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BEST Inc. (NYSE:BEST)
Q4 2019 Earnings Call
Mar 12, 2020, 7:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to BEST Inc.'s fourth-quarter and fiscal-year 2019 earnings conference call. [Operator instructions] With us today are Johnny Chou, BEST Inc.'s chairman and CEO; Gloria Fan, chief financial officer for today's agenda. Johnny will give a brief overview of business and operational highlights, then Gloria will explain certain details of financial results.

Following the prepared remarks, you may make comments or make request to ask questions. Please note that this call is also being webcast on BEST Inc.'s IR website at bestinc.com. A replay of this call will be available after the call. An investor presentation is also available on the IR website.

Before we begin, I would like to read the safe harbor statement on behalf of BEST Inc. Today's discussion will contain certain forward-looking statements. These forward-looking statements are based on management's current expectations. They involve risks, uncertainties and other factors, of which always are difficult to predict and many of which are beyond management's control.

The company does not undertake any obligations to update any forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law. Please also note that certain financial statements that the company uses on this call all represented on a certain non-GAAP basis, such as EBITDA, adjusted EBITDA and non-GAAP test results. The GAAP results and the reconciliation of GAAP to non-GAAP measures can be found on BEST Inc.'s operation earnings press release. Finally, please note that unless otherwise stated, all figures mentioned in the following discussion are in RMB.

Now I would like to turn the conference over to Johnny Chou, chairman and CEO of BEST Inc. Please, Johnny, please go ahead.

Johnny Chou -- Chairman and Chief Executive Officer

Thanks, operator. Good morning, and good evening, everyone. Welcome, and thank you for joining our fourth-quarter and fiscal year 2019 earnings call today. I'm pleased to report an excellent quarter and a strong finish to 2019.

We reached another milestone as the company recorded its first quarterly net income despite intense competition. In 2019, we've continued to execute our strategy of achieving fast growth and enhancing efficiency in our core business, while investing in our growth initiatives. Non-GAAP net income was RMB 61 million in the fourth quarter of 2019 compared to RMB 20 million in the same period of 2018, while reducing the non-GAAP net loss for the year significantly to RMB 124 million from RMB 452 million in 2018. Among our core businesses, express and freight continued their much faster than industry growth momentum despite market competition and consolidation.

With express' market share climbed to 12.4% and freight volume grew 31% year over year. For the new initiatives, UCargo continued its rapid growth pattern by leveraging significant market opportunity in truckload services brokerage, while Global further expanded its footprint in Southeast Asia to capture the growth opportunities there. To recap on 2019, there are several things worth noting. First, our focus on service quality and customer experience has rewarded us for incremental market share.

Second, our continued effort are strengthening operating efficiency and technology advancements has led us to margin expansion and allowed us to reduce net loss significantly. Third, we continue to invest in growth initiatives as they make meaningful contributions to the group. Now let me share some business highlights with you. BEST Express continued to grow much faster than the industry average in the fourth quarter.

Parcel volumes increased by 30.5% year over year to RMB 2.44 billion, compared to 22.8% industrywide growth. Our market share increased by 0.7 percentage points to 12.4% from 11.7% in the same period of 2018. Full-year parcel volume increased by 38.5%, more than 1.5 times the industrywide growth. Industry ASP continued to trend lower in the fourth quarter.

ASP, including last mile, decreased about 11% year over year to RMB 2.8, where we are able to maintain the margin level through ongoing enhancements of operating efficiency improvement, investments in technology and automation. For the fiscal year of 2019, percentage of our cost reduction continued to outpace percentage of the revenue decline. BEST Express consolidated hubs and sortation centers to ADA, while expanded GFA of operation to 2.3 million square meters. We installed 88 automated sorting lines and more than 100 dimensional and weighting scanning systems to facilitate operating productivity.

Number of last mile service outlets exceeded 42,000 as we continued to invest in our networks that improve service quality. BEST Express is well positioned to capture more market shares in coming years. BEST Freight delivered another solid quarter in the fiscal year. Freight volume grew by more than 30% year over year to 2.1 million tonnes in the fourth quarter.

