Deals | SoftBank China-backed logistics startup seeks to make last mile delivery service profitable

Founded in May 2014, Zhijian Shenghuo Pai claims to be China’s largest last mile delivery network company.

Image credit to Visual China.

It’s no secret that Chinese logistics market is booming. In 2017, Chinese logistics companies sent out 40 billion parcels, generating a revenue of almost RMB 500 billion (approx. US$ 78 billion), Chinese state press Xinhua reports.

For Chinese logistics companies, 40% of their cost is incurred by the last mile delivery, while most last mile delivery stations are operating at a loss due to the high cost of staff and rent.

A Chinese startup, Zhijian Shenghuo Pai (指尖生活派), which means “life at your fingertips” in Mandarin Chinese, seeks to make the last mile delivery a profitable business.

Founded in May 2014, Zhijian Shenghuo Pai claims to be China’s largest last mile delivery network company. The startup is a subsidiary of GtExpress and seeks to improve the current last mile delivery services.

The startup counts SoftBank China, Long Capital, Star VC as previous investors. It has raised over RMB 100 million (approx. US$ 15.6 million) to date.

For the last mile delivery service, the price per order is as low as around RMB 0.5-1.2, according to Zhijian Shenghuo Pai. That’s the reason why the startup thinks it should turn to value-added services to turn a profit, as it could monetize the user traffic.

Then which value-added services are appropriate?

Zhijian Shenghuo Pai thinks as long as the services can be simplified to delivery, receiving, and communication, then last mile delivery companies can easily add those services to its offerings without too many extra efforts.

Currently, the startup has started providing value-added services including bottled water delivery, flower delivery, self-service convenience store and snack shelves, a shopping guide app, staffless lottery machine, etc. According to the startup, it has established over 100 fully-owned delivery stations. In terms of innovation, it plans to come up with two or three new services every year.

As of the end of April, its bottled water devilry service Zhijian Shuiguanjia (指尖水管家) which was launched in January this year, claimed to have signed contracts with over 150 water stations and 500 selling points with a plan to expand to 2000 water stations and 10k selling points. According to the startup, each month, it has over 200 new customers and 468 orders.

It’s self-service convenience store and snack shelves, Genghao Bianli (更好便利), meaning better convenience store in Mandarin Chinese, serves inhabitants who live within 2 kilometers by providing daily commodities. Users can either shop in stores themselves or get the purchase delivered to their doorsteps. When shoppers shop at their staffless convenience store, 15%-25% of them actually made a purchase, according to Zhijian Shenghuo Pai.

In 2018, the startup prioritizes its plan for a national expansion through franchise stores, partnerships, buying stakes in other companies, and M&A. It plans to expand beyond its current 17,000 million delivery stations and lift its daily orders from 150k to 1 million, as it seeks to become China’s second-largest logistics terminal network after Alibaba’ s Cainiao.

The reason why the company has chosen the approach of fast expansion is that last mile delivery network is highly dependent on the number of station and the quality of services. For example, for fresh food delivery, the startup needs enough delivery stations dotted in the city to provide good services. It’s now targeting to cover 150 Chinese cities.

According to the CEO of the company, CHEN Lihua, in 2017, the company generated a revenue of tens of millions of yuan, 75% of which comes from its value-added services.

Currently, 20% of the company’s total orders are for value-added services, and the startup expects to turn a profit when that number is raised to 40%.

It’s parent company GtExpress currently has a team of over 500 across China. CHEN holds a degree of EMBA at Cheung Kong Graduate School of Business and has previously worked as senior executive at several companies.

Zhijian Shenghuo Pai is currently raising a Series B+ round from Paid-in Capital and Star VC.


Previous funding round:

  • 2014.06   Long Capital invested RMB 6 million (approx. US$ 936,968) in its angel round.
  • 2015.02   SoftBank China, Long Capital invested RMB 22 million (approx. US$3.4 million) in its Series Pre-A round.
  • 2015.12    China Chengtong, SoftBank China, Long Capital, and Tibet Spring invested RMB 28 million (approx. US$ 4.4 million) in its Series A round.
  • 2016.10    Star VC, Ganrong Investment, Tibet Spring invested RMB 80 million (approx. US$ 12.5 million) in a Series B round.

 

Writer LU Yurou