Written by Lu Qianying

Edited by Ziye

Not long ago, Flash Express, which has been established for ten years and has raised funds for 11 rounds, finally went public on NASDAQ.

However, after going public, the capital market response was lukewarm, and Flash Express's share price suffered a continuous decline.

Source: Flash Express official Weibo

At the initial stage of its establishment, Flash Express quickly gained a foothold in the niche market by relying on the "one-to-one express delivery" model. Nowadays, Flash Express covers 295 cities nationwide, with 2.7 million registered riders and 88.9 million registered users.

However, despite this, its overall scale is still difficult to compete with giants such as Meituan and SF Express. As competitors flood into the market, Flash Express no longer has a significant advantage.

Judging from the financial data, Flash Express achieved profitability in 2023, but most of the profits came from government subsidies. It remains questionable whether this profit model that relies on external funding can be sustained.

Specifically, the core issue with Flash Express lies in the high cost of riders. From 2021 to the first half of 2024, rider salaries consistently accounted for more than 85% of the company's revenue, directly compressing profit margins. Meanwhile, the average revenue per order for Flash Express continued to decline, further eroding profitability.

When facing giants like Meituan, Dada, and SF Express, Flash Express's high-price strategy appears increasingly vulnerable. In an increasingly competitive market characterized by price wars, relying on premium services to obtain a premium becomes increasingly difficult.

In search of a breakthrough, Flash Express has attempted to cooperate with platforms like Douyin to expand business channels and increase traffic inlets. However, compared to large platforms, Flash Express's disadvantages in resources and traffic are still significant. While these collaborations have provided some support, they have also exposed Flash Express's weakness within the platform ecosystem. In other words, Flash Express lacks a strong ability to attract traffic and has failed to deeply embed itself into users' daily consumption scenarios within the platform.

Flash Express's future challenges extend beyond the realm of instant delivery. To achieve continuous growth, Flash Express needs to find new breakthroughs in emerging markets such as fresh produce and cross-border e-commerce.

However, at present, Flash Express's new narrative has yet to gain significant traction. With inadequate scale, profitability, and new narratives, the capital market has shown a lack of confidence in Flash Express.

How can Flash Express break through the currently questioned situation in the future?

1. Flash Express has gone public, but why aren't investors buying in?

On October 4, Flash Express finally rang the bell on NASDAQ, with the stock code FLX and an issue price of $16.5 per share, valuing the company at approximately $1.17 billion.

On the first day of trading, Flash Express's share price surged to $21.95. However, on the second trading day, the share price fell below its issue price, dropping to $16.49. Subsequently, on the third trading day, the share price continued to decline, closing at $15, with the market value shrinking to $1.065 billion. In just three days, Flash Express's market value evaporated by nearly 10%.

The performance of Flash Express's share price after its IPO reflects the capital market's doubts about its ability to grow and develop.

Flash Express Share Price Chart, Source: Flash Express Official Website

Let's start with profitability.

In the past years of 2021, 2022, 2023, and the first half of 2024, Flash Express's corresponding net profits were -RMB 291 million, -RMB 180 million, RMB 110 million, and RMB 124 million, respectively. Although the company finally achieved profitability in 2023, its prospectus revealed that profitability was largely dependent on increased government subsidies, while the operating profit directly related to the company's business operations was only RMB 11 million.

For Flash Express, the question remains whether it can sustain profitability in the future.

During its early days, Flash Express's core selling point—the "one-to-one express delivery" model—helped it achieve rapid market growth. Under this model, each order had a dedicated rider responsible for the entire delivery process, providing faster and safer delivery experiences. This differentiated service attracted a segment of high-end users who were willing to pay for higher delivery efficiency and service quality.

However, this model inherently limits Flash Express's scalability, positioning it as a "small but beautiful" business.

A research report on the instant delivery market by China International Capital Corporation Limited indicates that food delivery dominates the instant delivery application scenarios, accounting for 70% of orders. Fresh produce and convenience stores follow, accounting for 12% and 10% of orders, respectively, while one-to-one express delivery orders account for only 3%.

This means that although Flash Express has a differentiated advantage in niche segments, its overall market capacity is limited and difficult to support large-scale expansion.

In the fiercely competitive market, Flash Express's model faces numerous challenges. Compared to giants like Meituan and Ele.me, which have vast user bases and high-frequency orders, Flash Express's "independent on-demand express delivery" model appears more limited. Its user base is relatively scattered, with limited order volumes, making it challenging for the company to expand its market share.

In fact, Flash Express is seeking a breakthrough.