For fiscal year 2019, we delivered nearly seven million tonnes, representing a year-over-year growth of 28.5%, significantly higher than industry average. Gross profit margin improved from 3.8% in 2018 to 5.5% in 2019, driven by volume growth, investments into our network, enhancing, enhance the operating efficiency and by focusing on e-commerce products. We decreased the total number of hubs and sortation centers to 98 from 111 a year ago, enabling us to implement more efficient the routing mix. We increased the last mile service station by 28% to 17,700 and extended last mile service coverage to a 97% of districts and counties in China with the improved service quality.

We believe increasing demand for e-commerce and growth in consumption, will continue to drive freight's growth and margin expansion going forward. BEST supply chain management. We continue to focus on growing franchised cloud order fulfillment centers. As a result, in the fourth quarter, franchised Cloud OFC number increased by 56% year over year to RMB 293 million and number of orders fulfilled for a franchised Cloud OFC doubled year over year to RMB 58 million.

As of December 2019, total GFAs of Cloud OFCs increased by 16% year over year to 3.25 million square meter, of which over 1.5 million square meter were operated by franchisees. In 2019, we strategically grew the supply chain management business by targeting projects with higher margins and clients with great credit record. Therefore, in the fourth quarter, gross profit margin improved by 0.7 percentage points year over year to 4.8%, and for the full fiscal year of 2019, our gross profit margin increased by 1.3 percentage points to 6.3%. BEST Store+, our strategy in 2019 to expand higher margin branded stores and target membership stores with high-quality and the productivities are bearing fruit.

Gross profit margin expanded notably and steadily in both 4Q 2019 and across the entire fiscal year by over two percentage points, bringing gross margin to 12.7% in Q4 and 11.4% for the full year. In the fourth quarter, total number of our branded stores, including franchised and self-operated stores increased by 96.4% year over year to over 3,600, of which the number of franchised BEST-Neighbor stores more than doubled to 3,268, from a year ago. The total number of orders fulfilled for franchised BEST-Neighbor stores increased by 172% to 89,000. As mentioned in our last earnings calls, we are performing strategic review of the businesses to lessen its impact on the company financials and continue to reshape this business for clear path to profitability.

BEST UCargo, our online full truckload brokerage platform, continued its rapid growth momentum. Revenue generated from external customers increased by 91% in the fourth quarter, to RMB 909 million and its corresponding transaction number increased 188% year over year to over 200,000. The number of registered trucks increased by 25% year over year to nearly 327,000 as of December 2019. UCargo now covers 30 provinces in China with over 5,000 agents registered on the platform.

We believe that our leading technology capability and management expertise will drive the UCargo business to capture the mass truckload brokerage market opportunities and become a leading player in the industry. BEST Global continued to expand its core cross-border logistics business and build its presence in Southeast Asia. As of December 2019, BEST Global served 20 countries and the regions outside of Mainland China. We continue to explore new growing markets where we can leverage our operating expertise.

We are making strong progress in Thailand and Vietnam. In the fourth quarter, parcel volume increased by 61.9% quarter over quarter to 2.61 million in Thailand, and it increased by 155.5% to 2.55 million in Vietnam. We also achieved 100% and a 91 percentage of coverage in those two markets, respectively. BEST Capital continue to provide financial solutions to our ecosystem participants and contribute to improved overall operating efficiency in our network.

Now let's talk about [Audio gap] entering 2020, like all companies in China, we are confronted with novel coronavirus outbreak. First and foremost, we are taking every effort to protect the safety and well-being of our employees and franchisees. We are happy to report that so far, we have zero infections among all our employees. We have procured sufficient medical supplies and more than four million masks for our employees and franchisees.

And helped over 250,000 delivery persons to procure coronavirus life insurance coverage. For staff, serving general and administrative functions, we adopted a flexible and remote work policy. For on-site workers, we have set up a comprehensive safety and prevention procedures. We have worked diligently with local governments, franchisees, suppliers and customers to overcome the challenges and have rapidly recovered our network capabilities.

