---
title: "JD Logistics' Enemy Is Not SF Express"
description: "JD Logistics listed on the Hong Kong Stock Exchange on May 28, 2021, after about 14 years of development. Unlike SF Express and the 'Three Tong One Da' courier companies, JD Logistics focuses on B2B integrated supply chain services, leveraging its unique pre-positioned warehousing model. Despite its growth, it remains unprofitable, raising questions about when it will achieve profitability."
author: "有趣有料有深度"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-05-28"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/jd-logistics-enemy-is-not-sf-express-a9b95f45/"
markdown: "https://xinjignxiao.com/en/articles/jd-logistics-enemy-is-not-sf-express-a9b95f45.md"
original_source: "https://mp.weixin.qq.com/s/9CmzgRvzKEE8v-ho0q6TDw"
translation: "https://xinjignxiao.com/zh/articles/%E4%BA%AC%E4%B8%9C%E7%89%A9%E6%B5%81%E7%9A%84%E6%95%8C%E4%BA%BA%E7%8E%B0%E5%9C%A8%E4%B8%8D%E6%98%AF%E9%A1%BA%E4%B8%B0-a9b95f45.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/jd-logistics-enemy-is-not-sf-express-a9b95f45/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# JD Logistics' Enemy Is Not SF Express

> JD Logistics listed on the Hong Kong Stock Exchange on May 28, 2021, after about 14 years of development. Unlike SF Express and the 'Three Tong One Da' courier companies, JD Logistics focuses on B2B integrated supply chain services, leveraging its unique pre-positioned warehousing model. Despite its growth, it remains unprofitable, raising questions about when it will achieve profitability.

**On May 28, 2021, JD Logistics officially listed on the Hong Kong Stock Exchange. From its inception to listing, JD Logistics has gone through about 14 years. This 'maverick' in the logistics industry is completely different from SF Holding, and the 'Three Tong One Da' (STO, YTO, ZTO, and Yunda). What exactly is JD Logistics?**

In 2004, after JD.com transformed into an e-commerce platform, it found that the vast majority of complaints came from logistics. At that time, many of JD's businesses were outsourced, and the products on the platform were mostly high-value 3C products, which had high requirements for express delivery. Delays, damage, or loss of packages greatly affected the user experience.

Facing the pain of logistics, Liu Qiangdong decided to build a self-operated logistics system in 2007. In 2009, JD used most of its raised funds to build its own warehouses. In 2010, it began to recruit logistics staff directly. In 2014, it launched the Pioneer Station Plan, allowing its 20,000 delivery personnel to apply to return to their hometowns to set up stations.

In this way, JD Logistics gradually grew from a 'supporting role' to a 'leading role', becoming one of JD's most important 'three carriages'.

On May 28, 2021, JD Logistics officially listed on the Hong Kong Stock Exchange. The fundraising of HK$24.113 billion was second only to Kuaishou's HK$42 billion, making it the second-largest Hong Kong IPO in terms of fundraising scale this year.

Based on today's opening price of HK$46.75, JD Logistics' latest total market value is approximately HK$284.801 billion.

JD Logistics can be considered a 'maverick' in the logistics industry, completely different from SF Holding and the 'Three Tong One Da'. The former earns money from B2B, while the latter earns from B2C.

Despite rapid growth and independent listing and financing, for JD Logistics, which is still loss-making, how to maintain high-quality delivery services and unique pre-positioned warehousing capabilities while leaving room for profitability for itself and investors is a problem it must eventually face.

**-01- Understanding JD Logistics**

JD Logistics has gone through about 14 years from its inception to listing.

In 2007, it was first born and existed as an internal logistics department of JD Group. In 2017, it began operating as an independent business segment and providing services to external customers.

After four years, JD Logistics became the third 'JD-affiliated' listed company after JD Group and JD Health.

Although its name contains 'logistics' and it is widely benchmarked against SF Express and the 'Three Tong One Da' courier companies, in fact, JD Logistics' main business is quite different from SF Express and the 'Three Tong One Da'—the others mainly do B2C business, while JD Logistics focuses more on 'B2B'.

From the revenue structure, JD Logistics' revenue from integrated supply chain customers increased from RMB 34.151 billion in 2018 to RMB 55.62 billion in 2020, always accounting for more than 75% of JD Logistics' total revenue.

