By BAI Fan
Logistics company J&T Express said on Friday that it is acquiring Fengwang Express, a subsidiary of SF Express dedicated to e-commerce deliveries, for 1.2 billion yuan (US$170 million).
J&T Express entered the Chinese market in 2020. Fengwang was founded in September of that year to compete with J&T. A year later, J&T acquired delivery business Best Inc. for 6.8 billion yuan.
The Fengwang network now covers 27 provinces. Last year, its revenue reached 3.2 billion yuan but has been surplus to parent SF’s needs for some time.
Fengwang is focused on e-commerce business and low rates. SF’s revenue was up 64 percent year in 2020. Yet the growth of SF’s core business - time-constraint delivery – that year was only 17.4 percent and 7.3 percent the next year. Gross profit margin dropped from 20 percent in 2017 to 12.5 percent last year.
By 2022, those who bought Fengwang franchises in 2020 were peddling them on second-hand sites. A franchisee in Guangdong Province who signed up in 2021 told Jiemian News that his Fengwang parcels never turned up. He said that although the price is much cheaper than SF’s deliveries, it is no cheaper than rivals like Shentong, Yunda and Zhongtong.
Last year, SF said Fengwang had 1,700 delivery stations nationwide, compared with Yuantong’s 5,123 and Yunda’s 3,850, let alone their tens of thousands of smaller delivery checkpoints.
In a statement released Friday night, SF said the company has been losing money because of Fengwang. In Q1 this year, Fengwang lost 143 million yuan.
While traditional time-constraint delivery still makes up half of SF’s revenue, international deliveries accounted for 32.5 percent of revenue last year, up from 18.2 percent in 2021. SF has a unique advantage in international deliveries with its own fleet of 100 aircraft.
When J&T entered China, it was already almost impossible to build a business from the ground up so the absorption of Best quickly doubled J&T’s package volume and the merger of Fengwang is pretty much the same.
It is reported that J&T is preparing for an IPO, the merger will bring J&T a higher valuation.
