ZTO Express (Cayman) Inc. operates as an express delivery company in China. The company, through its network partners, provides domestic and international express delivery services supplemented by other value-added services.
The company has developed an extensive and reliable delivery network in China. As of December 31, 2024, the company’s network infrastructure consisted of 95 sorting hubs with 596 automation lines, over 3,900 line-haul routes serviced by over 10,000 line-haul vehicles that t...
ZTO Express (Cayman) Inc. operates as an express delivery company in China. The company, through its network partners, provides domestic and international express delivery services supplemented by other value-added services.
The company has developed an extensive and reliable delivery network in China. As of December 31, 2024, the company’s network infrastructure consisted of 95 sorting hubs with 596 automation lines, over 3,900 line-haul routes serviced by over 10,000 line-haul vehicles that the company owns and operates, and approximate 6,000 direct network partners operating over 31,000 pickup/delivery outlets and over 110,000 last-mile posts. The company’s network covers over 99% of cities and counties in China.
Service Offerings
The company mainly provides express deliveries in China of parcels weighing under 50 kilograms with expected delivery time ranging from 24 to 72 hours. The company’s delivery time has improved over time.
Other Logistics Services
Building on its core express delivery business, the company provides an integrated logistics services. The company is expanding its service offerings with a goal to build an ecosystem featuring express delivery, less-than-truckload logistics, cross-border business, warehousing, aviation, commerce and more. For example, the company provides less-than-truckload (LTL) logistics services with a focus on heavy cargo and international express delivery services in Southeast Asia, Africa and other regions. The company also provides customers with integrated logistics solutions for warehousing, distribution and transportation. Furthermore, the company provides freight forwarding services through the acquired business of China Oriental Express Co., Ltd. and its subsidiaries, which is a major freight forwarding and international logistics services provider in Hong Kong and Shenzhen. Furthermore, the company is also expanding into the air cargo business.
Network and Infrastructure
The company’s network consists of its directly operated core sorting hubs and line-haul transportation network; and network partner-operated outlets, as well as last-mile posts, across China.
Sorting Hubs
The company’s sorting hubs are connected by the line-haul transportation network it operates. Each sorting hub collects parcels from outlets within its coverage area, sorts parcels according to their destination and dispatches them to the appropriate destination sorting hub. As of December 31, 2024, the company operated 91 sorting hubs and the company’s business partners operated 4 sorting hubs.
The sorting hubs operated by the company’s business partners are located in remote areas in China and the company works with independent third-party owners to effectively operate those hubs. In addition to the sorting hubs, the company’s network partners operate sorting facilities in certain remote areas in China.
Of the 91 sorting hubs the company operates, 79 are located on premises the company owns, for 7 of which the company also lease additional areas, and 19 are located on leased premises. The company plans to make long-term investments in land and facilities on premises the company owns to support the stability of the company’s operations. From time to time, the company also provides temporary warehousing services to certain key account customers to store their products close to their target demographics.
The company has continually adopted new technology solutions in automation hardware and software to enhance the efficiency of the company’s operations. For example, the company adopted telescopic conveyor belts for loading and unloading trucks in 2015, as well as fully integrated dynamic-weighing machines capable of measuring the dimensions and weight of parcels simultaneously at a high speed without having to stop the flow of packages. In addition, the company works with technology companies and academic institutions to customize and upgrade existing design concepts. For example, the company has successfully collaborated with the Chinese Academy of Sciences in the Academy’s development of several variations of automated sorting equipment since 2015. The company has also developed and continually re-engineered sophisticated software (including data-enabled algorithm, real-time analytics and recalibration) to support high-speed sorting in order to ensure fast and reliable package data capturing and dispatch, and to reduce sorting errors and costs of re-work. In particular, the company utilizes an image-based learning algorithm in the company’s safety inspection of packages to recognize prohibited or illegal items during the company’s inspection process and to reduce human error. The number and capacity of the company’s automated sorting lines increased substantially from 8 in 2016 (all of which were for small parcels) to 596 in 2024 (259 of which were for large parcels and the remaining 337 for small parcels).
Line-Haul Transportation Network
The company connects its sorting hubs with approximately 3,900 line-haul routes. The company’s line-haul transportation network is serviced primarily by its own fleet, and certain independent third-party vehicles. The company controls the route planning and vehicle dispatch of its entire line-haul transportation network.
As of December 31, 2024, the company's owned fleet consisted of over 10,000 trucks, of which more than 9,400 are high-capacity, 15 to 17-meter-long trailer models. The company also contracts other independent third-party transportation companies to fulfill additional capacity needs, most of which are single-trip transportation when it foresees a low return trip truckload. The company carefully reviews the operating history, fleet condition, reliability, and other criteria of the bidders to select only suitable providers.