With the exception of Hubei provinces, we have fully recovered the service nationwide, including all our hubs and warehouses for express, freight and supply chain. And all our franchisees and partners are back in operation. Currently, the number of delivered personnel has already surpassed that of the same time last year, and daily parcel in the freight volume have also exceeded that of the same time last year. As a leading supply chain and largest service provider, it's our responsibility to commit our resources to support epidemic relief efforts.

We have set up a relief green channel since the beginning of the epidemic to provide free shipping services for charities and donations worldwide for epidemic controls and across the country. As of now, BEST has transported nearly 170,000 items for over 1,000 tonnes of medical relief supplies to Hubei provinces and on the rest of China. The supplies, we have shipped, including medical masks, gloves, goggles, protective gears, medical equipments, food, etc. are worth more than JPY 50 million.

In addition, we have leveraged our cross-border logistics capability to support overseas donations. We have provided the customer clearance and the transportation services for medical aid suppliers from United States, Japan, Malaysia, Korea, France, Thailand, Vietnam and Brazil. Looking ahead in 2020, we will focus our strategy on three initiatives. First, we will continue a healthy growth for our core business to achieve market share gains and enhance the profitability.

For Express, we will continue to invest in network and automation, improving operating efficiency to reduce costs and enhanced service quality. We target a volume growth to continue to be much faster than the industry average to acquire incremental market share. For Freight, we aim to strengthen our market-leading position by continuing to focus on growing e-commerce rated transactions, investing in our network, services and enhancing customer satisfactions and growth in market share. Second, we will continue the past growth trajectory in Thailand and Vietnam, investing in networks, expanding last mile service stations, extending coverage and improving operating efficiency.

We plan to enter into Cambodia, Malaysia, Indonesia this year to capture enormous market opportunity from the growth in e-commerce. Third, we're enhancing the collaboration among business units by leveraging customer sharing, technology enhancement and shared services to gain more business opportunities and operating efficiency. More specifically, Express and Freight will continue to extract the synergy from combined dynamic evolving planning to enhance truck capacity utilization, increase the truck loading rates and reduce cost, supply chain management will continue its integration with other units, supporting Store+ for inventory management and logistic efficiency improvement, providing clients with end-to-end total solution services to incorporate warehouse management, Freight and Express delivery and cross-border services. 2020 is a critical year for BEST.

Despite a challenging start due to the coronavirus, we are optimistic and confident that the market will quickly pick up and demand for our services will remain strong. We are focused on the execution of our strategy and our goal of becoming the leading integrated logistics and supply chain company in China and Southeast Asia. With that, I will turn it over to Gloria, our chief financial officer. Gloria, go ahead.

Gloria Fan -- Chief Financial Officer

Thank you, Johnny. Good morning, and good evening, everyone. For the fourth quarter of 2019, BEST, again, delivered excellent financial results with strong revenue growth and the margin improvement. The company generated net income under U.S.

GAAP for the first time for Q4 2019. Our Q4 2019 revenue was RMB 10.8 billion, which represented a 19% growth compared to the fourth quarter of 2018. As to the full year, our revenue was RMB 35.2 billion, and this was a 26% growth over 2018. Our revenue growth came mainly came from our Express, Freight, UCargo and Global business units.

Our GAAP net income for Q4 2019 was RMB 43.4 million. Our fourth-quarter non-GAAP net income was RMB 61 million compared to the non-GAAP net income of RMB 20 million for the same period last year. For the year of 2019, our non-GAAP net loss was RMB 124 million compared to the net loss of RMB 452 million in 2018. As we continue to improve our operating efficiency, our fourth quarter gross profit margin has increased by 0.1 percentage point year over year to 5.9%.

For the full year of 2019, our gross profit margin was 5.6% compared to the 5.2% for 2018. EBITDA increased by 48% to RMB 162 million, while adjusted EBITDA increased to RMB 177 million from RMB 150 million for the same period last year. For the full year of 2019, the company's EBITDA was RMB 276 million compared to a negative RMB 63 million for 2018. 2019 adjusted EBITDA was RMB 360 million compared to the negative RMB 18 million in 2018.