What is 'integrated supply chain'?

The prospectus shows that JD Logistics provides services including: **warehouse and distribution services, express and freight services, bulky goods services, cold chain services, and cross-border services.** The specific descriptions of each business are shown in the figure below:

**Any customer who has recently used JD Logistics' warehousing or inventory management-related services is classified as an integrated supply chain customer by JD Logistics.**

In other words, except for express and freight services, customers of the other services are basically classified as integrated supply chain customers.

The prospectus shows that 50%-70% of JD Logistics' annual revenue comes from the first item in the figure above—warehouse and distribution services. Therefore, it can be said that understanding warehouse and distribution services basically means understanding JD Logistics' integrated supply chain business.

The so-called warehouse and distribution services refer to JD Logistics providing a series of services including warehousing and distribution for larger enterprise customers, such as Xiaomi.

Specifically, starting from Xiaomi's factory, JD Logistics first picks up the goods to its own service stations, then based on predicted terminal consumer demand, distributes and stores products in multiple warehouses, performs packaging, labeling, and other pre-sale preparations, and finally delivers and hands over according to customer orders.

The most critical part here is that **JD Logistics, based on its operational experience and algorithm optimization, will allocate products to various regional logistics centers and front-end logistics centers in advance before users place orders, 'waiting' for consumers to place orders closer to them, so that they can reach consumers with same-day or next-day delivery speed.**

Specifically, industries such as fresh food, FMCG, clothing, 3C electronics, and pharmaceuticals have higher requirements for this 'advance layout, fast delivery' logistics capability. These industries naturally become the key service targets of JD Logistics at this stage.

In addition, 'other customer revenue', which accounts for a relatively small proportion of JD Logistics' total revenue, increased from RMB 3.722 billion in 2018 to RMB 17.75 billion in 2020, mainly from express and freight services, addressing the **'scattered transportation needs'** of enterprises and individual customers, which is the same concept as SF Express and the 'Three Tong One Da' logistics services.

This part of the business grew 121.66% year-on-year in 2020, far exceeding the 32.94% growth of integrated supply chain business revenue, mainly due to the increase in the number of non-integrated supply chain customers and orders in 2020, and JD Logistics' acquisition of a logistics company called Kuayue Speed in August 2020, which contributed RMB 3.734 billion in revenue to JD Logistics after consolidation in August 2020.

Kuayue Speed's full-year revenue in 2020 reached RMB 7.928 billion, with net profit of RMB 626 million. The full-year data consolidation in 2021 will bring greater contributions to JD Logistics' revenue and net profit.

Overall, JD Logistics, which focuses on B2B business, is quite different from SF Holding, which focuses on B2C business, in terms of average order value, customer scale, and customer composition.

According to data from the State Post Bureau, the average price per parcel in the express delivery industry in 2020 was RMB 10.55, which has been declining continuously since 2007.

Among them, SF Holding's unit price dropped from RMB 21.94 in 2019 to RMB 17.77 in 2020, and business volume increased from 4.831 billion parcels in 2019 to 8.137 billion parcels in 2020.

In contrast, JD Logistics had only over 190,000 enterprise customers in 2020.

Among them, integrated supply chain customers increased from 32,500 in 2018 to 52,700 in 2020, far less than SF's B2C customer scale, but the average order value reached RMB 312,600 in 2020, which is also not the same concept as SF.

Of course, another important difference is that SF Holding can be said to be a relatively independent entity, with no significant transactions with related parties in terms of costs or revenue. In 2020, revenue from related parties was RMB 1.611 billion, accounting for only 1% of total revenue.

But JD Logistics has JD Group, a super e-commerce platform, behind it. JD Group and other related parties contributed RMB 26.847 billion, RMB 31.009 billion, and RMB 39.517 billion in revenue to JD Logistics from 2018 to 2020, accounting for 70.1%, 61.6%, and 53.4% of its total revenue, respectively.

**Therefore, it can also be said that JD Logistics is a ship sailing in the river of JD Group; when the water rises, the ship can be higher.**

**-02- Why Is JD Logistics Worth One-Third of JD?**

If calculated at today's opening price of HK$46.75 per share, JD Logistics' total market value is HK$284.801 billion. Compared with JD Group's market value of about HK$900 billion, it is not an exaggeration to say the former is one-third of the latter.

