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BEST INC (NYSE:BEST)
Q2 2020 Earnings Call
Aug 18, 2020, 9:00 p.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 Second Quarter 2020 Earnings Conference. [Operator Instructions] Following management's prepared remarks, there will be a question-and-answering session.

With us today are Johnny Chou, BEST Inc.'s Chairman and CEO; and Gloria Fan, Chief Financial Officer. For today's agenda, Johnny will give a brief overview of business and operational highlights. Then Gloria will explain the details of financial results. Following the prepared remarks, you may ask your questions.

Please note, this call is also being webcasted on BEST Inc.'s our website at ir.best inc.com. A replay of this call will be available after the call and investor -- an investor presentation is also available on the IR website.

Before it begins, I will read the safe harbor statement on behalf of BEST Inc. Today's discussion will contain forward-looking statements. These forward-looking statements are based on management's current expectations. They involve inherent risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the management's control. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or others, except as required under applicable law.

Please also note that certain financial measures that the company uses on this call are expressed on a non-GAAP basis, such as EBITDA, adjusted EBITDA and non-GAAP net loss the GAAP results and the reconciliation of GAAP to non-GAAP measures can be found in best Inc's earnings press release. Finally, please note that unless otherwise stated all of the figures mentioned during this conference call are in RMB.

Now, I'd like to turn the call over to Mr. Johnny Chou, Chairman and CEO of Best Inc. Johnny, please go ahead, sir.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Thank you, operator. Good morning and good evening, everyone. Welcome and thank you for joining our earnings call. With the height of the COVID-19 pandemic in China behind us, we made a faster than expected recovery as we benefited from the deeper and the wider trends of digitalization for merchants and the online shopping for consumers.

In the second quarter of 2020, we strategically targeted both top line growth and profitability, while enhancing efficiency across our business. As a result, we continue to gain healthy volume growth while lowering costs in our Express and Freight segments and improved our gross margin by 0.9 percentage points year-over-year, despite challenging market dynamics. We also continued to make strong progress in Store+, which resulted in a significant reduction in losses. We are confident that we have developed the right business model for Store+ that will bring a positive impact for the company revenue growth and the profitability.

Our momentum has also been strong for Global, driven by robust demand in Southeast Asia and further boosted by our entries into markets of Malaysia, Singapore and Cambodia during the second quarter.

Now, let me share some insights on the business. First, our core logistics and the supply chain units. Strategically, in line with our companywide pursuit of balanced top line growth and affordability. We continue to emphasize business integration, synergies and efficiencies. We promoted e-commerce related transactions across all business units and achieved a stronger business to consumer or the growth during the during the quarter. We also made progress on enhancement of service quality through strengthening network flexibility density of last mile service outlets, and finally, the overall consumer experience.

For Express, despite intensified market conditions, we have successfully in maintaining our position as one of the top tier players in the market. Through our continued efforts of cost reductions and the enhance quality of services, our parcel volume increased by 19.3% year-over-year to RMB2.3 billion, representing market share of 10.7% during the quarter. And improving 0.2 percentage point compared to the first quarter. We also achieved gross margin expansion of 0.9 percentage point year-over-year, as average cost per parcel decreased by 21.5% versus last year.

Going into the second half of 2020. We remain focused on increasing market share, investing in automation and further integrating dynamic routing with Freight to enhance operational efficiencies and improved profitability. Our freight business achieved great results in the second quarter, we continue to solidifying its leadership position and achieve the delivery volume of over 2.2 million tons, growing 28.9% year-over-year. Which was significantly higher than industry wide average.

Average cost per tons decreased by 21.1% year-over-year, leading to a stronger gross margin of 8.9%, a record high, and 2.5 percentage points higher compared to the same period last year. This was driven primarily our focus on e-commerce products, economy of scale and the continuous network optimization and the operating efficiency.

Let me provide a little bit more color on the LTL or less than truckload freight market and our positioning with its market. Overall, LTL is a larger market. Traditionally, the demand for LTL Freight service was primarily B2B for manufacturers and wholesalers. But since last year more demand has been e-commerce related. Our LTL services has experienced robust growth, driven by increasing more large size e-commerce products. Our network penetration into lower-tier cities to serve its strong consumption growth, as well as further market consolidation, Best has benefited top tier players such as Best Freight.