We continue to generate positive operating cash flow. For the fourth quarter of 2019, we have generated a net operating cash flow of RMB 487 million compared to the RMB 729 million for the same period last year. The decrease in net operating cash flow was because we accelerated payments schedule to our key vendors due to earlier Chinese New Year holiday compared to last year. Our net operating cash flow for the full year of 2019 was RMB 853 million compared to the RMB 637 million in the same period of 2018.

The reconciliation of non-GAAP measures to comparable GAAP measures and the relevant adjustments can be found in our earnings press release. Now I would like to give some key financial highlights for each of our business units. On year-over-year basis, the Q4 revenue for the Express business increased by 16% to RMB 6.9 billion, primarily due to a 31% increase in parcel volume and a 11% decrease in revenue per parcel. We offset the decrease in ASP with the decrease in cost and operating expenses per parcel.

As we continue to optimize our network and invest in technology applications to improve operating efficiency. Cost per parcel decreased by 12%, of which transportation costs decreased by 10% year over year to RMB 0.75. Labor costs decreased by 21% to RMB 0.22. Lease costs decreased by 7% to RMB 0.09, and other costs decreased by 23% to RMB 0.12.

Last mile delivery costs decreased by 10% to RMB 1.48. As a result, gross profit increased by 32% to RMB 411 million, while gross margin percentage increased [66%]. The fourth-quarter revenue for Freight business increased by 28% to RMB 1.6 billion compared to the Q4 of 2018. This was primarily due to a 31% increase in Freight volume.

Unit economics continue to improve, driven by economics of scale, cargo usage efficiency and expansion in e-commerce business. Revenue per tonne decreased by 2.1% to RMB 742, while cost per tonne decreased by 2% to RMB 701, of which transportation costs decreased by 8% to RMB 346. Labor costs decreased by 6% to RMB 91. Lease costs increased by 2% to RMB 50 and other costs increased by 1% to RMB 41.

Gross profit increased by 25% to RMB 86 million for the quarter. However, the gross profit margin decreased by 0.1 percentage points to 5.6%. The decrease in gross profit margin was mainly due to the unexpected severe weather condition in December that significantly increased transportation costs. Compared to the fourth-quarter revenue of 2018, supply chain management revenue decreased by 12% to RMB 607 million as we continue to optimize customer profile and the focus on franchise fulfillment in the e-commerce business.

Gross profit margin improved by 0.9 percentage points to 4.8% compared to Q4 of 2018. And the gross profit increased by 9% to RMB 29.1 million. Store+'s revenue decreased by 0.7% to RMB 611 million, primarily due to the decrease in number of orders fulfilled for membership stores, resulting from ongoing efforts to improve order quality and margin. Gross profit margin improved by 2.2 percentage points to 12.7%, while gross profit increased by 20% to RMB 78 million.

Other service lines of BEST UCargo, BEST Capital and BEST Global, continued their strong growth momentum in the fourth quarter of 2019. UCargo has almost doubled its revenue from the same period of 2018 to RMB 909 million, while Global has almost tripled its revenue to RMB 136 million. Gross profit for other service lines decreased 35% to RMB 35 million, mainly due to the increased investment in our Southeast Asia business. All major operating expense items, all excluding share-based compensation expense compared to the same quarter of 2018, selling, general and administrative expenses as a percentage of revenue decreased to 4.9% in Q4 2019 compared to 5.4% of the same period in 2018.

Research and development expenses increased by 11% in Q4 2019, as we continue to invest in technology development to drive operating efficiency. Research and development expenses as a percentage of revenue remained flat. For the full year, SG&A expenses as a percentage of revenue decreased to 5.5% in 2019 compared to 6.5% of last year, while R&D expense as a percentage of revenue increased from 0.6% in 2018 to 0.7% in 2019. Capex in the fourth quarter was RMB 388 million or 3.6% of total revenue compared to the RMB 284 million or 3.1% of total revenue in the same period for 2018.

Capex of 2019 was RMB 1.5 billion or 4.3% as a percentage of revenue compared to RMB 1.1 billion or 3.1% as a percentage of revenue for 2018. Of December 31, 2019, our cash and cash equivalents, restricted cash and short-term investments were RMB five billion, compared to RMB four billion at the end of 2018. As we continue to navigate the impact of COVID-19 public health crisis, we are not able to quantify the overall financial impact on our 2020 operations at this time. We are closely monitoring the situation and plan to provide more information during our first quarter earnings call, based on the information we have available at that time.

