With a loss of 2.8 billion yuan in 4 years, Kuaigou Taxi still wants to “burn money” to be the “roller king” of intra-city freight?

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The tempting “cake” of intra-city freight is not easy to eat

Written by Meng Huiyuan, edited by Li Jinlin

Source: Zinc Scale

Recently, the news of Kuaigou Taxi’s second delivery to the Hong Kong Stock Exchange has attracted great attention to the intra-city freight market.

What is surprising to the outside world is that a company that has lost nearly 2.8 billion yuan in four years and is expected to lose money until the end of 2024, why should it impact the “first share of freight in the same city”?

In fact, in the highly competitive intra-city freight track, it is not uncommon to lose money for a long time like Kuaigou Taxi. As Kuaigou Dache explained the loss in the prospectus, “The intra-city logistics business is still in its infancy and needs to be driven by a large amount of investment. To achieve business growth, a strong competitive advantage must be established.”

After the “Hundred Regiments War”, the intra-city freight market has formed a situation of Kuaigou taxis, cargo pulls, Yunman, and Didi Freight’s four-way seesaw. However, it has seen a large market demand, low market penetration, and market concentration. Low is the potential prospect of a huge incremental market. New players such as Meituan and Hello have also entered the field, which undoubtedly exacerbated the “conflict” on this track again.

Surrounded by strong enemies, Kuaigou Dache Borrowed to go public. “The funds raised will be used to expand the user base and enhance the network effect of the platform.” It is not easy to win this “roll king” battle.

Seeking IPO is to continue to fight “price war”?

Kuaigou Taxi has never concealed its intention to seek an IPO in order to “burn money” and fight a “price war”.

According to its prospectus, “the listing is mainly used to supplement supplementary funds to increase user subsidies and advertising; seek strategic cooperation, investment and acquisition, as well as technology research and development investment and daily operations.” But at the same time, the company does not guarantee The cost of sales and marketing activities will be recovered, or such activities will be effective in developing new users.

To put it bluntly, money has to continue to be “burned”, but the effect is not guaranteed. Judging from the actual effect of Kuaigou Taxi’s “burning money” in the past few years, it is very frank.

According to the financial report data, from 2018 to 2021, the sales and marketing expenses of Kuaigou Taxi remained high, at 524 million yuan, 296 million yuan, 195 million yuan and 335 million yuan respectively. This part of the cost accounted for about 50% of the total revenue during the corresponding period, and even reached as high as 115.7% at one point. Among them, about half of the marketing expenses were used in user rewards for shippers, and the company spent a lot of effort to exchange subsidies for market Accounting rate.

Unfortunately, the result of Kuaigou Taxi’s huge investment of 1.35 billion yuan is that its 3.2% market share in the mainland is still far from the top of the industry – as of 2021, cargo Lala still occupies more than half of the market share. Market share (52.8%), Kuaigou Dache’s market share has fallen from 5.5% in 2020 to 3.2%, ranking third after Didi Freight (5.5%).

So why does Kuaigou continue to raise funds and continue to “burn” even if the “burning money” effect of Kuaigou taxi is not good? This is about the pure platform positioning of Kuaigou Taxi, which basically has no self-support ability.

From the perspective of Kuaigou Taxi’s business model, on the capacity side, Kuaigou Taxi mainly aggregates independent drivers and logistics companies to provide them with dispatch services. Since there is no self-operating capacity, Kuaigou Dache is very dependent on third parties (including human resources agencies and fleet operators that dispatch drivers to the platform to complete the consignment), and the stability of the capacity depends entirely on the interests of Kuaigou Dache and these agencies;

On the demand side, Kuaigou Taxi also radiates B-end SMEs and independent C-end users, providing logistics services. Among them, B-end customers are relatively stable, but as the frequency of demand for transportation capacity increases, customers have higher requirements for price and experience, and there is an urge to bypass the platform for transactions at any time. The C-end is relatively more uncontrollable. Unlike the travel market with higher demand and higher frequency, personal intra-city freight is a low-frequency consumption scenario. Faced with diversified and homogeneous freight platforms, it is usually more difficult for users to cultivate brand loyalty.

