ZTO Express Chairman Says Economies of Scale Are Key to Its Competitiveness
Yicai Global
/SOURCE : yicai

(Yicai Global) Dec. 11 -- Economies of scale are crucial to making ZTO Express more efficient and competitive, enabling the brand to stand out in the cut-throat express delivery sector, according to its chairman.

"ZTO has the most venues, the most vehicles, the best cash reserves, the largest business scale as well as the most stable network and team in the industry," Lai Meisong said at an investor event last week. As a result, its shipping costs fell over 30 percent to CNY0.58 (8 US cents) an order at the end of the third quarter from CNY0.83 in 2016.

The Shanghai-based courier set a new world record in November when it became the first express delivery company to handle 10 billion parcels in a year. In the first three quarters of this year, it was China's busiest courier with an 18.9 percent market share, a year-on-year gain of 2.3 points, and a 4.6 percent increase in net profit to CNY1.3 billion (USD184.7 million).

At the end of September, ZTO had 89 handling centers, a fleet of more than 6,600 vehicles, around 8,000 drivers and about 35,000 operating staff, according to Wang Quanfa, who is in charge of its operations and management center. "But our headquarters only has a team of 100 people," he added.

ZTO has slashed labor costs through equipment upgrades, said Wang. It used to take two people 40 minutes to unload a 65-cubic-meter container, but with advanced machinery it now takes about 15 minutes, he said.

By creating an intelligent, transparent and optimized layout at the logistics centers, the firm expects further cost reductions of between 5 percent and 8 percent next year, said Wang. The 17-year-old company has greatly improved the degree of automation and significantly reduced vehicle operating costs, he added.

Seeping Competition

As the express delivery industry expands into different sectors, competition between courier firms will penetrate the whole industrial chain, said Lai Meisong. ZTO has been extending its operations into cross-border businesses, warehousing, aviation and finance since 2015, he added.

"ZTO will not just be a company that delivers packages," said Executive Vice President Lai Jianfa. The company will continue to develop and expand with its team at its core, skills as its mainstay and technology as its main strength, he added.

The company's express delivery business, which mainly operates as a franchise, has six times as many outlets as it did when it started in 2016 and the number of deliveries per day has more than doubled.

Its warehousing business ZTO CWST received over 10 million orders during the Chinese equivalent of Black Friday, the so-called Double 11 shopping bonanza around Nov. 11, and has extended its cross-border supply chain.

Founded in 2002, ZTO listed on the New York Stock Exchange in 2016. It was the first Chinese courier firm to go public in the US. The company's shares [NYSE:ZTO] rose 0.5 percent yesterday to close at USD20.92 apiece.

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Keywords: ZTO Express , Lai Meisong