With that, we will now open the call for Q&A.

Questions & Answers:

Operator

[Operator instructions] And the first question comes from Ronald Keung with Goldman Sachs.

Ronald Keung -- Goldman Sachs -- Analyst

I have two questions mostly on the Express side of the business, if I can. Firstly, on your sorting hubs, I see that's down to 88. So we are kind of really close to where industry peers are by the end of 2019. So compared with the 11% unit cost reduction in 2019, just want to see how do we see 2020 unit costs may trend? I know there's some one-off impact for first quarter.

So maybe you could take that first quarter impact away? Or kind of what's the rest of the unit cost targets for the rest of the year given all the big initiatives that you've done? My second question, can you share some of the average delivery times of your parcels? Typically, I think it's two to three days sent around the nationwide, but do we have any sort of targets for 2020 with now the streamline sorting hubs on how, at least on a delivery time perspective, what are the targets as we target the service improvements and better user experience for the year ahead?

Johnny Chou -- Chairman and Chief Executive Officer

Ronald, thank you for the questions on that. On the first question on unit cost. So you noticed that we have about 11% reduction in 2019. But actually, we were supposed to deliver more on the transportation side.

So this year, with the transporting side, we're working with the partners, also getting more of a rounding trip. So we're expecting the unit costs this year continue to go down for approximately about 15%. With transportation and/or the other costs and also the leasing and the labor cost all going to go down somewhat. So 15% is our working target but then again, you know that when every time it goes down, actually, your base is more, right? So your percentage [inaudible].

So 15% of what we are targeting. For delivery time, right now, we are looking at an average right now, the average about 40 -- 2 to 3 days, as exactly as you said correctly on nationwide. So it depends on right now, our average transportation lines is about 1,000 kilometers for the delivery. So this year, we're going to shorten, so about a little bit less than the last year, so about 54.

So our target is about 50 hours or so. For entry and from the pickup from the customer, given the orders to pick up and to transport and deliver.

Operator

And the next question comes from Baoying with Citi.

Baoying Zhai -- Citi -- Analyst

Johnny and Gloria, congratulations on the solid finish of 2019. Actually, I have three small questions. The first one is regarding the coronavirus, we actually see the end of January and February, mostly impacted by the virus. So I know we are currently uncertain about the full year.

But can we share more color on the impacts on this past one month on demand and the cost side, if possible? And my second question is, let's look beyond the coronavirus impact. Do we able to see or to charge the normalized demands post this, especially given we are entering into March, and we are seeing the International Women Holiday sales. And based on the demand we are seeing from this. And we actually, from our on the contract, we see the transport is becoming even more intense these days.

And what is our strategy now to compete with peers? And now maybe we cannot provide the full year guidance, but even it's already the mid of March, can you shed a little bit more color on the first quarter volume, ASP and cost trends of both express and freight segments? And my third question is regarding the Store+ business, and I noticed especially in a split the Store+ business from the results to show how the store results look like. So it seems to me we are doing more work on the potential spin-off of the Store+ business. Is there a time line update on the Store+ being off? So those are my three questions.

Johnny Chou -- Chairman and Chief Executive Officer

OK. Thank you, Baoying. Your first question is this is rather for the virus impacts on the demand and the costs. Yes.

So as I was saying in my opening remarks, January has less impact because basically, the virus outbreak is really toward the almost to the beginning of the Chinese New Year holiday festival. So January is less impacted, but February impact is pretty severe. And to the extent, as we are speaking now in March, covered old operations in China with exception of Hubei provinces, all our staffs are back at work. And so is all the franchisees.

They're all back to the work. The last mile delivery, the personnel now is more than last year, March, this time, March and so is our freight and the parcel volumes is also, as we are speaking now is more than last year same time in March. So that's a local rate. On the cost side, yes, there was some impact in short term, especially in transportation cost and the labor cost.