In the second half of 2020 we expect the Freight to continue to grow in the 30% range. We are also confidence we can continue to optimize our cost structure through economics of scale, automation and transportation cost reductions by working on areas, such as efficiency improvements of our hubs and sortation centers, while realizing additional synergies with our other business.

Moving to Best supply chain management. Strategically, we view it as a central component of our core supply chain and logistics units. And therefore, we'll continue deepening the integrated services model and promoting cross selling between unit -- business units. Operationally, we target expanding franchise of Cloud OFC business and the projects with a higher margins and clients with stronger credit profile. As a result, it's second quarter gross margin increased 0.8 percentage points year-over-year to 9.7%. The total number of orders fulfilled by Cloud OFC's increased by 28.5% year-over-year to RMB111.3 million in the second quarter, of which, total number of orders fulfilled by franchise Cloud OFCs increased by 46% year-over-year to 53.7%. The number of franchise OFCs increased by 25.9% year-over-year to RMB326 million.

Best Cargo, our fast growing online full truckload brokerage platform following the effort was started in the first quarter. We further expanded our brokerage model and added more small and mid-sized enterprises. The number of registered drivers on the UCargo mobile apps increased 141.9% year-over-year to over 244,000. Total number of transactions on the trucking brokerage platform increased by 19.8% year-over-year. We plan to bring many more drivers and SME directly onto the platform in coming quarters. And consequently further increase the number of transactions.

For BEST Store+, we continued our strategic initiative of transforming this unit to be more asset light by focusing on growing high-quality membership and franchise stores through a partnership model with strong -- with ongoing acceleration of businesses moving online, merchants and store owners have strong demand for digitization and the online business expansion, while improving the supply chain efficiency. Early this year, we started adopting the strategy to accelerate the growth of membership and franchise stores onto Store+ platform, while addressing the margin improvement and efficiency in fulfillment cost.

During the quarter our continued -- we continued to optimize the operation of our branded stores and refined our centralized procurement model in order to achieve a better cost structure and higher margins. As a result, as such, gross profit margin of Best Store+ improved by 2.2 percentage points year-over-year to 13% in the second quarter. We are confident that we have the right asset light model for Store+ that will bring a positive impact to our group's revenue growth and profitability.

For Best Global, we achieved a strong second quarter results driven by continued growth in Southeast Asia. Parcel volume in Thailand, increased by 95% quarter-over-quarter to approximate 10 million. While parcel volume in Vietnam increased by 54% quarter-over-quarter to 5.75 million, we also launched express delivery services in Malaysia, Cambodia and Singapore, marking another significant step forward in building an efficient logistics network with extensive coverage in Southeast Asia.

Looking ahead, we are committed to delivering high-quality growth in a challenging market environment. We will maintain a balancing -- balanced growth strategy and strive for profitability by continuing leveraging our technology enabled integrated supply chain and larger services model, through emphasizing e-commerce, investing in technology application and automation, capturing revenue and cost synergies across multiple business units, enhancing service quarter.

Now I would like to turn the call over to our CFO, Gloria, to walk you through our second quarter financials. Thank you.

Gloria Fan -- Chief Financial Officer

Thank you. Johnny. And hello to everyone. As Johnny clearly laid out, we delivered a solid quarter through operational excellence and execution with a difficult macro environment and intense competition of the industry. As we progress through this period of great economic uncertainty we have ample liquidity, strong balance sheet and a keen focus on cost management.

I will now provide a brief review of our second quarter 2020 financial results. Given the limited time on today's call, I will be presenting some abbreviating the financial highlights. I encourage you to read through our press release issued earlier today for further details. We focused our efforts on sustainable growth during the second quarter. While our revenue contracted slightly by 4% year-over-year, we achieved non-GAAP net income of RMB11 million, higher than RMB6.5 million in the same period of 2019. Excluding the interest expense of convertible bonds, our non-GAAP net income would have been over RMB20 million.

Our gross margin was 6.8%, an increase of 0.9 percentage point year-over-year due to improved operating efficiency, which resulted in continued cost reduction. Adjusted EBITDA for Q2 was RMB158 million, compared to RMB148 million of the same period of 2010. Q2 adjusted EBITDA for core logistics and the supply chain business was RMB291 million, compared to RMB298 million for the same period of 2019. Additionally, we generated a net operating cash flow of over RMB700 million during Q2, compared to the RMB334 million of the same period of 2018. As we recovered from COVID-19 and our Express and Freight volumes has grown -- has grown significantly from Q1 2020.

