After eight years since its founding and three years after entering the Chinese market, J&T Express has decided to list on the Hong Kong Stock Exchange. In just a few years, it has grown into the leader in Southeast Asia's express delivery market; it started its network in China in early 2020 and completed 12 billion parcels in 2022, closely trailing the 'Tongda' companies and SF Holding. Last year, it expanded to West Asia and South America, challenging global giants FedEx, UPS, and DHL. J&T's rapid rise has been supported by OPPO and Pinduoduo, companies associated with Duan Yongping's disciples, reflecting the significant opportunity of Chinese brands, especially Chinese e-commerce going global, and capital's desire for a third option beyond Alibaba and JD.com. However, can the money-burning model sustain in the express delivery industry? The Tongda companies, SF Holding, and JD Logistics may already have different answers. Now, it's J&T's turn to submit its answer.
The Rise of J&T In 2015, a courier company named J&T Express was founded in Indonesia. It started with high ambitions, calling itself a "tech-driven courier company with internet delivery as its core business." J&T stands for Jet, Timely, and Technology. At that time, people were accustomed to FedEx, UPS, and DHL dominating the global market, while STO, YTO, ZTO, Yunda, and SF Express and JD had formed a stable landscape in China. The courier industry seemed unlikely to have new stories. So, J&T Express initially didn't attract much attention. It wasn't until the company grew into the leader in Southeast Asia's courier industry in just a few years that people took notice. It turned out that its founder, Li Jie, was no ordinary person. After graduating from Beijing University of Science and Technology in 1998, he joined Jiangsu Anhui Bubugao Company and became the general manager of OPPO's Jiangsu-Anhui region in 2008. Due to his outstanding performance, OPPO headquarters established the Li Jie Award in 2015 to recognize outstanding contributions in sales. In 2013, Li Jie became the founder and CEO of OPPO's first overseas exclusive sales agency, responsible for leading global expansion in Indonesia, Singapore, Malaysia, and Japan, helping OPPO quickly become a leader in the mobile phone market in Indonesia and other places. Two years later, leveraging the strong ground promotion experience accumulated from OPPO phones, Li Jie improved the business model of the Tongda courier companies and replicated it in Southeast Asia, and J&T Express quietly rose.
However, the Southeast Asian market was clearly not enough for Li Jie. In 2020, by acquiring Shanghai Longbang Express to obtain operating qualifications, the company officially entered the Chinese market under the brand name "J&T Express." If J&T Express in Southeast Asia was learning from Chinese courier companies, then in the Chinese market, J&T Express was using the Tongda companies as a model, quickly opening up the situation with three strategies: network piggybacking, price wars, and capital operations. The entry of this catfish intensified the already fierce competition in China's courier industry, which was struggling with price wars. Subsequently, J&T Express took advantage of the situation to acquire the lagging Best Express, directly taking a seat at the main table. In 2022, the replication continued, expanding to Saudi Arabia, UAE, Egypt, Mexico, and Brazil. On the evening of June 16, J&T Express Global Co., Ltd. submitted its IPO prospectus, aiming for a main board listing on the Hong Kong Stock Exchange, with a fundraising amount possibly up to US$1 billion.
In 2022, J&T Express's business volume in Southeast Asia was 2.513 billion parcels, with a market share of 22.5%, ranking first; in the Chinese market, its business volume reached 12.026 billion parcels, with a market share of 10.9%, ranking sixth. From 2020 to 2022, the company's revenue was US$1.535 billion, US$4.852 billion, and US$7.267 billion, respectively, with gross margins of -17.0%, -11.2%, and -3.7%. Thanks to changes in the fair value of financial assets and liabilities, it nominally turned profitable in 2022, with net profits of -US$664 million, -US$6.192 billion, and US$1.573 billion over the past three years. In the Chinese market, J&T Express's revenue from 2020 to 2022 was US$479 million, US$2.181 billion, and US$4.096 billion, ranking after SF Holding, JD Logistics, and ZTO, YTO, Yunda, and STO in scale; its unaudited adjusted performance was -US$616 million, -US$940 million, and -US$335 million.
