Fresh e-commerce does not have a New Year festival

Text | Internet jianghu

The Spring Festival is approaching, and with the warm-up of the major e-commerce New Year Festivals, the New Year flavor on the Internet is gradually becoming stronger. For the retail industry under pressure under the epidemic in the past two years, this Spring Festival is the key to boosting sales throughout the year, and brands have also played the spirit of twelve points.

This year's Spring Festival, the liveliness is the e-commerce platform, and the fresh e-commerce in the name of new retail seems to have nothing. First there was a thunderstorm in the Ten Hui Group, Dingdong bought vegetables to lay off employees, and then there was a 40% layoff on meicai.com, and all the stores in Beijing were closed by Aunt Qian.

Under the new year' pass, the fresh track is in mourning. For fresh e-commerce, there is no New Year festival in 2022.

Recently, there is news that Hema has raised funds independently at a valuation of $10 billion, and the news has attracted the attention of all parties. Ali said it would not comment.

The fresh e-commerce industry is still in turmoil, and the news that Ali wants to seek independent financing for Hema has become more noteworthy.

While paying attention to the dynamics of Hema, people can't help but think about such a question: How long can "new retail" persist after consecutive years of losses? In the market, what kind of valuation logic will the head players of the fresh track have?

This is quite critical to the next capital market pricing of the fresh track and even the entire new retail.

Is the deep meaning behind independent financing, fresh or good business in the eyes of capital?

According to Bloomberg, Ali is currently considering seeking independent financing for Hema with a proposed valuation of $10 billion. It is reported that the round of financing may start in February, which is still in the deliberation stage and has not yet been confirmed.

Hema is independent of Ali, in fact, there is already a hint, last August, in the change of Ali's organizational structure, Dai Shan no longer represents the group in charge of the Hema business group, Hema business group president Hou Yi directly reported to the Daniel Zhang. This means that Ali seems unwilling to invest more money in the fresh track, and Hou Yi also needs to take on the responsibility of profitability.

From a financial point of view, Hema does have the possibility of independent financing, and it is quite similar to the previous Ele.me independence.

Previously, after the establishment of the local life service company, Ele.me and Word-of-Mouth actually partially separated from the dependence on Ali, especially financially, after which Ali Local Life Service Company completed an independent financing of 3 billion US dollars.

In fact, judging from Ali's financial report data, the new business has indeed had a certain impact on Ali's profits.

From the data point of view, in 2021, the loss of new business pulled down the overall profit level, making the net profit in the third quarter drop by 39% year-on-year, mainly due to the investment of 12.5 billion yuan in local life, community e-commerce and other fields. In other words, for the still unprofitable Hema, Ali's attitude seems to be undergoing more changes:

Considering seeking independent financing for Hema may not only mean that Ali's senior management hopes that Hema can support itself, but also may mean that as the industry situation as a whole turns cold, Ali is likely to be losing patience for businesses that still require high investment and will not be rewarded in the short term.

Seeking independent financing may also be a way for Ali to seek returns in the secondary market, the current full profitability of the fresh track has not yet been realized, if there are new variables in the industry, Hema may become an asset burden for Ali. According to the Tianyancha App, in 2016, Ali invested $150 million in Hema, after which Hema did not seem to have made new financing.

From the perspective of secondary market pricing, the capital environment has changed, and the value judgment logic of capital has changed.

From the perspective of the investment environment of the capital market in the past two years, one of the main evolutionary paths is that technology is more driven than model-driven:

On the one hand, heavy asset tracks with high technical density are favored. For example, the new car track, power battery track, semiconductor track, etc., the market value of some related companies continues to strengthen.

On the other hand, the valuation of heavy model tracks with low technology density has declined. For example, the ride-hailing track, as well as the fresh track.

In addition, with the strengthening of the entire Internet regulation, the penetration of Internet business into some specific industries may face more resistance.

