Founded by Xue Peng in 2014, FlashEX is an intra-city delivery service which prides itself on its 1-minute response time, 10-minute pick-up, and one-hour delivery. It currently operates across 220 cities in China and has over 100 million users and one million couriers. Xue Peng is a graduate of CKGSB’s Business Scholars Program.
In this new alumni series, we track down CKGSB’s most influential graduates, many of whom have gone on to lead unicorn companies – privately held companies valued at $1 billion USD or more. According to CB Insights – a global platform which provides authoritative and up-to-date information on the world’s billion-dollar private companies – China has created a total of 217 unicorn companies between 2017 to 2021. Thirty-nine (or 18%) of these companies are run by CKGSB alumni, including 35 companies where CKGSB alumni are founders or co-founders, and 4 companies where they serve as the chairman, CEO or president.
As China’s leading business school, it’s not surprising that CKGSB has been able to produce so many business leaders playing a pivotal role in China’s economic development. More than 18,000 successful entrepreneurs, industry leaders and executives of multinational corporations have chosen to study at CKGSB for the original China insights, world-class faculty and peer-to-peer learning with China’s movers-and-shakers. More than half of CKGSB’s alumni are at the CEO or Chairman level and, collectively, lead one-fourth of China’s most valuable brands.
The Idea that came to Xue Peng after Studying Abroad
Xue Peng, CEO, and founder of FlashEX, studied information and computer science at North China University. After graduating in 2005, he set up two start-ups. One was similar to the business model of Cainiao (Alibaba’s logistics subsidiary), which would later develop into a 24-hour delivery service which could deliver to any region in China. He also set up a company which provided SaaS systems to courier companies.
Xue Peng later studied a master’s degree at the Royal Holloway University in London. Analyzing the UK’s labor intensive and high-tech logistics network he realized the potential to improve the efficiency of domestic logistics in China.
In May 2014, Xue Peng returned to China to set up FlashEX, based on the idea of a ‘Lean Startup’ – a business strategy coined by the American Entrepreneur Eric Rice. It aims to shorten product development cycles and test business’ viability by measuring the value it provides to its customers.
When Xue Peng launched FlashEx, users would initially place an order on the website; this would be sent to couriers via text message and those who responded first would carry out the delivery. Xue Peng realized the potential for this idea to provide value for customers. This led to the launch of the app in May 2014. Soon afterwards the company received USD $4 million in venture capital for its Series A round. Since 2014, it has received 10 rounds of financing, raising a total of USD $339 million.
FlashEx’s Innovative “One-One” Model
The low ratio of users to couriers highlighted above reflects FlashEX’s user-centric business model. Xue Peng placed great importance on FlashEx’s ‘one-to-one’ model. This means one courier will deliver to one customer, and once the courier receives an order, they cannot take another. Traditional courier companies have tended to group multiple orders together which frequently leads to losses of items, a lack of accountability and longer delivery times. The business model pioneered by Xue Peng is the only of its kind in China which caters to a growing demand for more personalized customer services.
On the app users select a pick-up and delivery location. Prices vary according to the weight and distance, with a starting rate of RMB 16.00 (USD $2.50) for parcels under 50km. The prices then increase by RMB 10 per 5 kilometers and RMB 2 per kilometer.
The type of items delivered could be divided into personal and business items. Personal items might be a passport, wallet, flowers, or a cake; and businesses would use FlashEX’s platform to deliver documents, invoices, or files. For example, if someone working in Beijing needed to deliver documents to their office but could not be there in person, they could use FlashEx’s service to deliver that document.
Du Shanxi, Vice-President of FlashEX, summarized it well: “We usually have things that we forget at home, and need to go back and pick them up, or documents that need to be delivered immediately.”
Despite leading the market in the one-to-one courier industry, FlashEX faces competition from larger companies such as Meituan Dianpin, China’s largest on-demand retail service platform which now offers intra-city delivery services. Also, SF Express and JD.com have tapped into the intra-city courier market, both offering speed delivery services in 30 minutes.
Nonetheless, for these larger companies moving into the sector, it is still a challenge to match the speed and the personalization inherent to FlashEX’s model. These companies are also tied to partnerships with many businesses in B2C courier services which they cannot abandon.
FlashEX has won many awards for its delivery services. At the 7th China Finance Summit in 2021, it was listed among the top ten internet unicorns in China. It has also been recognized for increasing employment and its contribution to upscaling China’s rural areas. This led to FlashEX receiving the 2020 Targeted Poverty Alleviation Award. Although FlashEX started its intra-city service in first-tier cities, third and fourth tier cities are becoming increasingly important, accounting for 30% of total orders. FlashEx has become a hugely successful company in China.