Man Bang Group is stuck in the “long tail”

Image source @Visual China Text | Juchao Business Review, Author | Degree, Editor | Yang Xuran Capital likes grand narratives. The grand historical turning point always contains the most cost-effective long-term investment opportunities. Just like when not many people understand what the Internet is, and most people only regard it as a “new type of media”, investment institutions and Internet entrepreneurs have begun to explore the “display” function of media and extend it to a more real business world. in. The combination of the Internet and industry has given birth to a larger market, and the larger the market, the more it can stimulate the interest of venture capital institutions. The leading Internet companies in a broad category of industries can attract countless capital, so that they are over enthusiastic-the latest example is the just-listed Manbang Group (NYSE: YMM). The largest internet company in the field of road freight transportation is engaged in the display and matching business of freight information, and has gained a market value of US$23.4 billion, which is equivalent to more than RMB 150 billion. This number makes it directly into the echelon of China’s leading logistics companies in market value. The trillion-dollar road transportation market, the high efficiency of Internet companies, and the endorsement of star investment institutions have all attracted more investors who dare to bid: based on its total revenue in 2020, the market after the listing of Manbang Group The sales rate has exceeded 58 times. The grand narrative of the Internetization of the logistics industry is a key factor that motivates these investors to buy at high valuations. However, the complexity of China’s logistics industry is likely to exceed the most cautious and optimistic judgments of these investment institutions: Large enterprises have their own systematic logistics system; Small and medium enterprises are extremely price sensitive; Large and medium-sized logistics companies have their own mature customer groups; Courier companies have also undertaken a large part of the “integrated into parts” market in highway logistics; It is impossible to replace a considerable part of logistics parks and offline distribution stations. The market that is really left to Manbang and its idle capacity on its platform is far less exciting than described in various documents. This is not a problem in itself. The problem is that capital is treating “road logistics” as a whole, and then deducting it from the Manbang Group as the crown. 01 Trillions of space is indefinite In the 6 trillion yuan road freight market, the cake that Manbang Group can divide is actually relatively limited. Domestic road freight is a big market, but the industry has always been highly fragmented, and the information between suppliers and freight drivers is asymmetrical, resulting in high freight costs for suppliers, high vacancy rates for freight drivers, and low efficiency in the entire industry. In this context, digital freight platforms have emerged, and they are committed to using the Internet to solve the problem of matching trucks and goods. Before the emergence of Manbang Group, in the domestic long-distance freight market, there were three platforms: Truckbang, Yunmanman, and Fuyou Truck. In 2017, with the help of investor Wang Gang, Yunmanman merged with Truckbang, and Manbang Group was born and became the most monopolistic enterprise in the industry. Yunmanman finds a car APP page, Manbang has entered the same-city freight market According to a CIC report, Manbang is the largest digital freight platform for GTV (total transaction volume) in China and even the world in 2020, with GTV reaching 173.8 billion yuan. As of December 31, 2020, the number of registered heavy and medium freight drivers in Manbang is more than twice the number of the second to fifth largest digital freight platforms combined. The digitalization of freight is the most important story that Manbang Group tells the capital market. In 2020, the total scale of the road transportation market will reach 6 trillion yuan, but the total GTV of the digital freight platform only accounts for 4% of the entire road transportation market, which is about 240 billion yuan. According to this logic, the freight digitization rate is from 4% to 100%, and the industry has more than 20 times room for growth. The development space of Manbang Group is far from reaching the upper limit. CIC, the agency responsible for preparing the report entrusted by Manbang’s listing, clearly predicts that by 2025, the total amount of digital freight platform GTV will increase from 4% to 18% of the total road transportation market. The digitization of road freight is a major trend in the future, and this has become a consensus in the industry. But the actual situation is that Manbang Group is responsible for matching trucks and goods between long-tail cargo owners (demand side) and idle capacity (supply side), and only a part of the entire road freight market is cut away. Large shippers (companies above designated