.
Previously, SF City's executives mentioned that prices are expected to fall this year, and prices are its core competitiveness. Some people in the industry said that the price war in the errand industry is more significant this year than in previous years, "the average price of 16.5 yuan per order mentioned in the flash delivery prospectus is already a high value in the industry, but for example, Didi, who has developed the errand business, has a price war of less than 10 yuan, which is to lose money and change the market."
So, Flash Delivery, which has just turned losses into profits, is still determined to fight a price war at the critical node of the upcoming listing? Looking forward to the stock price performance after listing, I am afraid it is difficult to be optimistic.
Resources:
Finance Associated Press "Flash Launches PDIE 2.7 Million Registered Riders to Support an IPO"
The surging "Flash Delivery Plans to Go Public in the United States: Last Year's Revenue of 4.5 Billion Yuan Has Turned Around, and the Average Income of a Single Order Has Dropped to Less Than 17 Yuan"
Blue Whale Finance "A single income of 16 yuan, 2.7 million riders send flash to the market"
Sina Finance "Flash Delivery Plans to IPO in the United States: Single Customer Price Declines Year after Year, Unicorn Valuation "Halved"
Leopard Change "2.7 Million Riders, Can't Tell the Story of Flash Delivery"