To expand its market, Flash Express has not only intensified its efforts in the consumer market but also actively deployed in the business-to-business (B2B) market. In 2018, it launched "Flash Express Enterprise Edition" to provide efficient logistics solutions for corporate clients.

However, compared to other large platforms, Flash Express's market scale in the B2B segment remains limited. Coupled with its relatively high pricing, it struggles to achieve significant growth in cost-conscious corporate markets.

To further expand its market, Flash Express partnered with Douyin Life Services in 2022, hoping to leverage Douyin's traffic to expand its business. However, Douyin's third-party logistics partners also include competitors like Dada, SF Express City, and UU Running, limiting Flash Express's access to traffic and orders.

Over the years, Flash Express has frequently explored new areas, but so far, the response and progress have been limited, with little disclosure on its B2B business in its official website and financial reports.

Meanwhile, the high-cost and low-margin structure further exacerbate Flash Express's profitability challenges.

In terms of revenue, Flash Express's income has continued to grow.

Specifically, Flash Express's revenue increased from RMB 3.04 billion in 2021 to RMB 4.529 billion in 2023. However, the company recorded continuous losses in 2021 and 2022, achieving profitability only in 2023 through government subsidies, with a net profit of RMB 110 million.

From a broader perspective, Flash Express's average revenue per order is also gradually declining. In recent years, Flash Express's order volume has continued to grow, but this has not effectively translated into higher revenue. From 2021 to 2023, Flash Express's order volume increased from 159 million to 271 million, but the average revenue per order declined from RMB 19.2 to RMB 16.5.

Meanwhile, the cost of riders has increased.

This is closely related to Flash Express's "crowdsourcing" rider model. Under this model, riders have high mobility, and to maintain stable delivery capabilities, Flash Express needs to increase rider compensation.

Source: Flash Express official Weibo

According to the prospectus, the number of registered riders at Flash Express increased from approximately 1.1 million in 2021 to approximately 2.7 million in June 2024. From 2021 to 2023, Flash Express's compensation and rewards to riders accounted for 90.5%, 90.3%, and 87.8% of the company's revenue, respectively.

Even in the first half of 2024, this ratio was still as high as 85.4%. The high cost of riders limits the company's ability to reduce operating costs through economies of scale.

Due to the aforementioned reasons, Flash Express's gross margin is unimpressive. Although the company's gross margin increased from 6.2% in 2021 to 11.3% in the first half of 2024, the figure is still unimpressive compared to other players in the industry.

Flash Express has long faced challenges in terms of scale and profitability, and investor confidence in the company has declined.

In recent years, Flash Express's valuation has shrunk significantly. In its final funding round in 2021, the company was valued at up to $2 billion, or approximately RMB 13 billion. However, according to the Hurun Global Unicorn Index 2024, Flash Express's valuation has dropped to RMB 7.1 billion, nearly halved.

Despite its successful IPO, the capital market's lukewarm response reflects the many issues Flash Express still needs to address.

2. With fierce market competition, how can Flash Express face price wars?

As more players enter the market, Flash Express faces increasing competitive pressure in the instant delivery industry.

It must contend not only with traditional delivery giants like Dada and SF Express City but also with price wars from emerging platforms like Meituan Running Errands, Fengniao, and UU Running.

Among them, Flash Express's "one-to-one express delivery" model is challenging to reduce costs, making it difficult to compete on price.

In the instant delivery industry, price has become a crucial competitive factor.

Major platforms have resorted to low prices to attract users. According to company financial reports, Dada's average order value in the first half of this year was only RMB 4.49, while SF Express's express logistics business, which includes timed express and city delivery, had an average order value of RMB 15.9.

In contrast, Flash Express's average order value remains around RMB 16.5, which is relatively high in the industry.

Flash Express Pricing Table, Source: Flash Express APP

To expand its scale, Flash Express must address this situation.

What's more concerning for Flash Express is that even in its niche areas, it faces increasing competition.

Flash Express's flagship "one-to-one express delivery" model offers faster and safer service, particularly suitable for urgent or valuable items. This model has a loyal customer base among high-end users who are willing to pay a premium for speed and reliability.

However, as the instant delivery market matures, more platforms are offering similar dedicated delivery services, weakening Flash Express's differentiated advantage in this niche segment.

For example, SF Express City also relies on a high-price, high-quality service model, while Dada and UU Running are continuously improving their personalized services. Consequently, Flash Express's market space may be further compressed.

Survival is a must for Flash Express.

To expand its channels, Flash Express partnered with Douyin Life Services in 2022 and Meituan Takeout in 2023, hoping to leverage these platforms' vast traffic and network resources to increase order volumes. However, these platforms also work with other instant delivery service providers like Dada and SF Express City, leaving Flash Express to compete with multiple players.

