China’s Tiandihui eyes bigger scale to improve logistics efficiency

PUBLISHED : Monday, 26 December, 2016, 3:33pm
UPDATED : Monday, 26 December, 2016, 10:46pm

Shanghai Tiandihui Supply Chain Management, mainland China’s largest online road transportation operator, is looking to expand transaction value by more than 60 per cent to 100 billion yuan in 2017 as the internet continues to penetrate China’s fragmented logistics sector.

Xu Shuibo, chief executive of Tiandihui, told the South China Morning Post that the company also plans to raise funds via a stock market listing or a new round of financing to expand the scale of its operations.

“At the moment we are focusing on expanding the scale of our businesses,” he said. “Without a large volume of business [through new routes] it’s difficult to increase the use of internet technologies to improve efficiency.”

Tiandihui’s online platform matching trucks with cargo handled total transactions of more than 60 billion yuan this year, a surge of 340 per cent from 2015.

The Shanghai-based company raked in revenue of 20 billion yuan in 2016, nearly four times the amount a year ago.

The company posted a profit for only three months this year – January, May and November – but Xu said the operation could become fully profitable soon.

“Tiandihui aims to achieve a faster growth pace to vie for a bigger market share,” he said. “We will work out a plan to raise new funds to replenish our capital for expansion.”

However, Xu declined to reveal details of the new fund raising.

China’s logistics industry is valued at 10 trillion yuan, but Beijing is determined to downsize the business to avoid duplication and waste of transportation resources in the world’s second-largest economy that is undergoing a transition to a “New Normal” – a slower but sustainable growth model.

“The name of the game in the logistics sector is to cut the redundant capacity while better using the internet and existing transport tools to create a cost-efficient model,” said Cao Hua, an investment director with Tripod Capital. “It’s not an easy job but it’s worth a huge effort to try and achieve this.”

About 60 per cent of the mainland logistics industry derives from road transportation.

The central government envisions cutting logistics costs by 1 trillion yuan by 2020 by using the latest technologies and advanced facilities to efficiently handle the delivery of goods.

Unlike Cainiao Network Technology, an affiliate of Alibaba Group that coordinates deliveries and handles data for transactions on Taobao and Tmall, Tiandihui deals with only business-to-business (B2B) transactions.

“We don’t take on the B2C (business-to-customer) network operators directly,” said Xu. “Instead, we see the potential of partnering with them to expand the market.”

Cainiao and other B2C delivery firms could use the services offered by Tiandihui to find suitable trucks to help move their goods, he added.

Alibaba owns the South China Morning Post.

China’s top five delivery firms, including ZTO and SF, are speeding up expansion around the country amid the rapid rise of e-commerce which has redrawn mainland China’s commercial landscape.

Many mainland delivery companies have either completed an initial public offering or are preparing for a backdoor listing to access much-needed growth capital.

Tiandihui also plans to increase the number of its highway ports, or road transportation hubs, to 100 in 2017, more than double the current number, Xu said.