size) generally have dedicated carriers or fleets. Professional third-party logistics, including JD Logistics, Ande Logistics, Goodaymart, Kerry Logistics, and China Merchants Logistics, mainly serve large companies and cut away a piece of cake. There is also a considerable part of the market where the Manbang Group has no layout or it is difficult to intervene. For example, the ordinary express freight market has been controlled by major express companies; the same-city freight market is dominated by players such as freight forwarders and Kuaigou taxis; there are also containment slots. Special freight such as tank trucks, hazardous chemical trucks, ultra-long and ultra-wide large transportation vehicles are difficult to intervene because of their individual needs. Minus minus, in the 6 trillion yuan road freight market, the cake that Manbang Group can divide is actually limited. Some people in the industry even pointed out that Man Bang is about to hit the ceiling of the trunk highway freight market. The current ecological prosperity of the Man Bang still depends on the small and medium enterprises in the economy and idle capacity. The more SMEs and the more idle capacity, the higher the number of users and GTV of Manbang Group. On the contrary, if the proportion of large enterprises is higher, the more large fleets and professional logistics companies, the more the soil for the survival of Manbang Group will be thinner. The domestic capacity has already been declining. According to a set of data released by the Ministry of Transport in May 2020, the number of trucks in operation nationwide has dropped from 13.68 million to 10.88 million, a 20% decrease, and the number of employees has also decreased from 21 million to 18 million. The total number of vehicles that can be connected to digital freight platforms such as Manbang will also decline accordingly. 02 Realization anxiety is real Manbang’s VAT refunds from local governments in 2019 and 2020 are 860 million yuan and 939 million yuan, accounting for 34.8% and 36.4% of its revenue. Another sign that is considered to be full of people hitting the ceiling is to enter the intra-city freight market in 2020, looking for new growth points. However, there are already multiple players on the new track, such as Huolala, Kuaigou Taxi, Didi Freight, etc., and they are fighting a subsidy and marketing war. The competition is much fiercer. From the monopolistic trunk road freight market, to the fierce competition in the same city freight track, and it is very likely to follow the opponent to burn money, the strategy of gangbang has made some investors unable to understand. In addition to the possibility of encountering a ceiling of scale on the original track, the current Manbang Group is indeed facing the anxiety of realizing. At present, Manbang’s revenue mainly comes from freight matching business (freight brokerage income, membership income and transaction commissions, etc.) and value-added services (including credit, insurance, ETC and many other services). Among them, freight brokerage, as the core business, will account for 52.3% and 52.9% of the annual revenue in 2019 and 2020, respectively. The so-called freight matching and freight brokerage are matching costs. This cost is easy to understand like the Didi platform is drawn from the freight, but the actual situation is not the case. The cost of long-distance transportation is relatively large, and drivers and shippers are unwilling to pay through the platform. If commissions are to be paid for the freight, it is difficult to avoid the problem of skipping orders. However, even if it is transported within the same city and the freight is low, the freight online problem has not been solved 100%. If you want to draw money from the freight, Manbang will be the shipper of the shipper, sign a transportation contract with the owner, and take responsibility for the loss of the goods in transit, which is not the case with the current Manbang. Therefore, in 2020, the 1.95 billion freight matching service revenue of Manbang Group does not come from the 173.8 billion GTV rake (according to this calculation, the rake ratio is less than 1%), but from the user’s deposit, membership income, etc. . What’s more worrying is that the profitability of freight brokerage services depends on the lower cost of invoicing as a large platform, and it also relies on subsidies provided by local governments. The prospectus shows that Manbang’s VAT refunds from local governments in 2019 and 2020 will be 860 million yuan and 939 million yuan, accounting for 34.8% and 36.4% of its revenue. It is reported that according to the 2016 “Notice on Comprehensively Launching the Pilot Reform of Business Tax to VAT”, the state currently allows car-free companies like Manbang Group to engage in cargo transportation services and are eligible to issue VAT invoices with a tax rate of 11%. . This method solves the problem that it is difficult for shippers to obtain special value-added tax invoices when shipping goods, but it also transfers these problems to the platform. The platform issued invoices, but the