ZTO Express (“ZTO” or the “Company”) is a leading express delivery company in China and one of the largest express delivery companies globally, in terms of total parcel volume in 2015, according to the iResearch Report. ZTO provides express delivery service as well as other value-added logistics services through its extensive and reliable nationwide network in China covering over 96% of China’s cities and counties as of December 31, 2016. ZTO is both a key enabler and a direct beneficiary of China’s fast-growing e-commerce market, and has established itself as one of the largest express delivery service providers for millions of online merchants and consumers transacting on leading Chinese e-commerce platforms, such as Alibaba and JD.com. Globally, ZTO provides delivery services in key overseas markets through its business partners as it expands coverage of international express delivery by collaborating with international industry players.
ZTO operates a highly scalable network partner model, which the Company believes is best suited to support the significant growth of e-commerce in China. The Company leverages its network partners to provide pickup and last-mile delivery services, while controlling the mission-critical line-haul transportation and sorting network within the express delivery service value chain. The network partner model is developed to reach and serve the Chinese e-commerce industry’s fragmented and geographically dispersed merchant and consumer base and seasonal demand. ZTO has strong operational efficiency through centralized control and management of 75 sorting hubs and a fleet of over 4,200 trucks, route planning and optimization, as well as the Company’s proprietary waybill tracking system and transportation management system. ZTO's operational efficiency and economies of scale have resulted in it becoming a cost leader in terms of unit cost per parcel. This allows ZTO to achieve strong operating leverage by minimizing fixed costs and capital requirements which drives higher return on invested capital and equity.