Pickup and Delivery Outlets and Last-Mile Posts
The company's network partners primarily provide pickup and last-mile delivery services through the outlets managed by them, although certain larger outlets also have regional sorting and dispatching capabilities. Each outlet has its own designated geographical scope of operation and can generally only take orders originating within that area. The company's network partners also generally arrange the transportation between pickup/delivery outlets and the company's sorting hubs. As of December 31, 2024, the company's network had over 31,000 pickup and delivery outlets nationwide, covering over 99% of China’s cities and counties.
The company has encouraged its network partners to invest early and secure a physical presence with last-mile capabilities and consumer access by establishing last-mile posts. It currently has over 110,000 last-mile posts across China. A last-mile post is, on average, a 35-60 square meter space located near residential areas, office buildings, or on university campuses, where couriers can leave delivery packages for recipients to pick up instead of delivering in person. A last-mile post can be multifunctional and serve different purposes, including receiving outgoing packages, collecting fees from couriers who leave packages for pickup (including processing packages left by competitors’ couriers), and realizing retail profit, thereby achieving greater overall labor and facility cost efficiencies.
Network Partner Model
The company’s network partners own and operate the pickup and delivery outlets under the company’s brand and form an important part of the company’s network system.
As of December 31, 2024, the company had over 6,000 network partners with whom it has directly entered into agreements prescribing the terms and conditions of their operations of pickup and delivery outlets under the company's brand. It refers to such network partners as its direct network partners. These agreements with direct network partners are generally for a term of three years, and each direct network partner may elect to negotiate with the company for renewal of the agreement upon expiration if it wishes to remain in the company's network. The company's network partners pay it network transit fees for the express delivery services it provides to them. The network transit fees that the company charges its network partners for the express delivery services it provides primarily consist of a fixed amount for a waybill attached to each parcel, and a variable amount per parcel for sorting and line-haul transportation based on parcel weight and route distance. The company has the right to impose monetary penalties on its direct network partners for failure to adhere to the terms of the agreements. A direct network partner is also required to place a deposit with the company as a performance guarantee. The company has authorized its direct network partners to conduct their express delivery business exclusively under the company’s Zhongtong or ZTO brand and mandates the unified application of its logos on outlets, personnel uniforms, transportation vehicles, and packaging materials.
Each of its direct network partners is authorized by the company to operate within a designated area, the size of which ranges from a township to an entire province. Depending on the size of, and the business volume in, their respective authorized areas, many of the company’s direct network partners subcontract a portion of their business to third parties with the company’s consent. Indirect network partners are also authorized to operate ZTO-branded express delivery business.
The company's Zhongtian system provides the technological infrastructure for the management of its network partners. The Zhongtian system consists of its operational management system, network management system, settlement system, finance system, and other integrated systems and mobile apps connecting its network partners. In particular, the Zhongtian system tracks each delivery order and calculates the network transit fees payable to the company, and the last-mile delivery fees payable to its direct network partners and, where applicable, its indirect network partners. All of the company's direct network partners may use payment channels through its Zhongtian system to settle network transit fees, waybill fees, or last-mile delivery fees with the company. It requires direct network partners to make prepayments from their respective Zhongtian accounts to the company's payment channels account through its Zhongtian system. The company’s direct network partners’ Zhongtian accounts reflect the prepayment balance, which will be debited upon each settlement of payment. The prepaid amount is used to settle network transit fees and waybill fees from the company's network partners to it, and to settle last-mile delivery fees from the company to direct network partners.
All of the company's direct network partners and most of its indirect network partners work with it exclusively. A small number of its indirect network partners may process packages for other express delivery companies. This is typically limited to situations where an outlet is located in a remote or isolated area, or in newly established markets. Such exceptions to the company's exclusivity requirement are necessary in order to support the outlet’s start-up volume.
The company controls the qualification of new network partners and provides extensive ongoing training to its network partners. It also periodically reviews the performance of its network partners based on parcel volume, local market share, service quality, and parcel safety/security scores. The company considers the conditions and forecast of the local market to set guidance for those indicators. It also sets guidance and reviews the performance of certain pickup and delivery outlets with large parcel volumes. For its direct network partners at the provincial level, the company provides fee discounts to those who significantly outperform the performance targets that it sets.