Based on this, platform services, enterprise services and value-added services have become the three main businesses of Kuaigou Taxi. According to the data in the prospectus, in 2021, the total revenue of Kuaigou Taxi will be 660 million yuan, a year-on-year increase of 24.53%. Among them, the revenue of platform services (logistics services provided to C-end users and some small and medium-sized enterprises) was 260 million yuan, the revenue of enterprise services (customized services provided to small and medium-sized enterprises) was 370 million yuan, and the value-added services (providing fuel cards and vehicles for drivers) Maintenance and repair and referral and other value-added services) revenue was 30 million yuan, and the three accounted for 39.1%, 56.4%, and 4.5% of the total revenue respectively. In general, the proportion of pan-C and B-end is basically four or six, and the value-added income is basically negligible.

Obviously, the bulk of the revenue is in the C-end and B-end business, and Kuaigou Taxi has to make a fuss about it if it wants to make a profit. The more important premise is that to solve the problem of low viscosity at both ends of supply and demand, the platform must continue to leverage the growth of traffic through marketing.

Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University International Business School, believes that for Kuaigou Dache, which does not have strong technical support or R&D strength, the barrier to the intra-city freight industry lies in the local market business. Familiarity with the ecology, “Kaigou taxi needs localized marketing to build channels, recruit drivers, and cultivate user habits. These are the barriers to Kuaigou taxi.”

In short, “burning money” for marketing to expand market influence is the key. “In the case where the market structure is still unclear, even if you invest huge amounts of money to improve user experience and build high technical barriers, you still can’t Competitors distance themselves from each other. So the key at this time is to build market share first, and then use technology to optimize user consumption experience when the share increases.”

Disorderly competition has long been the norm in the freight industry

External competitive pressure is also accelerating the pace of Kuaigou Taxi’s journey to “burning money”. In the two versions of the prospectus updated before and after Kuaigou Dache, the fierce market competition was listed as the first of the seven major risks of the platform.

Previously, the reason why Didi Freight gained a firm foothold in the intra-city freight market was the price subsidy strategy, which increased the attractiveness and viscosity of users and drivers by giving high subsidies to both drivers and users; Meituan Zhuolu successfully entered the track with the trump card of “mainly transparent pricing” (no information fee, management fee, membership fee), and verified the superiority of “price war” in market competition.

A counter example is Kuaigou taxi. In 2019, the sales and marketing expenses of Kuaigou Taxi were 296 million yuan, a year-on-year decrease of 43.5%, and the market rate dropped from 115.7% to 54%. Due to the significant reduction in marketing expenses, its related business data also declined on a large scale. : In 2019, the average MAU of Kuaigou taxi users dropped from 691,000 in 2018 to 667,000, and the average MAU of enterprises also dropped from 1,802 in 2018 to 1,751. It was not until 2021 that Kuaigou Dache resumed burning money again, and the market rate increased from 36.7% to 50.7%.

Whether it’s Didi Freight’s 30-day platform service fee waiver for drivers, as well as various discount coupons and discounts; or Huo Lala’s 500 million subsidy to start the “Cargo Welfare Month”; or Kuaigou Taxi is also working for drivers The terminal launched a 20 yuan reward activity, and on the user side, offers such as “99 minus 10”, “338 minus 30”, “1288 minus 100” and other discounts… Under the industry trend of “burning money”, all entrants They were only carried forward.

Losing money has long been the norm for Kuaigou to take a taxi. In the four years from 2018 to 2021, the total loss of Kuaigou Taxi reached 2.786 billion yuan, almost exceeding the total revenue of these four years.

Judging from its relatively weak market share in 2021 and the fact that it may not see a turning point in profitability until the end of 2024, investors who want to impress the secondary market can successfully list and obtain a “recovery” fund. Dog taxis have to be a bit more aggressive.

Therefore, in the new story of Kuaigou Taxi, it can be seen that it has turned its attention to new energy freight: on the one hand, it will accelerate the landing of new energy trucks on the platform, provide new energy car purchase discounts for drivers, and reduce the threshold for capacity expansion and competition. On the other hand, it opens up the upstream supply side of new energy vehicles to form a multi-party collaborative network, providing more value-added services to OEMs, dealers, and drivers.

However, no matter how beautiful the story is, no matter how big the “pie” is, the future can only be achieved by holding on to the present. In the short term, Kuaigou Taxi still has to rely on the current fundamentals of intra-city freight. In particular, the rising cost of compliance development other than “burning money” has put forward higher requirements for major platforms.

In February of this year, the Law Enforcement Team of the Shanghai Communications Commission interviewed the three platforms of Didi Freight, Kuaigou Taxi and Huolala, and clearly required the platforms to conduct a comprehensive review of registered vehicles operating in Shanghai to ensure the information of vehicle personnel. Authenticity, prohibit unqualified vehicles and personnel from entering the platform, and formulate a plan for the removal of illegal vehicles. Those who do not make corrections within the time limit will face a fine of up to 500,000 yuan if the circumstances are serious. In addition, the Shanghai traffic law enforcement department also issued notices of ordering rectification to these three platforms.