Our robust cash flow from operations led to a strong balance -- balance of cash and cash equivalents with restricted cash and short term investment of RMB5.1 billion, which provides us a solid financial position for future growth.

Next, moving onto key financial highlights for our business unit. On year-over-year basis, Q2 revenue for Best Express decreased by 5% to RMB5.2 billion, primarily due to a 21% decrease in average selling price per parcel, offset by a 19% increase in cost of volume. The drop in ASP was due to competitive market dynamics. The cost per parcel decreased by 21% mainly due to improved operating efficiency and network optimization, which resulted in lower last mile, transportation, labor, lease and other costs. Adjusted EBITDA for Best Express was RMB189 million, compared to RMB216 million for the same period of last year.

Best Freight Q2 revenue increased by 4.5% to RMB1.4 billion, primarily due to a 29% increase of Freight volume and offset by a 19% decrease of ASP per ton. Adjusted EBITDA for Best Freight was RMB73 million RMB, which was more than doubled compared to RMB31 million for the same period of last year. Q2 revenue for Best supply chain management decreased by 50% to RMB510 million, primarily due to a decrease in transportation service revenue as we strategically target higher margin customers. Adjusted EBITDA for Best supply chain management was RMB5.7 million, compared to RMB14.4 million for the same period of last year.

BEST UCargo's Q2 revenue decreased by 6% to RMB493 million due to a shift from key account to small and media enterprise business. Adjusted EBITDA for Best Ucargo was negative RMB17.5 million, compared to positive RMB5 million for the same period of last year.

BEST Capital's revenue decreased by 13% compared to Q2 2019, due to our more stringent credit control policy. Its adjusted EBITDA was RMB41 million, compared to RMB32 million in the same period of last year. Store+ revenue decreased by 17% to RMB657 million, primarily due to ongoing efforts to enhance order quality to improve margin. Adjusted EBITDA loss for Store+ was RMB67 million, which was significantly lower compared to a loss of RMB102 million for the same period of last year.

Q2 revenue for Best Global was RMB193 million, almost tripling from the same period of last year as we continue our strong growth momentum in Southeast Asia. Adjusted EBITDA for Best Global was negative RMB48 million, compared to negative RMB32 million for the same period of last year, as we continue our investment to ramp up operations in Thailand and Vietnam. And to launch our network in Malaysia, Cambodia and in Singapore,

Next, let's look at major operating expense items. Compared to the same quarter of 2019 selling, general and administrative expenses increased by RMB28 million to RMB519 million. The increase was primarily attributable to losses on disposal of fixed assets due to upgrade of our expenses equipment. R&D expenses decreased by RMB12 million to RMB48 million, which was primarily attributable to capitalization of certain R&D expenditure to intangible assets, as well as reduction in travel expenses.

Please note, all of these expenses excluded share-based compensation. We will continue to optimize our SG&A and R&D expenses to improve our operating efficiency and we expect further benefit from operating leverage as our business grows.

Capex in the second quarter was RMB424 million or 5% of total revenue, compared to RMB381 or 4% of total revenue for the same period of last year. In addition, we are working on cost improvement programs to streamline capex and reduce expenses. Our results in Q2 demonstrated that through consistently improving operating efficiency and expense management we can well achieve balancing top line growth and the profitability. Despite this period of economic uncertainty we are well positioned to grow our business and continue to drive value creation for our shareholders.

With that, we will now open the call to Q&A. Thank you.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Thank you for joining the call. So we can open to Q&A right now.

Questions and Answers:

Operator

Thank you, sir. Thank you, ma'am. We will now begin the question-and-answer session. [Operator Instructions] And the first question we have will come from Baoying Zhai of Citi.

Baoying Zhai -- Citigroup -- Analyst

Hi, good morning Johnny, and Gloria, congratulations on the strong second quarter results. I have two questions. First is regarding the second quarter results on the Freight segment. I noticed a very strong transportation cost control in the second quarter. So wondering besides the tailwinds from the toll waiver and the lower fuel costs. What's the other reason behind is the transportation cost coming down so much? Is it because of the product mix leading to the latter average rate or anything else, because it's now almost 30% year-on-year in second quarter?

