Image source @ Visual China
Text | Business Data School, author | Sun Guangxin
Fresh e-commerce has been exposed to large-scale layoffs.
Dingdong former employee, was laid off last Wednesday.
Two days ago, I was still communicating to give me more work, a thriving atmosphere, Wednesday afternoon at six o'clock without warning suddenly called by hr to talk, saying that the probation period is still three days, not to be regularized. ”
A user with the pulse ID "Big Zebra Meditates in Edinburgh" posted the above post on January 13.
Subsequently, Dingdong Grocery was rumored to be laying off employees on a large scale, and detailed layoff plans were listed: 50% of the procurement layoffs, 30% of the algorithm, 30% of the operations, and 10%-20% of the recruitment. And most of the laid-off employees only received N compensation, no N+1.
Recently, netizens who claimed to be former employees of Meicai.com said that shortly after the 50% layoffs, Meicai.com launched about 40% of the layoff plan, and the headquarters has also moved, and said that "talk on the same day, go on the same day."
As of January 14, Meicai has not responded to this. Dingdong buys vegetables and opens up rumors, but said that there are "small-scale companies normal organizational resource adjustments". However, the "Dingdong Grocery Buying Employee" who was certified on the pulse said, "Fake, in fact, there should have been more than 20,000 layoffs." ”
The industries that need people the most are laying off workers
If the situation is true, this round of layoffs may be a continuation of the previous round. According to the above layoff ratio, after the completion of this round of layoffs, the number of employees of Meicai.com will only be 20% as of August 2021.
The last time meicai was rumored to have had a massive layoff in September 2021. According to internal emails, some urban services of Meicai.com have been shut down, the regions have begun to merge, and the internal personnel streamlining work is also being carried out simultaneously. At the same time, meicai Chengdu R & D center will be abolished as a whole, and technical departments such as product research and development in Beijing headquarters, business departments such as procurement and sales, and functional departments such as finance are facing a layoff ratio of 50% or more. At that time, the response given by Meicai.com was normal business adjustment and optimization.
According to 36Kr's report, since May 2021, the layoffs of Meicai.com have begun, and almost all the top executives of the self-operated warehouse backbone have been laid off.
Judging from the news of several layoffs, the layoffs of Meicai.com have affected almost all major departments at all levels.
At the same time, Dingdong buying vegetables was also exposed to lay off employees. Probationary employees are the hardest hit areas of this layoff, "also threaten to induce profits not to give or less compensation", if you insist on compensation, the company said that if you go to arbitration, it will take 3 months to more than half a year.
According to 36Kr, an employee of a Shenzhen service station in Dingdong Buy Vegetable said that when he first joined the company, there were 6 sorters, 4 night shifts, 4 warehouse management people, 4 aquatic products, and 27 distribution personnel, and now each post has a certain reduction in personnel, including 2 sorting people, 1 night shift, 1 warehouse management, 1 aquatic products, and 8 delivery people.
Before the large-scale layoffs were exposed, it was reported that Dingdong buying vegetables was already in a mandatory holiday, that is, some delivery staff were forced to rest, and there was no basic salary during the break, and some employees were even forced to take a break for nearly half a month in a month. The reason for the forced scheduling may be the waste of manpower caused by not having enough orders.
Dingdong Buy Food urgently debunked rumors on January 13, saying, "Individual job changes are the company's normal organizational resource adjustments, and the recruitment needs of some positions are also being released normally, and the business is currently operating normally." At the same time, there is no situation where employees are forced to take unpaid leave in front-line positions, and they will be reasonably adjusted according to the work situation of the site, especially the willingness and work intensity of employees. ”
Dingdong also said that in recent days, there have been rumors that "Dingdong buys vegetables has opened a large layoff", "the core department has cut up to 50%", "procurement 50%, algorithm 30%, operation 30%, recruitment 10%-20%", "forced to give the front warehouse service station employees a break", etc., the news is untrue, there is no factual basis and a malicious speculation of rigorous data sources. The Company reserves the right to pursue all false rumors.
Although the proportion of layoffs is not certain, it highlights that both fresh e-commerce companies face the same problem, that is, huge labor costs.
As a heavy supply chain and strong operation industry, fresh e-commerce is still a labor-intensive industry. Many employees of related companies said that they often have to follow the car before dawn, and they are busy until eleven or twelve o'clock at night to urge customers to place orders.
When the bubble in the market was punctured, the business model problem of fresh e-commerce was mentioned again.
Stretched cash flow
Behind the sharp layoffs is the cash flow of fresh e-commerce companies.
According to the financial report, in addition to the first quarter of 2020, Dingdong Buying achieved a net inflow of cash flow from operating activities of 15.657 million yuan and a net inflow of cash flow from investment activities of 212 million yuan, the operating cash flow and investment cash flow of other times have been negative, such as in the third quarter of 2021, the net outflow of operating cash flow of Dingdong Grocery was as high as 1.268 billion yuan, and the cash and equivalents were 2.052 billion yuan.
The first quarter of 2020 was able to achieve short-term positive cash flow, relying on the short-term impact of home isolation. Dingdong Grocery also admitted in the prospectus that what meets its working capital needs is the cash flow generated by the financing activities, that is, financing.
According to the prospectus, the cost of selling goods is the largest cost of Dingdong to buy vegetables, accounting for 82.9%, 80.3% and 81.1% of revenue in the first quarter of 2019-2021, respectively, and even the best performing first quarter of 2020, the cost of sales accounted for 73.3% of revenue. This situation has not changed after its listing, and in the third quarter of 2021, the cost of selling dingdong to buy vegetables was 5.061 billion yuan, accounting for 81.77% of revenue.