In the fresh track, due to the existence of social needs such as ensuring people's livelihood and employment, policy factors may further compress the large-scale space of the fresh track, and the competition among players in the track may be more intense than ever. In such an environment, when the top players in the industry do not establish a large enough advantage, they dilute their own value in the capital market.

In other words, even if it is a head fresh player like Hema today, it is not easy to obtain financing in the secondary market. You should know that two years ago, the valuation of Hema was not 10 billion US dollars, but 200 billion yuan.

If the news of Hema's independent financing is true, then according to the proposed valuation of $10 billion, Hema's valuation has shrunk by two-thirds from two years ago. The valuation of Instacar, a U.S. grocery e-commerce company that plans to raise funds next year, has reached $30 billion. If you take into account the Fed's quantitative easing policy in the past two years, the actual valuation may be lower than it was two years ago.

From this perspective, it seems that we can also see that the competition in the fresh track may be more intense for some time to come. One of the reasons ali seeks independent financing for Hema is likely to be to cope with more fierce competition and challenges in the next track.

After filling the pit and exploring, the box horses need a value transformation

In 2016, Ma Yun asserted at the Hangzhou Yunqi Conference: "The next 30 years will be the 30 years of human society turning upside down, the changes in the world will be far beyond imagination, and the term e-commerce will soon be eliminated."

5 years later, the word e-commerce is still there, and no one in new retail has been able to subvert it, but it is quite shaky. In the fresh track with Hema as the benchmark for new retail, the head players still failed to make an overall profit, while the Shihui Group has thundered, Aunt Qian has lost the capital, and the future of community fresh retail is slim.

At present, among the leading players in the industry, the net loss of Daily Excellent Fresh in 2021 is 974 million yuan, the net loss of Dingdong to buy vegetables is more than 2 billion yuan, and Hema is still a single store profit, Hema CEO Hou Yi said in an internal letter before that the goal of Hema in the future is to be fully profitable.

Plagued by profitability problems, it seems to be the fate of box horses, dingdong groceries, and daily fresh food.

The expansion model represented by Hema is the model of financing enclosure in the old era. This is very similar to the long video track where iQiyi is located, everyone is burning money and desperately using investors' money to exchange the market and users. Later things everyone knows, the underlying logic of Internet growth has changed, the enclosure model has been eliminated by the times, but the box horses have not yet run through the profit model, and the next door iQiyi has been facing the pressure of losses and layoffs.

In 2019, the problems caused by the expansion of Hema began to appear, involving quality, management and other aspects, so we saw that in May of that year, Hema closed its stores in Suzhou for the first time. Not only the box horse, but also the whole fresh track has begun a new reflection.

In fact, whether it is a box horse or a dingdong to buy vegetables, it is difficult to do fresh business on a large scale without problems, such as quality problems, which are common in the food industry and are difficult to avoid completely. For brands, a problem means a higher cost of resolution. Because in all consumer food areas, food safety issues can cause harm to brands, overdraft user trust.

For the existing quality, management and other issues, Hou Yi once said: "If you can't fill this pit, then you have to quit this market."

In fact, there are many pits to be filled by Hema, and one of the biggest ones is profit.

In 2019, Hou Yi began to have more changes in strategy, and successively launched Hema mini, Hema F2, Hema Small Station, Hema Vegetable Farm, Hema X Club and other formats to continuously explore. On the surface, it is a multi-format exploration, but the core is Hema trying to find a sustainable profit model.

The core purpose of the so-called multi-format is only one point, that is, after the failure of the law of staking, how to further refine the cost control without losing too much scale, so as to seek the possibility of overall profitability.

In fact, the two tracks of takeaway and fresh food are actually not particularly good industries, on the one hand, the cost of scale is high, on the other hand, the industry dividend created by scale is limited.

The Internet jianghu believes that all valuable tracks have two core points, one is to be able to scale at low cost, and the second is to scale at the same time, can produce enough industry dividends.

In terms of scale cost, for takeaway, the cost of scale lies in the cost of traffic acquisition on the one hand, and the cost of service performance on the other hand.