And my second question is regarding the competition strategy in the -- for the Express segment because we were intentionally are slowing down a little bit in terms of the volume growth for better profitability and business sustainability. But looking forward, we are seeing more new entrants come into the battlefield. So what's our current strategy? We still put the profit ahead of market share now or we are shifting our strategy to grabbing more market share in the next few quarters? Thank you.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Thank you, Baoying. Thank you very much for good questions. With regarding to Freight. Yeah. So second quarter we actually benefited from multiple front, right? One is that, like, as you said, fuel pricing and also the government policy at the early year to combating the COVID-19 has waived the tolls for the highway. Even though on the only benefit in April or few days of May, but that does give us a good cost reduction there. But second, as you said, the product mix and a stronger growth also contribute to the cost reduction. We brought about 28% -- more than 28% in the volume year-over-year as well as our product mix, our e-commerce related products has increased. That typically has a lower wage on -- and also have a higher incomes per kilograms in that. So basically, combination of that.

And on second one for the Express. Yeah. So we continue to drive for efficiency and the cost reduction, but meanwhile we want to balancing the profitability and sustainability of growth, rather than purely just for market share. So going forward, what we are going to do is, first of all, we continue to reduce the cost, improve efficiency as we demonstrated quarter by quarter. Meanwhile, we want to see if we can have more synergies with our other business units, such as Freight. They can share a lot of hot routes and a lot of other on cost. And so synergies will be more applied to, in fact, with that we already have saved a lot of money in the last couple of quarter or last year for that reason. We've shared a lot of synergies with other business units.

So moving forward, we continue to anticipate and expecting a strong revenue -- strong parcel growth, volume growth, as well as improved efficiency as well as the profitabilities.

Baoying Zhai -- Citigroup -- Analyst

Johnny, thanks for your response. Follow-on the average weight of the Freight now, in second quarter, actually?

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Second quarter average weight is close to about 115 to 120. And typically on the -- yeah, 120 -- around the 120. And typically on the fourth quarter will be a little bit lower. Second quarter, we'll be a little bit lower, third quarter will be a little bit higher. Reason, in third quarter typically is a low season and we will probably get some heavier shipment to balancing our load on the truck. So [Indecipherable].

Baoying Zhai -- Citigroup -- Analyst

How is the year-on-year trend on this?

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Last year, in 2019 we've reduced that by about 10 kilograms in average -- 10 kilograms average for the Freight. This year probably it's going to another 10, so we are moving toward about 110 toward the end of the year.

Baoying Zhai -- Citigroup -- Analyst

Okay, understood. And on the second question, may I further clarify with target. So in the next few quarters we target to be in line with the industry growth or we want to surpassing industry growth later date? I know we are very focused on the cost efficiency.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Yes. So -- Okay. So I think we have a, I guess, what's going to be industry growth, but we really don't know exactly what's the third quarter and fourth quarter industry growth going to be exactly. But presumably, it's still going to be strong looking at the June number. So yes, so our target for the third and fourth quarter is there anywhere between 25% to 30%, somewhere around -- as we planned it last year. So we don't know exactly say we want to ahead of the market, because we don't really know what's ahead of market is, but I think that 25% to 30% is fairly strong growth. [Multiple Speech]

Let's put this way, we will grow faster than second quarter.

Baoying Zhai -- Citigroup -- Analyst

Okay. Understood. Thank you.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Thank you. The next question we have will come from David Ross of Stifel.

David Ross -- Stifel -- Analyst

Yes. Good morning, Johnny. Good morning, Gloria. On the Express business, I wanted to see what you think the floor might be on pricing. As the package volumes grown, we've been talking about this for the past couple of years, and again, in this quarter, average price per piece was down 21.5% year-over-year. How much lower can it go?

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Okay. Good evening, Ross -- David. I assume you're in US.

David Ross -- Stifel -- Analyst

Yes.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Yeah. Okay. So thank you for joining the call. You're quite late there. Yeah, good question. The Express floor, price floor? Okay. So this year as everybody noticed, it's like, much lower price comparatively from last couple of years. Last couple of year may have like price reduction in 10, 20 or low teens, but this year, it's quite large. Partially because of COVID-19, from the recovery of COVID-19, and people wanted to recover the network quickly, so probably lower the price. Second is that, also during the February, basic government gave the toll waivers and toll waiver -- the toll waiver -- basically a toll is about 30% transportation cost, transportation is about 60% of the total -- total cost for the parcel. So we're talking about 18% to 20% on cost saving on the toll waivers. And so that contributed also to the -- lower the cost and some of the pricing -- severe price reduction, which we have seen.

