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ZTO Express Cayman ADR Representing Ord Shs Class A ZTO

ZTO Express (Cayman) Inc is a China-based company principally involved in the provision of express delivery services through its nationwide network as well as other value-added logistics services. Its express delivery services mainly include parcel sorting and line-haul transportation. The Company directly provides express delivery services to certain enterprise customers, including vertical e-commerce and traditional merchants, in connection with the delivery of their products to end consumers. The Company conducts its businesses in domestic and overseas markets.


NYSE:ZTO - Post by User

Post by RionsRunon Jul 20, 2018 10:30am
140 Views
Post# 28344084

More than What Meets the Eye

More than What Meets the Eye
Alibaba usually takes large or controlling interests in a company.  With ZTO they deviated. This spells out nicely why. -Rion
 
 
Alibaba and Cainiao’s Investment in ZTO Express – More than What Meets the Eye 
On May 28th, it was announced that Alibaba Group Holding Limited, its logistic subsidiary, Cainiao Network and ZTO Express Inc. an express delivery company in China, came to a strategic agreement in which investors led by Alibaba and Cainiao would invest US$1.38 billion in ZTO in exchange for an 10% equity stake in the company. Alibaba said that the investment will “further support both Cainiao and ZTO’s focus on building up first and last-mile pickup and delivery capabilities, warehouse management, cross-border logistics and technology-driven smart solutions”. 
 
The relationship among the three entities have always been close and almost dj vu like when in 2013 ZTO Express was among the first investors in what is now Cainiao. 
 
Overall this doesn’t seem that big of an announcement considering well over half of ZTO Express’ parcel volume are generated from Alibaba’s e-commerce platforms. The relationship with Alibaba has certainly benefited ZTO. According to SEC filings, ZTO’s total annual parcel volume has increased from 279 million in 2011 to 6.2 billion in 2017. 
 
While a number of express providers have benefited from Alibaba’s online platforms, ZTO Express differs from a few of them such as SF Express. Instead of a major emphasis on the last-mile, ZTO instead focuses on its core sorting hubs (a total of 76 facilities) and line-haul transportation while relying on network partners to carry out pickup and last-mile deliveries. Part of the line-haul transportation is outsourced to Tonglu Tongze which has a fleet of about 1,200 trucks. In total, ZTO’s fleet consists of more than 3,600 self-operated trucks, of which, about 1,800 of which are high capacity 15-17 meter long models. In addition, as of December 31, 2017, ZTO had 3,800 direct network partners and over 5,700 indirect network partners that handle pickup and last-mile deliveries. 
 
All of its services are managed via its proprietary technology platform, Zhongtian System. Significant investment has been made since ZTO’s 2016 IPO on the NYSE. Besides offering the usual parcel sorting, transportation and tracking management, the platform also tracks each delivery order and according to pre-set formulae, calculates the network transit fees payable to ZTO, last-mile delivery fees payable to direct network partners and, where applicable, indirect network partners. Zhongtian system is also connected to order systems of major e-commerce platforms and vertical e-commerce websites in China. 
 
But perhaps one of the most interesting services that ZTO Express offers is freight forwarding. In 2017, the company acquired the core business of China Oriental Express Co., Ltd. and its subsidiaries. China Oriental Express has offices in Hong Kong and Shenzhen. Besides offering traditional air and ocean freight forwarding services to and from China as well as customs brokerage, China Oriental Express also specializes in providing international mail and parcel delivery via partnerships with Aramex, FedEx, UPS, Singapore Post and more. In addition, it has warehouses in Hong Kong, Australia, China, US and UK. This acquisition could not only give ZTO Express a leg up on international deliveries it can also provide Alibaba and Cainiao a means of keeping packages within its network a little longer and ensure international capacity, perhaps at a more agreeable rate as negotiated by the forwarder, China Oriental Express. 
 
While Alibaba and Cainiao’s investment in ZTO Express will prove beneficial within domestic China, the true benefit will be in the international arena. 
 
https://logisticstrendsandinsights.com/alibaba-and-cainiaos-investment-in-zto-express-more-than-what-meets-the-eye/
 
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