Under the agreement with the company, the network partner also has the right to unilaterally terminate the agreement within seven days from the date of execution of the agreement with notice to the company; provided that, if the network partner has started to use the company’s network resources, has begun to provide services to customers, or has exercised other major rights under the agreement, the network partner shall not terminate the agreement accordingly. The network partner’s major rights under the agreement are entitlements to the following products or services provided by the company: electronic documents or software in relation to enterprise management system; guidance on the use of express delivery networks, business operation model and employee training; (3) sufficient, continuous and quality-guaranteed material supply; advertising support; and network transit service.
The company provides its network partners latitude in their pricing decisions. The network partners have full discretion over their daily operations and can make localized decisions with respect to facilities, vehicles and recruitment to meet their operational needs.
The company also provides financial services to qualified network partners. The company selects qualified network partners based on certain criteria set by the company, such as having legal and stable income or source of income and engaging in operation activities that are legal and meet the national industrial policies and requirements. To provide such financial services, the company enters into agreements with qualified network partners under which the material terms (e.g. loan amount, maturity date, guarantee or pledge and event of default (as applicable)) of such financial services are stipulated. The company has obtained the requisite business licenses and/or approvals under PRC laws and regulations in order to provide such financial services to qualified network partners.
Customers
The company’s direct customers are its direct network partners, who, along with the company’s indirect partners, own and operate pickup and delivery outlets. The company provides its direct network partners with access to the company’s line-haul transportation and sorting network, which form the infrastructure of their and the company’s indirect partners’ express delivery services. In addition, the company directly serves some enterprise customers, including vertical e-commerce and traditional merchants, providing express delivery services and handling return parcels for e-commerce platforms.
Together with the company’s network partners, the company mainly serves e-commerce merchants and other express service users as the company’s end customers. A significant portion of the company’s end customers are merchants on China’s e-commerce platforms. The company’s enterprise customers are typically larger, nationwide brands with customized requirements for express delivery services. For certain enterprise customers, the company provides direct pickup services without going through the pickup outlets of the company’s network partners. The company collects the full amount of delivery service fees from the company’s enterprise customers and pay a portion of these fees to the delivery outlets of the company’s network partners for last-mile delivery services provided by them. Depending on the availability and capacity of the company’s personnel at the relevant locations, orders from some enterprise customers may also be picked up through the company’s network partners.
Customer Service
The company's network partners directly interact with its end customers, and it provides ongoing training and conducts regular performance reviews to ensure they provide quality customer services.
The company also operates a call center network providing real-time assistance during business hours, seven days a week. Its automated system continues to respond to inquiries outside of business hours and forwards complicated inquiries to its live call center representatives for further handling during business hours. The company’s call center networks are localized, with branch offices in over 31 provinces in China, primarily staffed with local hires to leverage their local knowledge. All branches can be reached via a unified number and use a centralized call system and database. The company's call system automatically directs incoming calls to the local branch near the caller’s location for localized handling. It has over 500 call center representatives who adhere to the same customer service standards nationwide, and their local knowledge adds to the effectiveness of the company's customer service effectiveness. The company provides regular training to its representatives and periodically reviews callers’ levels of satisfaction with the service they received from the company. At the end of each call, each caller is asked to grade the quality of the company's customer service, and a designated call-back team follows up on all incidences of dissatisfaction.
Information Technology and Intellectual Property
The company has built its proprietary technology systems with open-source and mainstream technologies and has refined and tailored those technologies to suit the company’s operational needs. The company designs and utilizes its technology systems to enhance the efficiency and scalability of the company’s network and these systems play an important role in the success of the company’s business. The principal components of the company’s technology system include:
Zhongtian System—The company’s centralized Zhongtian system, which the company developed itself, serves as the technology backbone for the company’s express delivery management and network operation. The Zhongtian system has hundreds of modules with numerous functionalities and features covering all scenarios of the company’s business and operations, consisting of the company’s operational management system, network management system, settlement system, finance system and other integrated systems and mobile apps connecting the company’s network partners:
Parcel Sorting, Transportation and Tracking Management: The company’s parcels are sorted and dispatched based on routing logic through the Zhongtian system. With this system, that is compatible with the digital waybill technology, the company can track each parcel processed through the vast network based on a unique waybill barcode assigned to each parcel. As the parcel moves through each gateway, its barcode is scanned, and its route and other delivery information are captured in the Zhongtian system. The company also monitors the capacity of its sorting hubs on the Zhongtian system and monitor the real-time movement of each on-duty truck with GPS and Geographic Information System technology that is synchronized with the Zhongtian system.
Settlement Payment Calculation: The Zhongtian System tracks each delivery order, and according to pre-set formulae, calculates the network transit fees payable to the company, as well as last-mile delivery fees payable to the network partners.