We anticipate pricing continue to go down, but it's not -- it's going to be as steep as this. But essentially all the -- in end of day, all your costs are going to have a limitation, right? Given that how much the fuel cost is going to be, given the how much toll and everything else and that's always going to be there, it is not going to disappear. So, yeah, so I think the cost reduction is still going to do for going there. I mean, we're still looking at the year-over-year cost reduction target. But as it goes, the cost reduction is going to be diminishing return, right? Because essentially, you perhaps hold out. But -- and also I think the flow -- the pricing flow is also going to be fall out. I cannot tell you exactly what it is. Is that going to be $2 or below $2 or where it is, but I can say is that, cost reduction will continue, but however, cost reductions are going to be slowing down. And I can say is that competition is still going to be there. The pricing is still going to be lower. But honestly, I don't know where for us, but I would anticipate that the flow is going to be lower in today, but not as much steeper as what we have experienced the last quarter.

David Ross -- Stifel -- Analyst

That's helpful. And then on the volume side at Express, it was up 19% year-over-year in the quarter, how did it progressed through the quarter? Was April not as good and then May and June are much stronger? And where do we sit here in July? Just kind of frame that 19% for us. Is it actually better than that?

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Yeah. So, April we actually grown about 14% or 13%, and June we grown about 26%. So looking at July, right now, we are looking at about -- anywhere from 25% to 30%.

David Ross -- Stifel -- Analyst

Excellent. And then last question, just saw a headline about JD.com buying interest in Kuayue Express. Does that mean anything to the competitive landscape?

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Kuayue Express has no direct business overlap with us, they are more on the high end -- high end air travel, air based parcels or the freight. So, yes, it will have a minimal impact to us.

David Ross -- Stifel -- Analyst

Great, thank you very much.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Thank you, David. Have a good evening.

Operator

And next we have Ronald Keung of Goldman Sachs.

Ronald Keung -- Goldman Sachs -- Analyst

Thank you. Hi, Johnny. Hi, Gloria. Few question from me as well. Firstly, would be just how -- again on the Express pricing strategy. I mean, we've cut prices by 20% and positive growth relatively was slower versus, say, the other Yunda's and ZTO that have cut prices by 30% but kind of hanging in there with similar growth as ZTO in the second quarter. So we could see how -- what we're choosing between kind of profitability and market share gains and much here in the second quarter. Then into the second half and given, I think this is still quite a scale game, because we can't grow materially slower. So I think if you're targeting in line growth with the industry, should we expect kind of the ASP differential between you and the players to be more similar into the second half. So overall, price declines may be smaller for the others as well. But just that we will not be kind of pricing kind of less -- 10% less in pricing decline, maybe is that likely more that will be kind of a bit following the rest in the second half and then achieving kind of industry growth rates into the second half? It's the first question.

And then for the second, could you kind of give us some metrics on your kind of franchisees, health of franchisees any kind of turnover ratio that you could share? And how are we seeing just these new entrants including J&T that's coming in, do we see that could impact any of our kind of franchisees or the competitive landscape into the second half? Thank you.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Okay. So basically, you have two questions. One is about the second quarter pricing strategy and growth strategy. Yeah, so as you rightly pointed out, our peer players, they actually had a steeper pricing reduction than what we have done. Partly because we wanted to really improve the margin and have a profitability there. Moving to the second quarter, we still wanted to maintain our strategy to balance volume growth, as well as the profitability. So I don't think that we are going to meet the price just for the sake of share, because I think it's the more important currently is consolidating our ability to cost reduction and improve the quality in some other areas. Because the volume is always going to be there. If it is not here today, when you do a better job you can always get it back. So I think that our strategy -- to answer your questions, we are not going to a lower the pricing further more.

In fact, if you're look into last couple of years, the third quarter and toward the end of third quarter and fourth quarter the actual price goes up a little bit -- goes up a little bit because the high season, everybody is expecting huge volumes, a much bigger than July. And July is typically a lowest season, July and August. So fourth quarter I think the pricing is going to be not much lower, but I think it may be even improved. So that's to my first question. Your first question.

Second question is to the competitive landscape of new entries and -- new entrants and these. As you all know, right. The market is very competitive. In the past 10 years we are in this business. Every year we have to invest a huge amount of money and efforts in upgrade automations and the sites and everything. And in fact, if you build a site, you are looking for new site, I'll take a long time as well. So it requires time to build the order network and everything else. So I don't really -- I really don't think that new entrants will have a significant impact to our current business.

