Detailed Narrative
Industry Dynamics and Anti-Involution Policy
China's express delivery industry maintained overall growth with parcel volume up 5.8% year-over-year in Q1 FY26. Anti-involution policies continued to deepen, leading to pricing recovery and a return to rationality in competition. ZTO, as an industry leader, proactively upheld a healthy industry ecosystem by supporting these policies and committing to rational, value-driven competition, which provided a solid foundation for sustainable growth.
Operational Efficiency and Cost Advantage
ZTO achieved a RMB 0.06 year-over-year decrease in the combined unit cost of transportation and sorting, driven by digitalization and lean management. This included optimizing route planning, enhancing load efficiency, and improving fleet management, leading to a 10.5% decrease in unit cost of line haul transportation to RMB 0.37 and a 6.4% decrease in unit sorting costs to RMB 0.25. The company expects core transit-related costs to further decrease for the full year, with a focus on end-to-end cost reduction.
Product Mix Optimization and Retail Parcel Growth
The company focused on optimizing its product mix, with retail parcel volume growing 65% year-over-year. This strategic shift towards higher-value retail parcels and reverse logistics is driving a structural change from single-channel e-commerce volume to a more diversified and improved value mix. Average daily retail parcel volume reached approximately 9.7 million in Q1, with reverse logistics parcel volume exceeding 9.4 million average daily in Q2, contributing higher unit profit than traditional e-commerce parcels.
AI Integration and Digital Transformation
ZTO is deepening AI integration across its network to enhance operational empowerment. AI-powered solutions have reduced missorting rates by over 60% in approximately 25 sorting centers, automated over 70% of end-to-end customer service tickets, and reduced human agent escalations by 5 percentage points. AI also optimized last-mile dispatch, cutting short-distance transportation costs by 20% for large network outlets and supporting tens of millions of daily retail parcel orders.
Shareholder Returns and Long-Term Strategy
Backed by strong profitability and cash flow, ZTO plans to refine its regular cash dividend and share repurchase mechanisms to optimize capital return structure and deliver consistent returns to shareholders. The company's long-term strategy prioritizes high-quality market presence, service, low end-to-end costs, and sound profitability, aiming for steady earnings growth for network partners, continuous wage improvements for couriers, and healthy longevity for ZTO.
Social Security and Workforce Welfare
ZTO welcomes the implementation of Social Security policies for delivery workers, viewing it as aligned with anti-involution goals to safeguard frontline workers' interests. While acknowledging potential short-term per-parcel cost increases, the company believes a more stable employment system will enhance network cohesiveness, reduce turnover, and solidify last-mile service quality in the long run. ZTO will proactively support policy implementation and help network partners cope with additional costs.