Digital freight reduces the logistics information gap, and the moat of Lalamove continues to deepen.

On October 2, Lalamove (the listed entity is "Lala Technology", and the overseas brand is Lalamove) updated the latest performance data in the prospectus.

According to the disclosure, Lalamove (overseas brand Lalamove) facilitated over 338 million orders in the first half of 2024, with a global Gross Transaction Value (GTV) reaching 4.992 billion US dollars, a year-on-year increase of 18.4%. In terms of finance, Lalamove achieved an operating income of 709 million US dollars in the first half of the year, a year-on-year increase of 18.2%, and an adjusted profit of 213 million US dollars.

In terms of market position, according to Frost & Sullivan's calculation, under the closed-loop freight GTV metric, Lalamove is the logistics trading platform with the largest global closed-loop freight transaction value in the first half of 2024, with a market share of 53.9%; At the same time, the company also has the largest average monthly active merchants globally and the highest number of completed orders.

Closed Transactions Build a Trust Foundation

In early 2024, the Fourth Meeting of the Central Financial and Economic Commission clearly pointed out that "It is necessary to effectively reduce the logistics costs of the entire society" "The main approaches are to adjust the structure, promote reforms, and effectively reduce transportation costs, warehousing costs, and management costs". In May, the State Council Executive Meeting pointed out that it is necessary to "Promote the digital and intelligent development and green transformation of logistics, make up for the shortcomings in bulk commodity logistics, cold chain logistics, rural logistics, etc., and comprehensively promote a substantial decrease in logistics costs".

It is not difficult to find from the top-level policy guidance that cost is still a constraint on the development of the logistics industry. Currently, The biggest pain point in the logistics industry is the information asymmetry between the supply and demand sides, and the resulting series of problems such as mismatches between goods and vehicles, and mismatches between services and prices, which have greatly increased the transaction costs of the logistics industry.

Therefore, An important aspect of reducing logistics costs is to reduce transaction costs, And this depends on the digital capabilities of the logistics service platform to achieve "information equality" between the supply and demand sides.

Since its establishment, in the design of its business model, Lalamove has been committed to breaking the information gap in the logistics industry through the visualization, intelligence, and comprehensiveness of the service process information, to achieve "information equality" between the supply and demand sides of freight transportation.

The highway freight transportation industry mainly faces four major problems: decentralized supply and demand, low vehicle utilization rate, increased demand for delivery timeliness, and lack of mutual trust.

In order to solve the above problems, Lalamove's first major measure is to build a closed-loop transaction logistics service platform.

Currently, logistics service platforms mainly include two types: information release and closed-loop transactions. The information release platform only provides matching services for the transaction needs of drivers and merchants. Although it gathers both supply and demand groups, it cannot provide support for pricing and transaction quality, and still cannot solve the trust problem between the supply and demand sides.

The closed-loop transaction provides a full-process service from order issuance, pricing, prepayment, freight matching, order tracking to payment settlement confirmation. Throughout the process, both drivers and merchants can fully understand the entire process and key information of the transaction through the platform, thereby establishing a trust mechanism.

Figure: Closed-loop Platform Transaction Process Source: Prospectus, Compiled by 36Kr

Digital Investment Improves Transaction Efficiency

Another major advantage of closed-loop transactions is that as the platform's transaction scale continues to increase, the various transaction data accumulated can be transformed into the decision-making basis for platform order matching and transaction pricing through the platform's digital R & D investment, thereby significantly improving transaction efficiency.

Lalamove disclosed that Since 2021, the company has invested billions of RMB in R & D, and the R & D expenses in 2022/2023/2024H1 are as high as 197/175/80 million US dollars, maintaining a high level of R & D investment.

Based on continuous R & D investment, Lalamove has gradually accumulated the following advantages:

First, through artificial intelligence pricing and order matching and scheduling algorithms, the matching efficiency of transactions has been greatly improved.

In terms of order matching and scheduling, supported by the massive data accumulated from millions of past transactions, Lalamove has deployed a comprehensive automated tagging system, which includes multiple tags organized into different data categories, and through the analysis, summary, classification, and analysis of the transaction data generated by drivers and merchants. Specifically in the business process, Lalamove platform drivers can usually respond within 15 seconds after submitting a freight bill, and for same-city services, drivers can usually arrive at the pickup location within 5 minutes.

Second, through the tracking and monitoring system of the performance process, the transparency and safety of driver performance are improved.

Lalamove's real-time tracking system uses GPS technology to allow merchants to track in-transit transportation and delivery details in real time, improving transparency and safety. Through the tracking system, Lalamove can also track the driving trajectory of each loaded vehicle in real time.

Third, through the digital map, the transportation efficiency of freight transportation is improved.