Back to what you said about the stability of our franchisees. I think, of course, in this kind of competitive market when the pricing are lower, last-mile delivery fee are lower. Some uncertainties or some kind of problems within the franchise networks is anticipated. However, we have done a good job in maintaining communication and actually working with the franchisees to make sure that they can also working with was with the company to weather through this competitive market. In fact, with some of the franchisees, through this -- their cost reduction and efficiency improvement, they actually become stronger in competitiveness. So given that, I would say that the franchisees is really stable. We would see a few of them may have some problems in the May and June time when the delivery -- last-mile delivery cost was lower, but that was quickly stabilized and so far we don't see a major problems with the franchisee network.

In fact, as you said, new entrants comes in and we don't see a -- at least, I don't know where large amount of franchisees has joined the new entrants, because they understood that it would take lots of effort to really get the network, so they rather be working with the company and best to further the development of the -- and the real protected investment in the past.

Ronald Keung -- Goldman Sachs -- Analyst

Thank you. That's very useful. Thank you, Shao.

Operator

Next we have Thomas Chong of Jefferies.

Thomas Chong -- Jefferies -- Analyst

Hi. Thanks management for taking my question. I have a couple of questions regarding our domestic and international business. I think the first, can management comments about our shopping hubs target in 2020? And also our thoughts on increasing popularity, talking about the one-hour delivery, any thoughts there?

And my second question is about our international business. How should we think about the next few years, KPI that we want to achieve given a lot of geopolitical tensions, as well as COVID? Thank you.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Okay. Thank you, Thomas. I have a little bit difficult to hear well on the first question, but I guess your question is, what's our expectation of the number of hubs during the year. Right?

Thomas Chong -- Jefferies -- Analyst

Yes.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

If that's the case -- Yes. So we right now maintain about, self-operate about 87 hubs in all. There is some small hubs where we may want to consolidate, but we might want to open one or two [Technical Issues]

Operator

Excuse me, everyone. We will shortly reestablish connection here. Again, please standby, we will try to reestablish connection with the management. Everyone thank you for you still connected, please standby. Thank you again, everyone. Again, please standby for the Best Inc. Conference Call. Again, we are just reestablishing the connection with the management team. Again, thank you, and please standby.

Okay. Yes, sir. We can hear your location now.

Unidentified Speaker

I can't hear you. Anybody can here.

Operator

Okay. Currently the caller can hear you sir.

Unidentified Speaker

I know, but we have a problem, because this is the backup in Hong Kong. We can hear, but the main line in Hangzhou is not working. Our Chairman and our CFO are in Hangzhou, so what happened to that line?

Operator

Thank you for standing by. The Best Incorporated conference call will start momentarily.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Hello, how much of you still there. I'm sorry, it is a technical issue. The line seems went there immediately.

Thomas Chong -- Jefferies -- Analyst

Hi. This is Thomas. I'm here.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

I'm very sorry. We are talking and everybody tells me is you guys have no voice. We call the operator and there seems what happened. But we redialed and reconnected. So thank you very much for patients. I'm very sorry. So just half I answered. On the international front, I'll give you a little bit color. One is that, international is actually growing very rapidly. So like I just said, in the US, actually the second quarter we see our volume -- both our volume and the bottom line actually improved much more than we expected.

Southeast Asia also growing very rapidly as demonstrated on the second quarter, let's say, our Thailand, was growing about 90% quarter-over-quarter. Vietnam was at over 50% year over -- quarter-over-quarter, but we also see the new entry to the Malaysia, Singapore, they are also growing very rapidly. So that's the second front. Third is that, what do we really see is that a big trends on the cross-border business, so lot of merchants they open shops in Southeast Asia, in Lazada shopping, etc. They actually purchase most of the products in China from -- from Guangzhou, Dongguan, etc. Then we shifted to the Southeast Asia. And so our supply chain grew, supply chain management grew, but they're doing a lot of this works with, for example, with local government in Kunming, in Yunnan, Guangxi, Nanning to open the route through the road transportation, through the land to Vietnam and the Thailand. Previously most of these transportation are done through the sea freight or air freight, but now it's open another front through the land lines. So I would still anticipate our supply chain was also going to be benefited lot over collecting products in China and over ship to land transportation or seas through the Southeast Asia into the ground.