So, why is JD Logistics, which has been operating independently for nearly four years and has not yet achieved profitability, worth this price?

In fact, it can be compared from several different angles.

For consumers, fast speed and high-quality door-to-door service experience are the most direct reasons to choose JD Logistics.

This is indeed beyond doubt—at least many consumers choose to shop on JD platform because of JD Logistics' same-day or next-day delivery service, but there should not be many consumers who would specifically go to a platform to enjoy SF or 'Three Tong One Da' logistics services.

But C-end consumers are not the most direct transaction targets of JD Logistics; it is enterprise customers who pay for it.

From the perspective of these enterprises, there are two reasons to choose JD Logistics.

First, faster delivery speed can improve consumer satisfaction and naturally increase sales to a certain extent. Especially when customers urgently need to buy their products on the same day or the next day, JD often becomes their first choice.

Second, JD Logistics' experience, algorithms, and big data can help enterprises plan product storage in advance—how much to put in this warehouse, how much in that warehouse, avoiding both inventory shortages that lose sales and excessive stockpiling.

Among these two reasons, the first can help customers make money, and the second can help customers save money. When the benefit of choosing JD Logistics for customers is greater than the fee they need to pay JD Logistics, the enterprise makes money and is naturally willing to pay for it.

Can others learn JD Logistics' model of improving delivery speed and inventory turnover through pre-positioned warehouses? In other words, where is JD Logistics' moat?

Here we need to compare the advantages and disadvantages of JD Logistics and SF Express.

As mentioned earlier, the model of 'storing instead of transporting' and integrated supply chain services are JD Logistics' advantages. Behind this are JD's long-term experience accumulation in e-commerce, computing power support, a mature and stable e-commerce platform, and over 900 warehouses nationwide.

But because JD Logistics has put more effort into warehousing, its logistics trunk line layout is relatively weak. Although it acquired Kuayue Speed, its transportation capacity growth is still limited.

In contrast, although SF Express is not as strong as JD Logistics in warehousing, because its business model focuses more on end-to-end transportation speed, it has invested heavily in logistics trunk lines.

As of the end of 2020, JD Logistics' self-operated fleet had 7,500 trucks and other vehicles, 620 air cargo routes, and cooperated with the Railway Corporation to use 250 railway routes.

SF Express, on the other hand, has 58,000 self-operated and outsourced trunk line transport vehicles, 105,000 terminal pickup and delivery vehicles, 451 high-speed rail express product routes, and even 61 self-operated aircraft and 14 outsourced aircraft, with 2,027 scattered airline routes and a total of 49,400 flights.

When both sides have obvious advantages and disadvantages, the most important thing is to make up for shortcomings.

Obviously, the shortcoming JD Logistics needs to make up for is the B2C business, corresponding to a large transportation team.

If SF Express wants to catch up with JD Logistics, it is simple to say—**just recreate a JD Mall.** JD Logistics' advantages are almost all built on its connection with JD Mall.

The latter is obviously more difficult than the former. The former can be piled up with money, but the latter cannot.

This is the real advantage of JD Logistics—its advantages are hard for others to learn, but its disadvantages can be made up with money.

**-03- When Will It Make Money?**

Friendly to consumers and helping suppliers save money, the only thing JD Logistics is not friendly to at this stage is probably investors.

Since it began independent external operations in 2017, JD Logistics has still been in a relatively large loss state. From 2018 to 2020, it lost RMB 2.765 billion, RMB 2.234 billion, and RMB 4.134 billion, respectively. Although the loss as a percentage of revenue narrowed in 2019, it expanded again in 2020.

JD Logistics stated in the prospectus that **it currently prioritizes business growth and market share expansion over profitability, so in the short to medium term, profitability may fluctuate significantly.**

In addition, JD Logistics' gross margin from January to March 2021 was much lower than the same period in 2020, mainly because in 2020, government policy support reduced social security contributions and toll fees. In 2021, not only were there no such preferential policies, but the overall number of employees also increased significantly.

This may put greater pressure on JD Logistics' losses in 2021.

Behind the significant losses is JD Logistics' 'asset-heavy' model.