Settlement Payment Calculation: The Zhongtian System tracks each delivery order, and according to pre-set formulae, calculates the network transit fees payable to the company, as well as last-mile delivery fees payable to the network partners.
Mobile Application: The Zhongtian system also supports the company’s mobile applications so that pickup and delivery personnel are able to handle functions such as digital waybill printing, order pickup, parcel tracking, receipt signing on mobile devices. The mobile solutions are user centric and comprehensive in meeting the varied needs of different personnel.
Customer Service Support: The company’s call center representatives have access to the Zhongtian system’s database to provide better and more effective customer service. The automated customer service functions on its website and its WeChat official account allow end customers to track parcels and search outlet locations with the data support from the Zhongtian system.
Management of Sale of Accessories: The company’s network partners make online purchases of accessories, such as portable bar code readers, thermal paper used for digital waybill printing, and ZTO-branded packing materials and uniforms, from the company utilizing the accessories management module available on the Zhongtian system. The company’s network partners can log on to its system and place orders for waybills, packing materials, portable barcode scanners and other accessories. The company then sends out the accessories to its network partners once the company has processed the orders received.
Data Analytics and Decision Support: The Zhongtian system collects and provides valuable operational data such as parcel volume, hub utilization and parcel delivery speed to analyze and enhance the company’s and its network partners’ performance. It provides a dashboard available to the company’s core management team with various data and analytical tools. By utilizing the dashboard, the company’s management can monitor and evaluate the company’s business in real-time.
The company has leased a high-grade data center in Zhejiang province to support its core operational systems, such as Zhongtian, and the company’s transportation management system. The company’s server center in Shanghai mainly provides the network infrastructure for the company’s managerial, data backup and other non-core functions. The company has adopted security policies and measures, including encryption technology, to protect the company’s software, proprietary data and customer information. The company’s system is configured with multiple layers of security to prevent unauthorized access to the company’s software and databases, and the company implements security protocols for communication among applications. The company utilizes a system of firewalls to prevent unauthorized access to the company’s internal systems. Exchange of critical data on the company’s website and public and private interfaces use the Secure Sockets Layer networking protocol, a standard security technology for establishing encrypted network communications. The company regularly backs up its databases, including customer data, with both on-site and off-site storage. Encryption is used to secure sensitive information when it is in transit or being stored.
Since 2016, the company has established a digital product innovation system with eight major digital product lines, covering end-to-end online and offline processes for customer engagement, customer care, franchisee enablement, sorting hub operations, transportation, finance, smart mobility equipment and e-collaboration. This system enables around 200 applications throughout the company’s information technology platform.
The company has been developing a suite of technologies focusing on applying new features to enable fast digital product iteration, such as micro-service architecture, deep learning and AI, big data, private and hybrid cloud, DevOps, among others. The company has also developed proprietary algorithms for order dispatchment and forecasting, as well as capabilities for real-time monitoring of information systems, automatic failure detection and recovery and high-throughput processing of 100-million orders in a single day.
The company regards its trademarks, copyrights, patents, domain names, know-how, proprietary technologies, and similar intellectual property as critical to its success. As of December 31, 2024, it owned over 200 computer software copyrights in China for various aspects of its operations, maintained over 700 trademark registrations, and held 200 patents within China. As of December 31, 2024, the company had registered nine domain names, including zto.cn, among others.
In addition, the company demonstrates the wide use of its technology resources, including Application Programming Interfaces (APIs), in various digital services, such as the ZTO Open Platform at zop.zto.com, an express delivery service technology docking platform which shares ZTO’s various service interfaces, and ZTO Security Response Center at sec.zto.com, an online platform for persons inside and outside the ZTO network to report security vulnerabilities to better protect customer information and enhance network security. The company shares with the public its achievements in improving digitization and intelligization in the company’s operations through its annual ZTO Tech Open Day.
Competition
The company competes primarily with leading domestic express delivery companies, including YTO Express, STO Express, Yunda Express, J&T Express, SF Express, JD Logistics and the express delivery services provided by China Post, such as EMS.
Regulation
The company’s PRC subsidiaries also operate in certain industries which fall into the encouraged category, such as road transportation and technical support and consulting services. The company’s subsidiary Shanghai Zhongtongji Network is registered in accordance with PRC law and mainly engages in technical support and consulting services, which are encouraged under the Catalogue of Industries for Encouraging Foreign Investment (2022 Edition).
History
ZTO Express (Cayman) Inc. was founded in 2002. The company was incorporated in 2015.
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