So we will continue to manage our cost structure. Initially we have invested a lot of equipments and capex into Vietnam and Thailand, like we just did in China in the past. And that actually as the volume goes up and the per parcel cost goes down a lot. So we are anticipating two things, continue a fast growth on the topline and improvement on the per parcel cost to overly reducing the losses in the global business and hopefully in the next year, we will see a much balanced results on that.

Thomas Chong -- Jefferies -- Analyst

Thank you.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Okay.

Operator

Thank you. The next question we have will come from Eric Zong of Macquarie.

Eric Zong -- Macquarie -- Analyst

Hi, Johnny and management team. Thanks for taking my question. I have two quick questions. So one is regarding the last mile delivery fee in Express delivery business. So we saw that last mile delivery fee are RMB1.2 per parcel, which was much lower than a year ago, was lower than the first quarter. So just thinking about the longer term, like, I just want to know your view, like what's the draw for last mile delivery fee going forward in the second half of next year? And would you like, maybe we can say last-mile delivery phase going below [Indecipherable] per parcel next year. Okay. That's my first question.

And the second question is regarding your Store+ business being off-plan. So do you have any news toward that development?

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Okay. Yeah. So last mile [Technical Issues] reduced compared quarter-by-quarter as compared with last year are primarily driven by two, right? One, as the volume grows you get a more density for delivery. So definitely your cost is going to be -- per parcel is going to be lower. Imagine the area which has one parcel or two parcel, cost wise this is going to be improved. The second is on -- because of severe competition more and more last mile delivery is through the post, through the stores or some other kind of mean lockers, the parcel lockers and stuff like that.

In the past, last year, I think only 35% -- only 35% of the parcel was delivered through the last mile, other means of last mile, through locker box, through the other stores, etc. But this year, it already increased to 50% or 60%. And in fact the portion is still increasing. But that has a much lower cost structure compared with deliver on the door to door. Because think about a delivery person carry 50 parcels going into a lock box, the cost will be much lower than deliver 50 box, parcel into 50 families door to door. So that's the thing.

So you're quite -- your question was, where is the floor? I think that continue to lower. I cannot say that should be $1 or less. But what I'm saying, the trend is continue to be gradually lower. As I said, the two last reasons or factors. One is, increasing volumes low the cost. And second is, more meetings of last mile delivery versus in person door to door type of delivery. Would that be lower than RMB1? It's possible, but I'm not going guess when it is going to be. It also depends on the franchisees acceptance, stability. We want to maintain a healthy, stable last mile delivery network and make sure that the franchisees are stable and they can be -- do a good services to our customers.

The second question you had was a spin-off some of the business units. As you -- we had said in several call that the company, the management team are continuously looking for various ways to improve the shareholders' value, as well as the business development, liquidity and the further development of business that we think is going to bring future growth opportunity for the company. As we did for Freight, right? We're the first one really in early 2012 started a freight business. And we right now bearing the fruits after six, seven years of development, since last year the freight business is growing rapidly, it is also making profit and profitable.

So hoping that our international business, as well as our store business is going to bring a long -- contribute to our long-term growth and profitability. Meanwhile, it creates a lot of synergies between our -- for example, our Store+ with our supply chains and the Global with our supply chain as well as Express and Freight. So hopefully that's thing. So we are continuing to looking at these opportunities, but we don't have anything to report right now. We're certainly, as you know, when more is solid. So. Eric, thank you.

Eric Zong -- Macquarie -- Analyst

Okay, thank you.

Operator

And next we have Hans Chung of KeyBanc.

Eric Zong -- Macquarie -- Analyst

Hi, good morning, Johnny and Gloria. And George [Phonetic] thank you for taking my question. So I have two question. First, still regarding our -- the balanced strategy on the pricing and growth in Express. So I think that your scale still matter a lot in Express industry. And then -- so my question is, how should we make sure -- because I think that going forward, it should be, whether we can reduce our cost faster than the price decline, right? So I think going forward, how should we make sure we can continue to achieve the faster cost reduction without, let's say, maybe just to keep the in-line industry growth or maybe even slower, and, let's say, in the medium to longer term.

