Logistics

Hunger games

SF Express takes on Meituan and Ele.me

SF-Express-w

Now delivering meals too

The delivery business isn’t always very dependable. In New York, 90,000 packages are stolen or disappear without explanation every day, the New York Times reported last year.

In China, city residents are finding ways to reduce the failure rate by sending their packages through Hive Box. The five year-old firm, backed by logistics giant SF Express, operates a network of locker stations in residential compounds around the country. The lockers give couriers a convenient place to drop off packages in the event that the recipients are not home. They also give residents a place to pick up their parcels if they miss delivery.

Hive Box now operates 180,000 lockers in more than 100 cities. Earlier this month, it started charging customers Rmb0.50 ($7 cents) for every 12 hours of storage time, up to a Rmb3 maximum – beforehand customers could wait up to 24 hours to pick up a package before they were charged a small fee. This caused outrage: users weren’t given advanced notice only finding out about the new charge when they went to collect their packages.

Hive Box explained that its lockers were at capacity in many locations and that it needed to increase the turnover rate to free up more space.

But consumers were furious at having to pay for what used to be free. Under pressure, Hive Box has partially relented, saying that it will only charge for locker storage after more than 18 hours of usage.

Hive Box controls 50% of China’s smart-locker market but it needs to boost revenues, after suffering a net loss of Rmb781 million last year. In the first quarter of this year it lost another Rmb245 million.

Key investor SF Express is pushing for a reversal of the trend at a time when the logistics giant has also announced plans to launch a food-delivery service targeting business clients (think offices and construction sites).

The idea is to concentrate on selling meals in bulk as a way of coming into a marketplace contested by Tencent affiliate Meituan and Alibaba’s Ele.me.

Called Fengshi (a play on SF Express’s Chinese name Shun Feng), the food delivery service is being offered via an app and a mini program on WeChat. 36Kr, a tech portal, reports that over 100 restaurants, including Pizza Hut, Yoshinoya and Domino’s have signed up with the courier giant as partners. To attract more vendors, SF Express has waived commissions on the platform. That is attractive for restaurant operators as rivals Meituan and Ele.me charge up to 20% in commissions (in addition to delivery charges for consumers).

But why food delivery and why group meals? iiMedia Research says the size of the corporate group-meal market is now Rmb1.5 trillion, accounting for a third of sales in the catering industry. The sector is likely to grow 13% this year. More importantly, it is an area that Fengshi’s larger rivals have not yet cornered.

“After the pandemic, companies have resumed work and production has continued. But employee meals have become a major problem. How to reduce the risk of infection during ordering and meal delivery while also meeting employee dining needs?” asks Jiemian.

Although designed as a food delivery app for corporate meal reservations, the service supports smaller batches of orders, including individual ones. But taking share in the food delivery market is going to be an uphill climb. As of the third quarter of last year, Meituan and Ele.me were utterly dominant, accounting for 53% and 44% respectively.

The foray into food delivery and Hive Box’s price hike highlights how SF Express is trying to broaden beyond its core business. The SF Express strategy is to provide new services in city neighbourhoods on the back of its pre-existing courier network of deliverypeople. But earlier efforts to get into cold chain delivery and a grocery store network have not been particularly successful. “SF Express’s continuous attempts in same-city delivery, cold chain, supply chain and unmanned convenience stores were all attempts to diversify from its express delivery business. But judging from their financial structure, these businesses have not yet produced any substantial income,” 36Kr concludes.


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