On August 4, the State Post Bureau officially launched an investigation into STO Express, citing systemic gaps in safety management across its network.

Amid a broader industry push to curb cut-throat pricing and boost performance, regulators are now holding brand headquarters directly accountable. This crisis for STO Express not only reveals deep-seated governance issues within the Tongda System’s franchise network but also serves as a wake-up call for the entire sector, emphasizing the importance of safety compliance.

Regulatory Action and Incident Overview

Official reports confirm that since 2026, entities operating under the “STO Express” brand, name, and shipping labels have been involved in multiple safety incidents, with recurring safety hazards identified at operational sites. Regulators determined that STO Express headquarters failed to enforce unified safety management across its network, as required by regulations.

This investigation is not the result of isolated incidents at a single outlet. Since the start of the year, several safety-related events have occurred, including a fire in a STO Express transport vehicle in Yongji, Shanxi, which damaged thousands of parcels, and a sorting center equipment collapse that caused casualties. Despite multiple rounds of discussions and corrective actions, safety risks persisted, ultimately leading to formal proceedings against the brand headquarters.

In response to the regulatory investigation, STO Express quickly issued an official statement, fully accepting the regulatory findings, pledging full cooperation, acknowledging significant shortcomings in unified safety management across its network, and publicly apologizing to consumers and society.

STO Express’s Safety Committee immediately launched a network-wide safety review, revising safety protocols, restructuring management systems, strengthening provincial-level oversight, implementing a “one-strike” policy for safety violations, and enforcing unified safety standards for directly operated outlets, franchisees, and suppliers. The company also clarified that its network operations and daily delivery services remain unaffected by the investigation.

The capital market reacted relatively calmly. As of the August 4 close, STO Express (002468.SZ) finished at RMB 14.32, down 0.35%, with a total market cap of RMB 21.921 billion and daily trading volume of RMB 197 million. While short-term stock price movements were limited, the medium- to long-term operational and brand risks stemming from the investigation have become more apparent.

From a regulatory perspective, under express industry rules, brand headquarters must fulfill unified safety management responsibilities as long as entities operate under the same brand, name, and shipping labels. Franchise agreements cannot absolve headquarters of legal obligations, which is the core reason for holding STO’s headquarters directly accountable.

The industry has long operated under the assumption that “outlets bear the blame when incidents occur, while headquarters avoid responsibility.” However, this investigation marks a significant shift in regulatory enforcement, clarifying that trademark licensing does not equate to liability separation.

Performance Recovery Amid Structural Challenges

Notably, this regulatory action coincides with STO Express’s strongest performance recovery in recent years.

Benefiting from industry-wide efforts to curb irrational price competition, per-ticket revenue has stabilized and risen, improving corporate profitability.

In 2025, STO Express’s annual express delivery volume grew by 15% year-on-year to 26.139 billion pieces, with market share increasing by 0.16 percentage points to 13.14%. Annual revenue reached RMB 55.586 billion, up 17.84% year-on-year, and net profit attributable to shareholders was RMB 1.369 billion, up 31.61% year-on-year.

The growth momentum continued into 2026. In Q1, STO Express reported revenue of RMB 15.686 billion, up 30.74% year-on-year, and net profit attributable to shareholders of RMB 459 million, up 94.29% year-on-year.

STO Express projects that its net profit attributable to shareholders for H1 2026 will be RMB 950 million to RMB 1.06 billion, up 109.59% to 133.85% year-on-year, driven by volume and price increases.

However, beneath these strong financial figures, the structural contradictions within the franchise network persist.

The Tongda System’s franchise model relies heavily on franchisees to cover facility and labor costs, allowing headquarters to expand the national network with lower capital expenditure and support the rapid growth of e-commerce express delivery.

The trade-offs of this model are clear. Franchisees operate independently, with profit margins continuously squeezed by industry competition, leading them to prioritize cost-cutting in non-direct areas such as fire safety investments, equipment maintenance, and personnel safety training.

Meanwhile, while headquarters controls the brand, shipping labels, and sorting systems, its ability to enforce standards at end outlets is limited, relying mostly on fines and assessments without sufficient financial support or on-site oversight, allowing safety risks to accumulate.

In the past, the industry tended to blame individual franchisees for safety incidents, attempting to define responsibilities through franchise contracts. However, current regulatory guidance is clear: brand owners, who benefit commercially from trademark licensing, must bear primary responsibility for unified safety management across the network, and internal franchise agreements cannot override external regulatory requirements and public interests.

Safety hazards stemming from the franchise model are not unique to STO but are an industry-wide issue among Tongda System members, differing only in the degree of headquarters’ control, resource investment, and risk exposure.

In H1 2026, the express industry’s business volume CR8 reached 96.1%, with industry concentration continuing to rise. The sector has moved beyond crude expansion focused solely on volume and scale, with safety, compliance, and service quality becoming core competitive dimensions.

The investigation into STO Express marks a regulatory shift from penalizing outlets to holding headquarters accountable, signaling a comprehensive tightening of safety supervision in the express industry.

Multiple Challenges and Industry Transformation

The investigation is just the beginning. Subsequent findings, penalties, and network-wide rectification efforts will pose multiple practical challenges for STO.

Network-wide safety upgrades require substantial capital investment. The overhaul involves fire safety improvements at sorting facilities, equipment maintenance and updates, expansion of safety personnel across the network, and regular safety training, all of which will increase operational costs.

With the express industry’s gross margins recovering but still under pressure, safety investments will directly squeeze corporate profits. If rectification remains superficial without penetrating thousands of franchise outlets, safety risks are likely to resurface.

Franchisee cooperation is crucial to the success of rectification. Given the current low delivery fees at end outlets, most franchisees operate on thin margins, and additional safety upgrade investments will further burden their operations.

How headquarters balances stringent safety requirements with franchisees’ survival realities, avoiding outlet resistance to rectification and network instability, is a pressing challenge for management. Widespread outlet fluctuations would directly impact network service stability.

The capital market is also waiting to see the outcome. With no formal penalties issued yet, future hefty fines or business restrictions could directly impact brand reputation and investor expectations.

As competition in the express sector intensifies, e-commerce clients are increasingly sensitive to network stability and safety risks. Recurring safety issues could indirectly erode client confidence in cooperation.

Beyond individual companies, this incident reflects a profound shift in the express industry’s development logic. While price, scale, and market share were once the core competitive focuses, quality safety and compliant operations now carry greater weight under regulatory guidance.

The franchise model will not change due to a single investigation, but its operational logic is being redefined. Brand owners must not only pursue network expansion but also ensure that control capabilities and safety resource investments match business scale.

For the entire express industry, STO Express’s rectification process will serve as an important observation sample. Price cut-throat competition in the express sector has reached its limits, and safety bottom lines must not be compromised.

How STO Express balances scale growth, franchisee survival, and compliance safety will determine the trajectory of the express industry’s next phase.

Whether STO Express can achieve genuine management upgrades through this regulatory action, rather than a short-term campaign-style rectification, will continue to be monitored by Global Finance Talk.