Transportation cost meaning that when you have a network unbalanced. So we require a lot of that's a run way and trucks. And that's a very expensive during that period of time because we can't find at the February time cannot find a ride ,drivers who are willing to go. Our cost is very high.

So I think on the second quarter, on February, the cost on the transportation is going to be higher. Pretty much the same thing. So as we recover the older transportation routes gradually. That impact is being gradually reduced.

So that is the first question you had on the demand impact. As for the cutoff for the recovery on the March. As I said, we already recovered. The current volume is more over last year.

So passed the last year same time, March. So because today's volumes are higher than last March's the volume. I think they were already, but the demand is still gradually recovering. And I think the people who are coming out from the staying home to a workplace and still has some transition goal.

And at pricing war, you're saying that you checked this is going to continue to persist, which were knowledge. What is our strategy is continue to play what we have done before, by improving our issuances. Our transportation cost. This year, we're going to have a significant reduction as planned.

Since last year, we have been doing several things. One is sharing the resources with freight. So freight has a lot of long lines to less popular cities before it was basically doing a transit, but now it can go straight with combined it to network. And the other is we are running more as a volume growth, so we will do a more efficient routing schemes, use the technology to automated routing.

So hopefully, the loading factors and it will be better. So that's how are we going to improve the cost structure. Second is that, as Ronald also mentioned, I think the quality of services are continuing to improve by the delivery time, as well as the customer satisfaction continue to improve, which will also give us an upside on the market gain. And the next is that we will continue to stress for the synergies across the business units with the supply chain business will be more concentrated on e-commerce, rather than B2B.

With the other shared a similar franchisee stations on the last mile, especially in the remote area with freight, etc. So more synergies across business units, and we will go through that. The next question you had was the store spin-off. Yes, so we have been discussing this since last year.

And in fact, we already hired a professional help. And we should have a very clean strategy and operation done by end of second quarter. So next quarter, we should definitely have some definitive strategy and definitive step taken to do that. Baoying, I don't know if I missed any your questions.

[inaudible] do you have any other questions?

Baoying Zhai -- Citi -- Analyst

Yes, I may have a small follow-up. I think you answered most of the question. I just have a small follow-up on the pricing strategy, actually, from the fourth quarter, I can see you are becoming more conservative on the pricing strategy because the ASP decline is actually better than expected, excluding delivery, it's only 11% to 12% year on year, down much better than the previous two quarters. Does this means that in 2020, we will be also more balanced on the pricing strategy, your peers could be very intensive on the pricing competition? Will you be more conservative, and they will be more profit driven?

Johnny Chou -- Chairman and Chief Executive Officer

Of course, you know we are running business as a more combined optimization of the chain, market share gains as well as the financial profitabilities. So our goal is that, on the growth side, we want to maintain still much faster than the industry growth. So last year, 2019, we achieved a 1.5 times, like 38% versus 20-some percent. So this year, our target is still going to be faster growth, much faster than the industry growth.

And meanwhile, we wanted to reduce the cost and improve the profitability and efficiency. So in other words, yes, we would have balanced this out. Not just for only for profit, or only for the market share, but with balanced out to achieve the post goals.

Operator

[Operator instructions] And the next question comes from Bob Pay with Oppenheimer.

Unknown speaker

I have two follow-ups on coronavirus. so can you provide more observations around coronavirus ramp-up, the recovery curve after Chinese New Year? And my second question is, do you expect any competitive landscape change after this coronavirus impact because obviously, some of our peers, they control, they have more control over there their networks. So any color around that in the long-term will be helpful.

Johnny Chou -- Chairman and Chief Executive Officer

OK. So the government has pushed out the work of returning work for the holiday to early February. So immediately, we are working with the government from the stay a bureau to the local government so we are the first as a company to recover from the work. So the ramp-up is gradual.

We actually spend a lot of our efforts, order management spend a lot of efforts on one side, we want to make sure the safety of our employees and the other thing, we want to recover our process very quickly. So to ramp up upon complete shutdown to up to like now, more than 100% strength compared with last year's same time last year. So that is. The comparative landscape, I think, I view this as two things.