After deducting the hard cost of the goods, Dingdong has not much money left to buy vegetables.
At the same time, in order to acquire new users, Dingdong's sales and marketing expenses in the third quarter increased by 206.8% year-on-year to 428 million yuan, and general and administrative expenses also increased by 78.0% to 153 million yuan due to the increase in business scale. With a double increase in selling expenses, but only 111.0% revenue growth, fresh e-commerce companies are now facing the same problem of increasing customer acquisition costs as other e-commerce companies.
A series of layoffs on Meicai.com may be related to the unsuccessful listing plan. Just on January 12, Ryan Capital posted on its public account that Meicai.com plans to submit a prospectus on the Hong Kong Stock Exchange in the first half of this year, or has selected CICC, Citi, Nomura and other investment banks to be responsible for its listing.
In the first half of 2021, Meicai.com has secretly submitted a prospectus in the United States, but with the sudden changes in the US stock market, some listed Chinese stocks have sought to return to Hong Kong for secondary listing, and many IPO companies have withdrawn and postponed their IPOs, changing the listing location to Hong Kong. In this context, Meicai.com also had to change its route to Hong Kong stocks.
However, after receiving $800 million in financing from Tiger Global Fund and Hillhouse Capital in October 2018, there was no further financing information from Meicai. Although there was news after this that Meicai had sought investment from SoftBank, it ultimately failed.
In the past three years, there has been no income from fundraising, which has made the cash flow of Meicai.com into a tight.
It is understood that the initial business of Meicai.com is B2B fresh e-commerce, providing fresh e-commerce services for small and medium-sized restaurants. In January 2021, Meicai began to provide fresh e-commerce services to individual families in Wuhan.
From to B to C, the business expansion of Meicai has both the special reasons why B-end customers have no orders to place under the epidemic, and also wants to use the popularity of fresh e-commerce to find new growth points at the C-end. But the to C business is a double-edged sword, with faster scale growth and faster burning.
Previously, Meicai.com was exposed to sell the to C business, which showed that it was in urgent need of blood.
There are relevant reports that if Meicai maintains the original personnel scale, the cash flow may not last for half a year.
The paradox of the sinking market and the fate of the front position
The first generation of fresh e-commerce has been established nearly 8 or 9 years ago, but the penetration rate is still not high.
According to the latest data from Tiger Investment Research Institute, the current penetration rate of fresh e-commerce is only 14.6%. According to the 2021 China Fresh E-commerce Industry Report, as of September 2021, even in first-tier and new first-tier cities, the penetration of fresh e-commerce is only 35.5% and 18.9%, respectively. Although the proportion of users in second-tier cities and below is increasing, in the past four years, it has increased from 35.1% in September 2018 to 41.5% in September 2021.
A staff member who had done the work of pushing the beijing area of Meituan to buy vegetables told the "Business Data Faction" that the requirement of 20 new users in 1 day to place orders is also difficult to complete. Young people have basically used it, the elderly do not listen to what he says, and some new users are just another mobile phone number of the old user.
It can be seen that in the first-tier and new first-tier cities, the user growth of fresh e-commerce has encountered bottlenecks, and it is impossible to rapidly expand the scale of users in a short period of time, and the performance of fresh e-commerce in the sinking market is not satisfactory.
But what is more frightening is that fresh e-commerce companies are facing not only the problem of market size, but also the model of their front positions, and the marginal cost is almost not decreasing, and profitability can only be improved by increasing the unit price of customers.
We mentioned earlier in the "two major fresh e-commerce impact listing, there is no winner in the front warehouse" that each new front warehouse needs to be invested in all aspects of warehousing, transportation, labor, etc., so the income and loss of Dingdong buying vegetables that use the front warehouse model are almost the same as the growth.
Liang Changlin, the founder of Dingdong Grocery Shopping, once said that after a single pre-warehouse has been operating for more than 1 year, the average unit price of daily orders has reached 1,000 single orders of more than 65 yuan, and each single can reach 3% of the operating profit after removing the cost of the single order, so as to achieve profitability. According to a research report by Haitong Securities, in order to achieve profitability, the order volume of a single warehouse needs to reach 1250 orders/day to achieve breakeven.
According to the financial data of Dingdong Grocery Shopping, the performance cost alone in the third quarter of 2021 was 2.309 billion yuan, and the cost of sales in the same period was 5.061 billion yuan, a total of more than 7 billion yuan, while dingdong BuyIng's total revenue in the third quarter was only 6.190 billion yuan.
In addition to the high cost of sales and performance, as well as the increasingly high cost of customer acquisition, the supply chain is also an important factor restricting the profitability of fresh e-commerce. In its brief three-quarter report, Dingdong Grocery said that in order to further improve efficiency and reduce operating costs, spending on supply chain systems increased, resulting in a 197.5% year-on-year increase in product development expenditure to 257 million yuan.
However, Yu Le, chief strategy officer of Dingdong Grocery, said in the third quarter report that it is expected to achieve breakeven in Shanghai in the fourth quarter.
Shanghai, as the headquarters of Dingdong Grocery Shopping, is also one of the first-tier cities with the strongest spending power. Even if it is profitable, it is difficult to guarantee that its experience will be replicated in other regions.
The thin-profit selling of vegetables may not be able to support the dreams of fresh e-commerce.