In terms of the scale of traffic, due to the early traffic dividend, the cost is not particularly high, and the high cost is service performance, such as the construction of the distribution system. It is not difficult to study the meituan financial report and find that the rider's salary cost expenditure accounts for a considerable proportion.

For the fresh track, it is mainly the cost of supply chain integration.

The fresh track is a heavy asset track, and the supply chain needs to invest a lot of costs.

Taking Hema as an example, Hema has established a cold chain logistics network in the country, with 3 cold chain warehouses in the place of origin, 6 fresh temporary storage warehouses in the sales area, 41 sales areas of normal temperature and cold chain warehouses, 16 sales of the local processing center; there are more than 550 direct supply and direct sales bases in the country. The construction and operation and maintenance investment of these supply chains have become the source of profit pressure for Hema .

In terms of industry dividends, the biggest dividend of the takeaway industry is to expand the service radius of offline catering and cover more people, but the problem is that the productivity of catering stores is constant, and takeaway does not bring more cost changes to physical catering stores, which leads to the limited industry dividend brought by takeaway itself.

Similarly, the fresh track integrates the supply chain and brings online traffic, but such an industry dividend is also limited. On the one hand, the integration of the supply chain has led to new cost increases, on the other hand, the operating costs of offline stores are not lower than those of traditional supermarkets. In other words, new retail has not changed the cost structure of the fresh track.

Therefore, compared with the increase in costs behind scale, the limited industry dividends generated by scale may be the root cause of Hema's profit dilemma.

Facts also seem to prove it. In an environment of full competition, it is difficult for Box Horses to make a profit in the fresh track, and they must find a profit point that can support the cost coverage. Compared with takeaway, the order scale of fresh food is not large enough, and the user is not dense enough, so it is difficult to make a fuss about the delivery efficiency.

For Hema and Ma, what is needed today is not only new traffic, new markets, and new additions, but also a value transformation.

In fact, the core value of the fresh track is not in front-end sales and user coverage, but more in the efficiency of the supply chain itself and the control of total costs. Today's fresh track is not a track that can rely on scale barriers, but a track that can rely on cost barriers.

The cost of fresh tracks has three main categories:

Supply chain loss costs.

Operating costs of offline stores.

Potential policy costs.

Let's first talk about policy costs, the fresh industry is an industry related to people's livelihood, especially in the context of the epidemic. This means that the scale of the fresh track has a natural ceiling, which means that the scale effect of the track is actually not so good, which is a potential cost for all players.

In terms of supply chain costs, in addition to building an effective supply chain architecture, the key lies in whether an effective SOP system can be built.

Loss in the supply chain is inevitable, the key is to establish a set of executable SOP processes to minimize losses, which not only requires the process itself to be efficient enough, but also requires the practitioners of the fresh supply chain to have a certain professional quality, which may be ignored by many fresh players.

In terms of operating costs, it is actually a balance between the scale of offline stores and investment. In this regard, Daily Excellent Fresh is to optimize the front warehouse model, while Hema explores a multi-format combination, mainly including new retail formats such as Hema Fresh, Hema X Membership Store and Hema Neighborhood.

In fact, hema's exploration of multiple formats is far from over, and the profit model of the fresh track needs to be further verified.

Overall, the fresh track is a track that always has pain points. In the past, the root cause of the pain point was the low efficiency and high cost of the supply chain, while the traditional supermarkets were scattered and did not have the ability to integrate the supply chain, so the pain points were almost unsolvable.

Entering the fresh track with the new retail model is the bottom card for Hema to compete with traditional supermarkets for the market. The strategy of Hema was once considered a trick in the retail industry, because fresh retail accounted for about 30% of the offline retail sales of traditional supermarkets. But today's facts have proved that even Hema, once hailed as the benchmark of new retail, seems to be less easy to survive in the jungle of the retail industry.

Today, after constant exploration, Hema stands at a new crossroads. Independent financing may be the right path, but whether this road can reach the other side of profitability still needs time to verify.