This letter of intent for partnership came from SF Express. The partnership hoped to introduce drone express technology to Hua and use the city of Xiangjiang as a pilot to complete the deployment of the drone logistics network.
Jiang Chen was extremely confused after reading the content of the partnership.
“Drone + Courier” – this concept was proposed long ago, and it wasn’t a concept from Future Group.
As early as June 2013, Matternet Corporation tested drone networks in Haiti and Dominican Republic. The drones used were capable of carrying two kilograms of weight and flew 9.7 kilometers. After completing the initial planning of the drone network, the company was planning to establish a large international drone transport network and a global supply system for drone accessories. At the same time, it also planned to establish a charging base station so that drones could land along the way for charging.
In September of the same year, the courier drone independently developed by SF Express completed internal tests and conducted trial operations in local areas. This drone adopted eight rotors and had a flying height of about 100 meters. With a built-in GPS navigation system, the destination and route could be set in advance by staff. The drone would automatically reach the destination and errors could be controlled within two meters.However, both Matternet and SF hadn’t been able to extend the drone logistics for widespread adoption. The former drone seemed to be suitable only for poor countries in the third world, while the latter’s drones were only suitable for use in poor mountainous areas in the country.
Although drone logistics could significantly increase distribution efficiency as well as reduce labor costs, they were constrained by severe weather and the inability to avoid vandalism and other shortcomings during flight, rendering the concept of “Drone + Courier” only feasible on paper.
Penglai was probably the only modern city in the world that achieved adoption of drone logistics. However, the reason why was partially because of the technical advancement in drones. However, the more crucial factor was the safety and security of Penglai.
For example, some news from some time ago: “A man in Guangzhou sent mooncakes to his girlfriend with a drone and the drone was shot down by an old woman. When the guy discovered that his drone was ‘hijacked’, he rushed to the woman for compensation, but the woman not only denied having the drone shot down, but she also said she was almost injured by the drone…”
Not to mention that the legislation of drones had always been a gray area, and there seemed to be no space for drone logistics to become bigger and stronger from the general public. SF Express wanted to introduce beta series drones from Future Heavy Industries and complete the establishment of the drone logistics network in Hua. To be honest, Jiang Chen didn’t view their decision favorably.
However, their offer made it difficult for Jiang Chen to refuse.
For the completion of the drone logistics network in Xiangjiang, the quote from SF Express was 450 million US Dollar. According to Jiang Chen’s calculations, 500 drone terminals should be able to cover all areas of Xiangjiang and to meet the demand for distributio, about 50,000 drones would suffice.According to the cost of production of the Beta-3 drone, a drone cost 3,000 US Dollar. Compared to Matternet’s 5,000 US Dollar drone, they offered an advantage in both technology and price.
A detailed calculation suggested that the establishment of the drone logistic network for SF Express wouldn’t exceed 200 million US Dollar. Compared to its offer of 450 million US Dollar, it was a 125% profit!
Moreover, if the pilot city of Xiangjiang proved the feasibility of drone logistics networks to the mainland, the next step of SF Express undoubtedly would be to expand the drone logistics network to Shenzhen, followed by Guangzhou, and then…
Consider the number of cities in the entire country. How many courier companies would they need?
Such a huge market was simply an inexhaustible gold mine!
“Your face tells me you’re very interested.” Looking at Jiang Chen’s expression, Xia Shiyu grinned and smiled.
“Yes, this market is worth more than 100 billion US Dollar. I don’t think any company wouldn’t be interested.” Jiang Chen looked at the documents and nodded.
To be honest, although he didn’t understand the details of the partnership, he was certain about the prospects of the entire market. With the number of cities and courier companies, even if the average city could only earn 500 million US Dollar, the scale of the market would be unimaginable.
“I’m also very optimistic about this agreement. Regardless of whether SF Express will succeed during pilot operations in Xiangjiang, there are no risks for us. However, I don’t agree with their proposal for the time being.”
“Why?” Jiang Chen was intrigued by her decision.
He knew she must have some reason for this.
“Although SF Express’s offer is very attractive, we have the core technology, and we have the cash flow. Why don’t we do it ourselves?”
[Why don’t we do it ourselves?]
Future Group controlled VRstore, a huge virtual reality shopping platform that integrated the ecommerce giants. Daily trading volume on the VRstore already reached an astronomical figure. With such a huge resource advantage, Future Group could fully develop the offline delivery service on this basis.
Users could shop on the VRstore, and Future Group would deliver!
The use of drone delivery technology would greatly reduce the labor costs of Future Group. SF Express had to pay salaries for 400,000 employees, but for Future Group, this figure could be reduced to less than 50,000.
In terms of operating costs, Future Group had an absolute advantage.
When he heard Xia Shiyu say this, Jiang Chen thought about it for a moment.
“Do the logistics by ourselves? Does our company have management experience in this area?”
“We don’t need to start from scratch. My advice is to buy a logistics company, integrate its management team then restructure it. In the process of sorting, transporting, and dispatching goods, our head office will send people to redesign and replicate the model of Penglai City. If the trial operation proves to be feasible, we will fully promote it on the mainland and further promote it to the world!”
Prior to this, Xia Shiyu apparently had a plan for the development of this “Drone + Logistics”, so she had full confidence in her explanation.
Jiang Chen was convinced too.
Providing service for other people would definitely not be as lucrative as integrating the entire industry chain?
“What about the risks?” Jiang Chen asked the last question he was concerned about.
“The completion of the acquisition will cost about 3 billion US Dollar. Then we’ll gradually cancel the local agency rights, turn the franchise model into direct operations, and set up our own outlets in major cities. This work will probably require an investment of 1 billion US Dollar. The use of Xiangjiang as a drone logistics network pilot has a cost of 200 million US Dollar.”
By his calculations, the cost of the entire project was about 4 billion US Dollar. With the financial resources of Future Group, this risk could easily be managed.
“Well, you have my full support!” Jiang Chen smiled.
Since they decided to engage in this drone logistics network, the letter of intent from Shunfeng Company was naturally ignored.
Xia Shiyu smiled and combed her hair behind her ear.
“I got it.”