Compared with the digital map services widely used in passenger transportation, The digital map used in freight transportation usually requires a higher level of accuracy and reliability, as well as more road freight-specific and Points of Interest (POI) and other traffic information (such as road restrictions and roadblocks). Based on third-party map service providers, with the user's permission, Lalamove combines the data generated in the freight transaction with the third-party map data to continuously enhance, optimize, and iterate its digital map solution. The proprietary map will automatically generate suggested loading and unloading points, thereby facilitating merchants to choose the pickup and delivery locations.

Lalamove's substantial digital investment not only improves transaction efficiency but also accumulates user stickiness for drivers and merchants.

According to Lalamove's disclosure, the average monthly active merchants of Lalamove in 2021/2022/2023/2024H1 are approximately 9.6 million/10.4 million/13.4 million/15.2 million, and the average monthly active drivers are 821,000/917,000/1.2123 million/1.4 million, showing a continuous upward trend.

The Moat is Gradually Deepened and Widened

The highway freight transportation is a high-growth, trillion-dollar-level large market.

Frost & Sullivan statistics show that in 2023, the GTV of China's highway freight transportation market is 1.19 trillion US dollars, accounting for 32.6% of the global market, and it is expected to continue to grow at a compound annual growth rate of 7.1% from 2023 to 2028.

Figure: China's Highway Freight Transportation Market Size Source: Prospectus, Compiled by 36Kr

Several leading online platform leaders in the highway freight transportation industry, such as Full Truck Alliance and Wei Tian Yun Tong (Lu Ge), etc., also achieved outstanding performances in the first half of 2024. 

Full Truck Alliance's financial report discloses that the company achieved an operating income of 5.033 billion RMB in 2024H1, a year-on-year increase of 33.77%, and a net profit of 1.427 billion, a year-on-year increase of 39.83%.

Wei Tian Yun Tong discloses that the company achieved an operating income of 3.257 billion RMB in 2024H1, a year-on-year increase of 24.74%, and a net profit of 21.8 million, a year-on-year increase of 183%.

Specifically from the business model perspective, Full Truck Alliance and Wei Tian Yun Tong are both committed to building a digital platform and focus on cross-city freight transportation, but Lalamove's strongest same-city freight transportation has a higher growth rate and potential.

Frost & Sullivan estimates that the GTV of cross-city freight transportation in 2023 is 736.1 billion US dollars, and it is expected to grow at a compound growth rate of approximately 4.4% from 2023 to 2028; while The GTV of the same-city freight transportation sector is 237.1 billion US dollars, and it is expected to grow at a compound growth rate of approximately 9.8% from 2023 to 2028.

From the perspective of the online penetration rate of same-city freight transportation, Frost & Sullivan pointed out that in 2023, the online penetration rate of same-city freight transportation is only 4.2%, but the online process has been unstoppable, and it is expected to increase to 7.2% in 2028.

Therefore, from the perspective of industry development, Lalamove is not only in the trillion-dollar-level large market of highway freight transportation, but also its leading position in the same-city freight transportation segment has extremely high growth potential.

Figure: China's Online Same-City Freight Transportation Penetration Rate Source: Prospectus, Compiled by 36Kr

As mentioned earlier , The digital capabilities of the logistics service platform are an important way to reduce logistics costs, and the establishment of digital capabilities requires not only continuous and large-scale capital investment but also the support of rich transaction data resources. Especially in the wave of the digital economy, transaction data actually has asset attributes.

In the case of Lalamove, as the world's largest logistics trading platform, it has invested billions of RMB in digital R & D, which constitutes a capital barrier. At the same time, the massive transaction data accumulated by Lalamove has actually formed a data asset barrier. Lalamove can establish a leading advantage in transaction matching, transaction pricing, and transaction security, which undoubtedly deepens Lalamove's moat.

In addition, Lalamove's prospectus discloses that in recent years, the company has begun to gradually expand its business boundaries. In terms of business space, Lalamove gradually migrates the business experience accumulated in domestic freight transportation to overseas. For example, in 2023, the company's GTV in overseas markets has reached 660 million US dollars, and its revenue is 117 million US dollars; at the same time, In terms of business types, Lalamove has also long begun to use its established market reputation and user stickiness to carry out cross-city freight transportation business. As of the end of 2023, Lalamove has provided cross-city freight transportation services in 250 cities in the mainland. The company discloses that currently, more than 70% of the first-time users are existing merchants of its same-city freight transportation service.

Overall, Lalamove has been committed to building a digital service platform with the data accumulated through closed-loop transactions since its establishment. This forward-looking strategy not only catches the trend of the current digital economy, but the company's continuously growing performance level also validates the effectiveness of this strategy.

Supported by the current national strategy of "reducing the logistics costs of the entire society", the digital freight transportation leader Lalamove undoubtedly has a strong growth momentum.