In March, SF Express, China’s largest express delivery company, released their first annual report since being listed on the Shenzhen Stock Exchange. Last year, the company claimed profits of 4.2 billion yuan ($609 million), saying that their annual growth rate was almost three times that of 2015.

In reality, however, SF Express is not doing as well as they would have others believe. After deducting nonrecurring profits and losses, the firm made only 1.02 billion yuan last year — still an increase of more than 60 percent on 2015, but nowhere near the figures touted by the company.

Operating revenue serves as an important index when evaluating listed companies, but competition between express delivery companies is measured by “network-wide earnings” — revenues taken by stores owned and operated directly by the company itself. However, most of China’s courier services, including SF Express’ competitors, YTO Express and STO Express, grow their industry presence through franchise systems, and therefore find it useful to separate the money they make across the entire network from that which they make at directly-owned stores.

SF Express, however, does not operate a franchise network. It owns all of its stores, meaning its operating revenue and network-wide earnings are the same. As most industry-wide data still equates company influence with network-wide earnings, reports of SF Express’ supposed market dominance have been greatly exaggerated.

SF Express’ network-wide earnings actually account for about one-fifth of the Chinese courier industry’s total income. However, as the company’s growth rate slows, SF Express may lose their status as a lead player in the industry. According to their own data, YTO Express’ volume of mail and earnings grew by more than 40 percent in 2016 over the previous year.

In 2012, the State Post Bureau drew up a plan for the entire express delivery industry in which it laid out its objective to create two “mothership companies” with annual network-wide earnings greater than 100 billion yuan by 2020. If current market trends continue, YTO Express and others may overtake SF Express in terms of network-wide earnings within the next three to five years — and even beat it to the 100 billion mark.

Looking over the statistics for the last few years, it is clear that SF Express has failed to keep pace with the industry’s key growth drivers. In 2016, its growth rate was around 25 percent lower than the industry average. Optimistic analysts of SF Express’ fortunes say, first and foremost, that the courier industry has maintained high rates of growth in the past and can expect to see a resurgence in the future. Second, they say that e-commerce will be the key to rapid future growth, a trend that SF Express could theoretically still latch on to.

Such prospects, however, seem bleak for a company that last year appeared satisfied that the proportion of online transactions on Singles’ Day — a November shopping frenzy similar to Cyber Monday in the West — rose to 10 percent of total deliveries, a paltry sum by industry standards.

Should this culture of mediocrity persist, then by 2020 we can expect SF Express’ share of the e-commerce market to be very small indeed. While it might continue to hold an advantage when it comes to business deliveries, these only account for 10 percent of total deliveries across the industry — they are no longer a core part of any courier’s business.

At their latest press briefing, SF Express stated that the company is unconcerned with market share, as profits are the key factor in evaluating investments. Apple, for instance, has a low market share but rakes in 90 percent of the smartphone industry’s profits. Yet while this logic is applicable to the manufacturing industry, in a market like express deliveries, where networks and scale play fundamental roles in generating revenue, a company’s market share is crucial to their success.

Overall, the statement sounded like a company trying to reassure itself. SF Express’ failure to seize a sizeable portion of the market can only translate into more profit for their rivals.

It was the e-commerce market that enabled delivery industry competitors YTO, STO, and ZTO to grow from an informal alliance of small businesses into an empire worth billions of yuan. In 2012, for example, YTO only delivered 900 million packages — 30 percent of what they delivered in 2016. However, within the space of five years, these companies have achieved tremendous growth, whether in terms of service quality, investor relations, control exerted over their franchisees, quality of management, systems and technologies, or aviation teams.

Back in its heyday, SF Express became the first privately owned express delivery company in China to have its own fleet of aircraft. In 2012, SF Express should have listed themselves on the stock exchange and reaped all the attendant monetary rewards of doing so. However, at the very moment when they should have taken that risk, they opted for supposedly steadier development. They did not stay ahead of the pack, and only got listed this year, around the same time as their major competitors.

In focusing too much on brand image and profit margins for individual packages, SF Express missed its chance to ride on the coattails of the e-commerce boom. In doing so, it consigned itself to the proverbial doldrums of being a high-end, niche brand in an industry where most consumers only care about one thing: low prices.

Translator: Lewis Wright, editors: Lu Hongyong and Matthew Walsh.

(Header image: Workers prepare to sort parcels on a production line at an SF Express branch in Shenzhen, Guangdong province, Nov. 11, 2013. VCG)