output invoices could not match enough input invoice deductions. Therefore, the local government introduced transitional policies to make up for the high tax burden caused by enterprises in the short term. A person with a background in the logistics industry and investment said that most of Manbang’s current income comes from providing call-in ticketing services for drivers who do not have ticket-issuing qualifications. As a big platform, Manbang is able to expand this type of business because of the government’s tax rebate incentives and lower billing costs than smaller players in the market, but the profit margin is very limited. Man Bang also clearly stated in the prospectus that “if such subsidies are not available in the future, the contribution of the group’s freight brokerage services to financial performance will have a significant adverse impact.” In addition, the performance of Manbang’s value-added business was not as expected. Zhao Qiang, head of public affairs in Guiyang, Manbang in 2020, once said that in the future, its source of income will mainly depend on the financial services industry. However, the prospectus shows that in 2020, Manbang’s value-added services accounted for about 24.4% of total revenue; and in 2020, the revenue of value-added services fell 10% year-on-year. 03 Moat with or without Since there is so much capital rushing to the “6 trillion yuan road freight market”, Man Gang must work hard to fight with all competitors. It has conducted multiple rounds of financing like Manbang, but the listing process has been relatively slow. There are also several well-known Internet “little giants”: Zhihu, Didi, Keep, Findgang, Huolala, etc., in these companies We can find some commonalities. The first is that they all describe the grand industrial background story, which is also a necessary reason to attract investment institutions to stay permanently; Secondly, these companies have more or less problems with commercialization, especially profitability. For various reasons, we cannot see profitability in these companies smoothly. In other words, the long-term deployment of capital is itself confirming and waiting for the true profitability of these companies; Moreover, users of these companies tend to be highly price-sensitive – as long as the price charged by the platform is high, users dare to change the platform, and can obtain nearly undifferentiated goods and services in the market. For a matching platform, the ability to control the upstream and downstream is more based on whether the price is low. For example, after several price increases, Didi quickly caused bad feedback from drivers and users, as well as competitors’ batches of competing for capacity, and Didi’s market share was diluted; The situation of Keep is similar-when there is no charge, users and the platform are in peace, and once the level of commercialization is increased, users will be lost. The competitiveness currently embodied by Manbang is the competitiveness before commercialization. Can not reflect the changes in market performance after accelerated commercialization. Once the matching platform starts to increase the charging level of upstream sources and downstream vehicles, these resources will be migrated to competitors’ platforms including Fuyou, Barter, First Logistics, and Huolala. Man Bang had previously promised drivers that they would never charge fees and subsidized them heavily. But after occupying the monopoly advantage, Man Gang violated its previous promise and charged the driver. In January 2018, Manbang began to collect annual fees, which aroused the indignation of drivers. After that, Manbang quickly clarified that it only charges the cargo owner, not the driver. However, starting from the second half of 2020, Manbang will not only charge the driver’s express deposit or the cold transport preferred deposit as a “value-added service fee” (ie, a “membership fee”), but also a “technical service fee” ranging from dozens to hundreds. . The Man Gang’s behavior was criticized by public opinion, and even due to outstanding issues such as unreasonable pricing mechanisms, unfair operating rules, and other outstanding issues, relevant departments were interviewed and asked for rectification. How to make more money is a difficult problem for Man Gang. What’s more, Manbang’s opponents have always been not only Fuyou and Huolala, but also logistics parks, major third-party logistics companies, and even the logistics systems of large enterprises. If the full group of entrepreneurs and investors position themselves as a long-tail market, then they only need to face the competition from rivals such as Huolala and Fuyou. But since it is “China’s top-ranked logistics company”, since it is a large logistics enterprise of 100 billion yuan, and since there is so much capital rushing to the “6 trillion yuan road freight market”, then Man Gang must work hard. Fight with all competitors on the highway. Just like Zweig’s famous saying that made her back chills: “She was too young at the time to know that all the gifts given by fate had already secretly marked the price.”