The operational challenges brought about by strong supervision have forced relevant platforms to make changes. For example, in terms of data security and employment compliance, technology can be used to prevent data leakage, protect user data security, and use technology to audit the operation of its drivers. Qualifications etc.

Kuaigou Taxi also stated this in the prospectus. It is facing the inherent risks of handling large volumes of data and securing such data, facing several challenges related to data such as platform transactions, and failure to comply with the relevant regulations “could expose the company to significant penalties and negative publicity, changing its business practices. , the risk of increasing costs and significantly disrupting the business.”

Burning money is cool for a while, technology and service are the protracted battle

“Burn money” for the market is not enough, the tempting “cake” of intra-city freight is actually not so easy to eat.

Many pain points in the industry have become the shackles that inhibit the further development of the industry and related companies.

First, the intra-city freight market has long had the problem of opaque price information, lack of unified charging standards, and random charging has occurred from time to time; secondly, the B-side demand is complex and difficult to scale, the C-side demand is low-frequency and scattered, and the problem of supply and demand matching has always been a problem in the industry. Finally, non-standard services, poor platform reputation, and safety problems caused by imperfect driver training and management systems are also stubborn diseases.

It is more intuitive to show the negative impact of these pain points with data. Data on illegal acts involving online freight platforms shows that since 2019, a total of 186 cases of illegal freight transport have been registered using online freight platforms without authorization. Last year, the number of related cases reached 67. Didi Freight or Kuaigou accounted for nearly 60% of the cases.

Among them, Kuaigou taxi can be said to be a frequent problem.

According to the APP notification (the third batch in 2020) published on the website of the Information and Communications Administration of the Ministry of Industry and Information Technology, Kuaigou Dache collected personal information privately, shared it with third parties privately, frequently applied for permissions and Excessive request for authority and required to complete the rectification and implementation work before July 30, 2020. In the APP notification on infringement of user rights and interests (the fifth batch in 2020), it was shown that Kuaigou Taxi has not been rectified, and there is still the problem of illegal collection of personal information.

From April 2021 to March 2022, Kuaigou Taxi was also interviewed 6 times by the Ministry of Communications, the Shanghai Communications Commission and other departments, mainly involving issues such as public safety and the protection of drivers’ rights and interests. But even so, the average commission rate of Kuaigou Taxi’s platform services in the Chinese mainland market has been rising for four consecutive years. After all, the monetization ability of intra-city freight platform services largely depends on the commission rate, and reducing the commission rate means reducing income.

When Kuaigou Taxi is still struggling with how to balance and make good use of the double-edged sword of the commission rate (a low commission rate will lead to insufficient monetization ability of the platform, and a continuous increase in the commission rate will lead to a large loss of drivers and reduce the activity of the platform), In order to improve freight efficiency and service quality, competitors such as Huolala and Yunmanman have to solve the problem fundamentally.

That is, digital transformation, such as using AR and deep learning technology to identify and measure three-dimensional objects to improve the digital level of goods; based on big data algorithms to efficiently match consumers and drivers, optimize delivery routes, and solve the problem of insufficient capacity during peak periods.

Correspondingly, Huolala invested 1.5 billion yuan for it, mainly for recruiting R&D personnel in big data development, algorithms, intelligent scheduling, etc., as well as for technological innovations such as artificial intelligence and big data. In the third quarter of 2021, Manbang Group, the parent company of Yunman, showed that its investment in research and development reached 202.9 million yuan, accounting for 16.34% of total revenue, an increase of 75.22% from 115.8 million yuan in the same period last year.

As we all know, the price war is an effective means to quickly gain market share, but it is not a long-term solution, especially after the new and old players have joined the subsidy war, the advantage of “burning money” is more difficult to maintain. It will be a protracted battle of technology and service on the same-city freight track. Only by working hard on this can real industry barriers be built.

From this point of view, even if Kuaigou Dache succeeds in winning the title of “the first freight forwarding company in the same city”, it does not mean that it is one step ahead of all its competitors. On the contrary, for Kuaigou Dache, whose net cash used in operating activities has been negative year after year and research and development expenses have been declining repeatedly, it is necessary to ensure sales and marketing expenses to stabilize the existing driver capacity pool and user stickiness, and then there will be a follow-up around digital technology services. Gaming opportunity.

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