Favorable Timing, Geographical Advantage, and Human Harmony When J&T Express was founded, the Southeast Asian market already had local courier giants like JNE, Lion Parcel, and Sicepat Ekspres; when J&T Express entered the Chinese market, the overall growth rate of the courier industry was declining, and the market structure of the Tongda companies, JD, and SF was relatively stable. How to stand out against the trend in this battle for existing market share? Internally, it's this team that excels at tackling tough problems and implementation, choosing a regional agency model different from the direct-operated and Tongda network cooperation models, based on their understanding of the courier market. This allows for rapid volume growth and efficient operation under a relatively asset-light background—its China division, with a business volume exceeding 12 billion parcels, has only 7,831 employees. More importantly, externally, J&T Express's growth has been blessed with favorable timing, geographical advantage, and human harmony. In its early days, J&T Express started with OPPO's mobile phone delivery business; in the Chinese market, Pinduoduo also provided a large amount of e-commerce parcel business. In fact, whether it's OPPO, vivo, iQOO, or Pinduoduo and J&T Express, they can all be called Duan Yongping's disciple companies. These cases are successful examples of Duan Yongping's "later-mover advantage" strategy. Find a market that's just starting, improve on pain points, emphasize extreme cost-performance in products, strengthen brand labeling, and with capital support, you're invincible. OPPO and vivo entered the mobile phone market after the 'Zhonghua Kulian' era, catching the fast train of smartphones; Pinduoduo is a new e-commerce force beyond Alibaba and JD.com; J&T Express grew up directly on the shoulders of giants... Guided by this philosophy, J&T Express also caught the good timing of Chinese brands, especially Chinese e-commerce going global. J&T's major customers include not only Pinduoduo, Taobao, and Tmall, but also Shopee, Lazada, Tokopedia, and Shein, which hold dominant positions in the global e-commerce market. All of these are deeply connected to the Chinese market: Shopee is backed by Tencent, Alibaba has invested in Lazada and Tokopedia, and Shein, which is popular overseas, is originally a Chinese company. The upcoming wave of e-commerce going overseas provides ample imagination space for J&T Express, which has a natural global advantage. In this context, capital that wants to make a difference beyond the traditional e-commerce poles of Alibaba and JD.com is eager to support J&T Express. J&T's investors include Tencent, Boyu Capital, Hillhouse Capital, Sequoia Capital, SF Express, Temasek, and CMB International, though it's unclear which shareholder Duan Yongping is hiding behind. Tencent cleared its shares in JD.com but remains the second-largest shareholder of Pinduoduo and also the second-largest shareholder of J&T Express, its main partner, which clarifies its stance. Additionally, after SF Holding sold its low-end franchise business Fengwang Express to J&T Express in May, news of SF's investment in J&T emerged in June. A few days later, J&T's prospectus disclosed that SF holds a 1.54% stake. The alliance between SF Holding and J&T Express means that China's courier industry has officially transitioned from the "Seven Warring States" to a "Three Pillars" era. This combination will directly face challenges from Alibaba's Cainiao + Tongda companies and JD Logistics.
The Impossible Triangle J&T Express has grown very fast. It started its network in China in early 2020 and achieved 12 billion parcels in 2022, ranking sixth in market share—in fact, the gap between J&T and STO Express and SF Holding is only a few hundred million parcels. If the growth rate continues this year, it should stably enter the top five. From industry data, rapid growth hasn't caused J&T Express to lag in service quality. The State Post Bureau's user complaint data for Q1 2023 shows that J&T Express's complaints per million parcels were only 0.78, the lowest among the nine major courier companies, and its complaint handling comprehensive index was 99.95, the highest among the nine. Additionally, industry data shows that J&T Express's 72-hour punctuality rate ranks third in the industry. It seems that tech-driven courier companies indeed value growth and reputation more than traditional ones. However, even J&T Express finds it difficult to achieve the impossible triangle of growth, profitability, and reputation. With the current business pace, the company's profitability is far off, which is a reality that tech-driven courier companies must face. From 2020 to 2022, the company's gross loss rate has indeed been declining, reaching -3.7% in 2022, while the Tongda companies with similar business structures typically have gross margins of 10%-20%. With gross margin not yet positive and sustained high investment, J&T Express's operational profitability hasn't improved much, with operating losses of US$606 million, US$1.647 billion, and US$1.390 billion from 2020 to 2022. Moreover, under current market conditions, even if J&T Express temporarily doesn't pursue profitability and wants to maintain growth and reputation, it faces numerous challenges. J&T's rapid growth is based on continuously opening new markets. After topping Southeast Asia, it entered the Chinese market, and once it stabilized, it expanded to South America and Central Asia. J&T has lost growth momentum in Southeast Asia, and in China, it faces siege from giants. More critically, besides these two markets, where else is there a grassland for this rabbit to run freely? Even if such target markets exist, further expansion would likely not be as simple as in Southeast Asia and China. Otherwise, Xiaomi wouldn't have lost billions of real money in India. Moreover, J&T Express's rapid expansion has left a trail of problems. In June last year, at J&T Express's delivery point in Hutang Town, Wujin District, Changzhou, Jiangsu, the company owed couriers over 300,000 yuan in wages. A courier with his 11-month-old child waited until midnight for his wages, unable to contact the site manager, which drew strong attention. At that time, J&T's courier business in that area stalled, with a large number of parcels piling up at the site, severely damaging customer interests. No matter how J&T Express improves its business model, it is essentially still a franchise-based courier company. There is a fundamental contradiction among courier companies, regional agents, franchise sites, and grassroots couriers, caused by the impossible triangle of low-price model, company performance, and service quality. This is a business crisis that most of the 'Tongda' companies experienced in their early years, and it's now an industry pain point that the new-generation J&T Express cannot escape.