Meituan Running Errands Page, Source: Meituan APP

While these collaborations undoubtedly bring more business opportunities to Flash Express, ensuring long-term user stickiness for these new orders remains a challenge.

Moreover, as the instant delivery industry matures, diversification of platform services and scenario expansion have become irreversible trends. From solely delivering meals to delivering "anything and everything," major enterprises continuously meet users' increasingly diverse needs through technological innovation and efficiency optimization.

Take Meituan and SF Express City as examples. Leveraging their robust platform resources and diverse service scenarios, these enterprises occupy a significant advantage in delivery network construction. They not only rely on vast user bases but also continuously integrate supply chains, covering various scenarios including catering, retail, fresh produce, and even pharmaceuticals, gradually forming comprehensive instant delivery ecosystems.

In contrast, while Flash Express's "independent operation" model offers flexibility, it is weaker in terms of resource ecosystems.

All of these issues await Flash Express's new solutions.

3. Instant retail is a hot trend, but Flash Express needs more narratives

Currently, the trend of instant retail undoubtedly presents vast development opportunities for Flash Express.

According to iResearch, China's instant delivery user base grew from 124 million in 2014 to 506 million in 2020. According to Frost & Sullivan, China's instant delivery industry order volume reached approximately 40.88 billion in 2023, up 22.8% year-on-year, and is expected to reach 81.31 billion by 2028, with an average annual growth rate of 14.7% over the next five years.

However, in this increasingly competitive market, relying solely on Flash Express's existing "one-to-one express delivery" narrative is clearly insufficient for it to stand out.

As one of the earliest entrants into the instant delivery sector, Flash Express has proven the feasibility and market value of its model, but this does not guarantee a smooth ride ahead.

Looking around, giants like Meituan and JD.com have built comprehensive ecosystems in the retail and logistics sectors, endowing them with broader market influence through robust supply chains, platform traffic, and brand effects.

In recent years, Flash Express has gradually expanded its business scope. In 2018, it applied for trademarks including "Flash Express Overseas Shopping," "Flash Express Fresh Produce," and "Flash Express City Shopping." In 2019, it applied for the "Flash Express Quick Shopping" trademark.

Subsequently, Flash Express began providing delivery services for local restaurants, flower shops, supermarkets, and other merchants. By expanding into these new business areas, Flash Express hopes to enhance its market competitiveness. However, these attempts have garnered limited attention.

Source: Flash Express Official Website

On one hand, competition in the fresh produce delivery sector is particularly fierce, with platforms like Meituan and Dada already dominating. Although Flash Express's "one-to-one express delivery" offers timing advantages, it lacks sufficient competitive barriers in terms of infrastructure and supply chain support, making it difficult to compete with these giants.

Meanwhile, challenges in the cross-border e-commerce sector cannot be overlooked. Flash Express's "overseas shopping" service has not significantly contributed to its overall business growth.

Compared to cross-border e-commerce giants in the industry, Flash Express still has obvious shortcomings in logistics efficiency and cost control. While Flash Express continues to experiment, its actual results have been unsatisfactory so far, with little disclosure about these new businesses in its official website and financial reports.

More recently, according to TechPlanet, Flash Express is internally testing a new function called "Squirrel Express." Currently, this function is being piloted among some riders in regions like Beijing and Shanghai, offering three order modes: Squirrel Dedicated Delivery (one-to-one and one-to-many deliveries) and Squirrel Group Delivery (many-to-many deliveries).

Among them, one-to-one dedicated deliveries use a dispatch model, while multiple and group deliveries operate on a grab-and-go model. On the "Flash Express Rider" APP, riders can now choose between "Flash Express Knight" and "Squirrel Courier" identities to accept orders. Compared to the "one-to-one express delivery" service, Squirrel Express offers lower order prices, but its order-taking model is more flexible, supporting group and multiple deliveries, allowing riders to accept more orders and earn more based on their efforts.

It is evident that Flash Express is still growing and telling new narratives. However, whether these businesses can bring substantial breakthroughs hinges on Flash Express's ability to build corresponding infrastructure and acquire customers through quality-price ratios.

It's important to note that fresh produce delivery and cross-border e-commerce require vast supply chain support and highly refined operational management. Only by making breakthroughs in these areas can Flash Express's diversification narratives truly take root.

In the trend of instant retail, the core issues facing Flash Express are no longer solely about speed but also about expanding scale, enhancing profitability, and adopting a multi-legged approach.