One is that after this ongoing coronavirus is in control. But a lot of people probably would change the patterns and move online. So online, our activity both on work and also shopping and demand will increase, so which is really will help in our Express, Operate and the Supply Chain Management business because most of their is e-commerce related, especially the freight last couple of years, so we have been turning them more and more to the e-commerce rather than HS2B business. So that's helpful.

And second is that the smaller players and continue to probably ease out from the competition because the recovery is a little bit slower and also the competition intensified in the marketplace. So overall, we're seeing that even though the first quarter is pretty impacted, but we are confident, and we are optimistic that second, third, or fourth quarter will actually be in a recovery to a full strength and even probably ahead of some of our targets.

Operator

And the next question comes from Eric Zong with Macquarie.

Eric Zong -- Macquarie Group -- Analyst

I have two questions. So the first one is regarding the last mile delivery fair the express sector. So basically, we have seen industry cutting the last mile fair since 2019, right? So if we look at the number, so last mile delivery fair in Q4 was 1.048. So that was RMB 0.17 lower than Q4 in like 2018.

So do you have any guidance on this and what kind of number we may see at the end of this year, like I say, in Q4 2020? And that's my first question. And the second question is, on the freight side, right? So freight business, we have seen the volume growth continued to be very strong, and I think this is achieving the target for the whole year, 28% growth. And on a unit cost declined by 2% year on year. So I still wondering what's the expectation for unit cost reduction in 2020? And where you may see the biggest cost saving?

Johnny Chou -- Chairman and Chief Executive Officer

OK. The last mile delivery fees, as the volume increase, and the people are used to pick up their parcels on the last mile service stations and lockbox, etc. So more and more actual deliveries being done to the lockbox and the last mile service station, picking up by the customers themselves rather than personally delivered door-to-door. So that that percentage has been increasing industry wise.

For us, we will see this trend continue. So more of this parcel is going to be delivered to a pickup site and the pickup by the consumer themself. Especially with the outbreak of the coronavirus and people are actually used to it, to go pick up the parcels in the nearby community center or the outlets, convenience stores rather than go to pick it at home. So we are seeing an industry wide, not just BEST, but everybody else is as sure lowering the delivery, last mile delivery cost.

So we expect in 2020 we'll continue to coming down at a similar rate as the ASP. So maybe about 10% to 15% will be there through it because if volume goes up and you will pass now the delivery for the lockbox and pickup will be lower cost. Second question is for freight. As we see the fourth quarter, we actually had about 30.5% or 31% of the volume growth.

Yes, the ASP was a little bit lower. There's two reasons. One is competitive market and our few players are now also reduced pricing and so that's part of the reason. Another part of the reason is that our every shipment, or our total weight is being reduced somewhat, too.

So I think this year, the ASP will continue to decline, but not as severe as what we see on the express side. Our planning is anywhere from about 2% to 5%. Now that means if we want to include the margin, then we will have to improve the cost structure. Where the cost of savings come from, obviously, No.1 is they come from the largest two cost structure.

One is the transportation. So transportation, that means we would have to, just like we're facing with express, we will have a more direct shipment lines a lot of them by [inaudible] through the transit. And as volume goes up, it will allow us to have a more direct to the shipping lines. And secondly is that combined with the express with a smaller and more remote area delivery can be shared resources.

Last year, we had saved a significant amount. And this year, we think that we can save even more on combined sharing resources sharing. So I'm still optimistic and we're still optimistic in planning that our margins continue to grow. And so cost reduction efficiency improvement, is going to outpace the ASP decrease.

Operator

And this concludes our question-and-answer session. I would like to turn the conference back over to Johnny Chou for any closing comments.

Johnny Chou -- Chairman and Chief Executive Officer

OK. Thank you for joining our call, and we appreciate your support of BEST. Please reach out to our investor relations teams if you have further questions. We look forward to speaking to you soon.

Thank you very much.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Johnny Chou -- Chairman and Chief Executive Officer

Gloria Fan -- Chief Financial Officer

Ronald Keung -- Goldman Sachs -- Analyst

Baoying Zhai -- Citi -- Analyst

Unknown speaker

Eric Zong -- Macquarie Group -- Analyst

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