During the National Day holiday, the one-to-one urgent delivery platform, Shansong, officially went public on the NASDAQ.

Shansong successfully sold 4 million American Depositary Shares (ADS) at an issue price of $16.5 per share, raising a total of $66 million. On the first day of listing, Shansong opened at $16.5 per share and the stock price once rose to $21.95 during the trading session, closing at $18.01 per share, up 9.15%.

However, in the following three trading days, Shansong's stock price continued to fall. On October 7th, Shansong's stock price closed at $16.49, breaking the issue price; on October 8th, Shansong closed at $15, down 9.04%; on October 9th, Shansong fell 13.67%, with the closing price dropping to $12.95, and the total market value fell to $920 million.

As of October 10th, before the deadline for this article, Shansong's stock price fell by more than 1% again, and the market value is about to break through $900 million.

As a same-city instant delivery company established in 2014, Shansong has solved urgent needs for a large number of users over the past ten years, and has gradually grown into a star company in the industry, achieving profitability last year.

However, when looking at the fiercely competitive instant delivery market, Shansong's market share is hard to compete with players such as Meituan, Ele.me, Dada, and SF City. Without the support of a large company, Shansong has long been focused on "one-to-one urgent delivery". Although it is "small and beautiful", the ceiling is not high. At the same time, Shansong's own costs remain high, and it may become a problem to maintain profitability if government subsidies are excluded.

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Human "hard costs" remain high

In the past ten years, Shansong's growth is inseparable from the development of the same-city instant delivery market. Especially in the past five years, instant delivery services have penetrated all aspects of life, and under the continuous growth of consumer demand, the same-city instant delivery market has ushered in a period of rapid development.

Sullivan research data shows that in 2023, the order scale of the instant delivery service industry is expected to reach about 40.88 billion orders, a year-on-year increase of 22.8%, and the average annual compound growth rate over the past 5 years has reached 21.4%.

In the track that Shansong focuses on, iResearch consulting data shows that the total market size of China's one-to-one express delivery industry was 164.1 billion yuan in 2019, and has grown to 338.5 billion yuan in 2023.The order volume of Shansong has also risen with the tide. According to the prospectus, the order volume of Shansong in 2021, 2022, 2023, and the first six months of 2024 were 159 million, 213 million, 271 million, and 138 million, respectively, with corresponding revenues of 30.39 billion yuan, 40.03 billion yuan, 45.29 billion yuan, and 22.84 billion yuan.

In 2022 and 2023, the order volume of Shansong increased by 33.96% and 27.23% year-on-year, respectively. The increase in order volume boosted the revenue growth of Shansong, with revenues increasing by 31.72% and 13.14% year-on-year in 2022 and 2023, respectively. However, it is evident that the revenue growth rate of Shansong is lower than the order volume growth rate, and the growth rate is gradually slowing down. In the first half of 2024, the revenue growth rate of Shansong has declined to 7.63%.

Behind this, the expansion of scale has not brought a synchronized reduction in costs, mainly due to the high hard costs of paying salaries and rewards to couriers. Data shows that the number of registered couriers of Shansong increased from about 1.1 million in 2021 to about 2.7 million as of June 30, 2024. During this period, from 2021 to 2022, 2023, and the first half of 2024, the salaries and rewards paid by Shansong to couriers were 27.51 billion yuan, 36.14 billion yuan, 39.75 billion yuan, and 19.51 billion yuan, respectively, accounting for 90.5%, 90.3%, 87.8%, and 85.4% of the revenue, respectively. Shansong stated in the prospectus that in the foreseeable future, the cost of revenue will increase with the expected growth of order volume.

In fact, it is not surprising that "one-to-one urgent delivery" relies on a large amount of human resources and has high costs. Liu Junbin, a special researcher at the E-commerce Research Center of the Network Economy Society, said that one-to-one urgent delivery can quickly respond to customer needs, but there are fewer business and return trips, making the operating costs higher. Mo Daiqing, a senior analyst at the E-commerce Research Center of the Network Economy Society, also pointed out that this model is destined to make the cost of couriers for Shansong higher than other companies, and the increase in operating costs may make it difficult for Shansong to compete with competitors in some price-sensitive markets, and also limits the expansion space of Shansong in some regions or sub-markets.

How to deal with competition with "small and beautiful"

To highlight its positioning, Shansong added two attributes of "independent" and "dedicated line" before its self-introduction in the prospectus, and emphasized "We are the largest independent on-demand dedicated express delivery service provider". In this sub-field, the market share of Shansong is 33.9%, which can be said to be a leading company.

However, if we look at the entire instant delivery market, it has long been a battleground for many heroes.

At present, there are mainly four types of players in this industry: the first type is platform companies led by takeaway companies such as Meituan and Ele.me; the second type includes traditional logistics and express delivery companies such as SF, JD, and ZTO, YTO, and Yunda; the third type is car-hailing platforms such as Didi, Gaode, and Hello, which have also launched delivery and errand services; the fourth type is professional delivery companies such as Shansong, Dada, and UU Run Leg.

In the instant delivery industry, which intersects with many sub-markets such as same-city express delivery, express delivery, and takeaways, there are many players who are not willing to "stick to one's own business" and expand their business. Can Shansong, which is "small and beautiful", avoid competition?

Mo Daiqing introduced that the competition in the instant delivery market is becoming more and more intense. Dada Group and SF Same-City have successfully gone public, and Cainiao has also announced the upgrade of its same-city express delivery service, launching the "half-day delivery" service. They are backed by giants such as JD, SF, and Alibaba, with strong financial support and business resources. In addition, there are some new "disruptors", such as last year's announcement by Huolala to launch errand services; Didi also launched Didi errand services; Gaode Map announced a cooperation with many instant delivery companies to provide errand services through its platform; Douyin, Kuaishou, and Dongfang Zhenxuan are also accelerating the trial of instant retail.Unlike the players who rely on "big trees" mentioned earlier, the "independence" that Shansong emphasizes means that it can operate without restrictions from other platforms. This is an advantage, but it could also be a disadvantage. Taking Dada as an example, this year, as JD.com increased its investment in instant delivery services, Dada made a series of adjustments to further integrate into the JD ecosystem, gaining more resource sharing and business synergy.

Going public may temporarily alleviate some of Shansong's pressures. Regarding the use of funds raised in this financing round, Shansong stated that it will mainly be used to expand its customer base and increase market penetration, build brand image, invest in technology research and development, and for general corporate purposes.

Zhuang Shuai, the founder of Bailian Consulting, mentioned that going public for Shansong means, first, obtaining public financing capabilities and strengthening financial strength. Second, becoming a public company subject to securities market supervision can also win more customer trust and recognition, attracting more partners. For U.S.-listed companies, it can also improve international influence and expand into global markets. Third, as a public company, it can better retain and attract outstanding talents through stock incentives. However, Zhuang Shuai also mentioned that since going public requires disclosing some operational and financial data, it allows competitors to better understand Shansong's business situation, which could potentially intensify competition.