Among SF Holding's various costs, the top four in descending order are outsourcing costs, employee compensation, transportation costs, and office rental. The total cost as a percentage of revenue remains between 82% and 84%, leaving a gross margin of 16% to 18%.

But among JD Logistics' various costs, in descending order are **employee welfare expenses, outsourcing costs, rental costs, and depreciation and amortization. Operating costs account for as high as 91% to 97% of total revenue, and the gross margin at its highest in 2020 was only 8.58%.**

Looking at each cost item can reflect different issues.

First, JD Logistics' rental cost, accounting for about 10%, refers to warehouse and delivery station rental expenses. These warehouses were actually previously owned by JD Group. However, starting in 2019, JD Group transferred the ownership of these warehouses to a core fund in which JD Group has a stake, and then JD Logistics leases the warehouses from this fund.

In this way, since this core fund is not a related party of JD Logistics, the lease payments JD Logistics makes to the core fund are not classified as related-party transactions with JD Group.

This approach is relatively flexible. Compared with JD Logistics directly owning these warehouses and depreciating them at a fixed amount each year, leasing from a third party can control costs.

In addition, JD Logistics' employee compensation as a percentage of revenue is much higher than SF's, and its outsourcing cost ratio is much lower than SF's, which means **JD Logistics has a higher proportion of self-owned employees.**

A higher proportion of self-owned employees means JD has to pay social security for a larger proportion of couriers, which is a considerable expense in a labor-intensive industry.

Liu Qiangdong once proudly revealed in 2018 that JD paid RMB 6 billion in social security and housing provident fund for employees, and said that if it outsourced labor or paid less, it could earn at least RMB 5 billion more a year.

In an earlier interview, Liu Qiangdong also said that JD resolutely prohibits outsourcing companies, 'Every hired person, every security guard, every cleaner, every courier must sign a labor contract directly with JD, and no employee is allowed to be outsourced for me.'

But from JD Logistics' cost structure, from 2018 to 2020, outsourcing costs increased from RMB 10.492 billion to RMB 26.087 billion, and as a percentage of revenue increased from 27.7% to 35.55%, gradually exceeding employee welfare expenses.

The reason behind this, **in addition to using related party Dada's delivery services, is also because the acquired Kuayue Speed in 2020 used a lot of labor outsourcing.**

Overall, JD Logistics still uses a relatively high proportion of self-owned employees, but in the process of competing for the track, it inevitably bowed to scale and growth and increased its tolerance for outsourced labor.

In 2019, JD announced the cancellation of couriers' base salary and reduced the social security contribution base to improve courier efficiency and control costs, which also sparked a wave of discussion. In response, Liu Qiangdong said in an internal letter that canceling the base salary was to let JD Logistics survive.

Despite taking various measures to reduce costs and increase efficiency, JD Logistics is still far from profitability.

From the two profitability comparison charts below, compared with the already profitable 'Three Tong One Da', SF Holding, and Deppon, JD Logistics is clearly lagging in both gross margin and net margin.

In the short term, profitability seems unlikely. In the long term, although JD is in a leading position in the B2B track of the logistics industry, compared with the proven profitability of the B2C track, when will the B2B model become profitable? Or how many customers are needed?

These questions are not answered in JD Logistics' prospectus, nor do existing competitors have answers.

On the road to finding this answer, competitors including SF Express and Cainiao have already joined, increasing their layout in the integrated supply chain track.

If the price war in the B2C track is brought to the B2B track, can JD Logistics' average customer revenue of RMB 312,600 be maintained or continue to grow?

Since it has not yet achieved profitability, it is more reasonable to use the price-to-sales ratio to calculate JD Logistics' valuation. JD Logistics' opening market value today is HK$284.801 billion, corresponding to its 2020 revenue of RMB 73.445 billion, with a price-to-sales ratio of 3.88, much higher than SF's approximately 2 times.

The price war in the B2C logistics track is in full swing. Investors' optimism about JD Logistics, which is in the B2B track, is an expectation of another imagination for the logistics industry.

The deep connection between JD Logistics and JD e-commerce is complementary; neither can do without the other, and there is actually no need to separate.

But only when the ship in the water truly 'lands', creating prosperity in the integrated supply chain and faster circulation of more goods, is something more worth looking forward to.

Source: Shijie (ID: ishijie2018)
Tips will be paid 400-2000 yuan once adopted.


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671