And then second question would be just regarding the Thailand market in Tucson. Can you give us, like, what kind of competitive landscape in that market? Like what's our market share now and then what's the unit economy so far? And what should we think about that in next one to two years? Thank you.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Okay, thank you, Hans. You have three questions. I'm going to ask you -- first question you had was on the strategy on pricing. Yeah, so our pricing, as we said, we want to make sure that the pricing is in line with our cost reduction strategy, right? So we want to make the margin improvement as well as the profitability. So we are not going to say blindly follow the pricing on the market or the others. As we demonstrated on the second quarter, even though our volumes growth has been impacted somewhat, 19% versus more than market growth or more than 30%. But we are making a very healthy pricing. Our pricing is literally look at June number, second quarter, we're pretty higher with higher ASP than some of our peers. So, yes, pricing side, we're maintaining that strategy, right? Doing a cost reduction then that means that we will improve our margin on that.

So that lead to your second question. So what's the cost reduction strategy, right? So you say the pricing is based on your cost reduction. Well, cost relations from -- mainly from four area, right? Largest is transportation, because transportation -- if you look at our second quarter, we have about less than RMB1 total cost, right? So the transporting cost is about 60% of it. Given our third quarter, maybe even little bit more than 60% of it, because the waiver for the toll, everything is gone. So let's say, transportation side. So we have been doing a good job to continue to lower the transportation cost, primarily driven by three things, right? Volume growth, of course, one of them, that's most obvious. But second is really through a more dynamic routing, we have a R&D team for the industrial engineering and they're working on the system, we already have a system in place, so they can dynamically really do a routing, so make sure that our routing are most efficient.

So that's second. Use of technologies solution automations for the routing efficiencies. And the third is basically synergies across with our other business units. For example, Freight volume is very large already, we are actually doing -- current year we're doing like 28,000 tonnes a day, that translate to equivalent to a similar type of network of same sizable network as the Express. So how do you combining some of these transportation routes, especially to a remote area, a long distance area which timing -- delivery of timing is not critical. And you know what, you have two or three days to work out, how do you combining them, some of the routing efficiencies to reduce the total cost for both Freight as well as for the Express.

So we started a project last year for merging of Freight and Express on the transportation side, we just started. I think we have a lot more to go to make sure that the cost can be reduced, meanwhile, the service level can be maintained. So we are not reducing the the transit time or anything else, and make sure that our really time and transit time can be maintained. So that could be looking forward to on reduced some more cost on that front.

Yeah. So third is on Thailand market. I'm sorry. The Thailand market --Thailand is actually -- I think in the past Thailand actually the offline market is actually well developed through like 30, 40 years development. Off market is well developed, but since a couple of years ago, I think I would say 2018 starting the e-commerce growth very rapidly. Even though they only have a 3% penetration online for the total consumption, but that's growing every year 30%, 40% for the past couple of years. So I think that trend is only going to be accelerating.

Our market position, we entered the market little bit late, because there is several local players and some other international players already there. But however, our market share has been growing very rapidly. We enter Thailand market in, I think, it was in early 2019. So we then basically landed the first group people 2018, into Thailand in late 2018. We started building up the network of 2019 and start building on top of that. As on the June our peak volume already exceeded like 200,000 volumes and still growing very rapidly. So hopefully by end of year, we will be moving much higher volume grow. Meanwhile, the market share is continued to be growing. We [Technical Issues] 1% toward the end of last year to now it's a little bit shy of 5%, but it is still growing. So I'm sure that in next couple of years, we will grow fast.

Our basic philosophy or the strategy is that, for the -- for the Southeast Asia market for every market we entry we want to be on top three players in the next couple of years. So that's our goal. And some maybe top two, some maybe top three and some maybe top one, but that is our strategy and target.

Operator

Well, at this time, we're showing no further questions. We'll go ahead and conclude the question-and-answer session. I would now like to turn the conference call back over to the management team for any closing remarks.

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Thank you for joining our call, and we appreciate your support of BEST. Please reach out to our Investor Relations team if you have any further questions. We look forward to speaking to you soon. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 66 minutes

Call participants:

Shao-Ning Johnny Chou -- Founder, Chairman and Chief Executive Officer

Gloria Fan -- Chief Financial Officer

Unidentified Speaker

Baoying Zhai -- Citigroup -- Analyst

David Ross -- Stifel -- Analyst

Ronald Keung -- Goldman Sachs -- Analyst

Thomas Chong -- Jefferies -- Analyst

Eric Zong -- Macquarie -- Analyst

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