Fresh e-commerce company breathed a sigh of relief

Image source @ Visual China

Wen | Box Lunch Finance, author | Andi Bi, Editor | Zhao Jinjie

Under the influence of the epidemic, the demand for online grocery shopping has increased sharply in a short period of time, which has promoted a wave of sharp rise in Chinese fresh e-commerce stocks. Since April, the stock price of Daily Excellent Fresh has risen by more than 70%, and the stock price of Dingdong Grocery has risen by more than 90%.

In a photo circulating on social media, a refrigerator was placed on the balcony of a resident of the opposite building, and the refrigerator door was open and empty. Grocery shopping anxiety is everywhere, and there's nothing more frustrating and panicked than an empty refrigerator.

In the past, how much to buy and how much to eat, now can be hoarded, the depth of anxiety may even affect people's grocery shopping habits in the long run. The alphabet list found in the Shanghai community group that many residents plan to change larger refrigerators or buy a freezer after the epidemic.

This anxiety is understandable. Home shoppers have made the demand for online grocery shopping soar in the short term, but the express delivery has stopped, the traditional takeaway platform has capacity but the supply is insufficient, and the spotlight has once again hit the fresh pre-warehouse players.

What wakes up residents is no longer the alarm clock at work, but one after another "food grabbing alarm clock": 6 o'clock dingdong to buy vegetables, 7 o'clock box horse, 8 o'clock daily excellent fresh... Even if the delivery time is long and the premium is high, people have to get up early to add goods to the shopping cart, and then unrelentingly grab the food on time, and return empty-handed if they are not careful.

In the face of the surge in demand for groceries, fresh e-commerce companies have launched epidemic prevention and supply packages for Shanghai, which contain various types of vegetables, meat, eggs and fruits, with a unified price, and an appointment for delivery a day or a few days later.

A similar scenario was staged when the outbreak first broke out in the first half of 2020.

The fresh e-commerce of "contactless delivery" has also received people's attention in 2020, and orders and users have surged. On the night of Chinese New Year's Eve 2020, dingdong's orders for groceries increased more than threefold compared with the previous month, and the same increase was the daily fresh food. The following year, the two dark horses that rushed out of the epidemic rushed all the way to the US stock market to complete the listing.

But after the highlight of the listing, it is ushered in by a stock price that has fallen and fallen. Daily Excellent Fresh grabbed the "first share of fresh e-commerce", but it broke on the first day of listing. The premise of Dingdong buying vegetables' stock price soaring by more than 90% is also based on the previous plunge: as of the close of trading on April 8, Dingdong's share price of food was $5.24, a sharp drop of more than 70% from the listing price of $23.5 10 months ago.

The demand brought about by the epidemic has soared, for the fresh e-commerce that is in a deep loss situation, does it mean a new turnaround, or is it another "return to the light"?

01

Shanghai, as the focus city of this round of epidemics, is setting off a fierce battle for fresh e-commerce.

In a screenshot of a WeChat group circulating on social media on April 7, Xu Xin, a suspected "queen of venture capital", was also inquiring about the group buying group: "Which neighbor can pull me to the 'dumpling bread group'?" We have a lot of family and need bread and milk, thank you! ”

Xu Xin, worth more than 10 billion yuan, has been named the best female venture capitalist in China by Forbes for two consecutive years, and the list of investment companies includes players such as Yonghui Supermarket, Dingdong Grocery Shopping, Daily Excellent Fresh and Meituan. This has become a very impactful example of the scale and intensity of Shanghai residents' rush for vegetables.

Even Liang Changlin, CEO of Dingdong Grocery Shopping, couldn't help but launch a circle of friends on the morning of April 8, teaching everyone how to rush to buy more successfully, and listed in detail several time points when the platform's daily capacity was released, as well as the precautions for placing orders.

The surge in orders has brought unexpectedly strong traffic to fresh e-commerce, taking Shanghai as an example, its permanent population of 24 million, the positioning of first-tier large cities makes Shanghai has always been a must for major fresh e-commerce platforms, and its population density, Internet penetration rate, consumption capacity, and the perfection of logistics trunk roads are all consistent with the infrastructure conditions required by the fresh e-commerce platform.

For several major pain points in the fresh e-commerce industry: operating costs, customer order volume, and customer unit price, Shanghai is the most likely place to give solutions.

The two pre-warehouse fresh e-commerce players whose stock prices have risen sharply under the impetus of this wave of the epidemic, whether it is Dingdong to buy vegetables or daily excellent fresh, have attached great importance to Shanghai.

After the daily excellent fresh established a foothold in Beijing in 2019, it marched south into Shanghai. According to Interface News, Wang Jun, CFO of Daily Excellent Fresh, said that it will invest 1 billion yuan in the construction of infrastructure such as front warehouses in Shanghai. At that time, Daily Youxian even put forward the ambition of being the first in East China.

And after buying vegetables in Dingdong, which was born and raised in Shanghai, after slowing down, it also began to explore the possibility of profitability from Shanghai.

In February this year, Dingdong Buy Food released the fourth quarter of 2021 performance report, announcing that the Shanghai area has achieved profitability in December, Liang Changlin said on a conference call: "Shanghai is the first city that Dingdong Buy Food has entered, and we have found a profitable path in this city. From the fourth quarter financial report, the average unit price of Shanghai is 66 yuan, which is much higher than the national 60 yuan, while the comprehensive performance cost rate is more than 10% lower than that of other cities.

02

In the entire 2021 year before this wave of epidemics, the fresh e-commerce industry is difficult to say smooth. Life in the same city went bankrupt, Hungry "Youcai" stopped operating, the head player profit was difficult to understand, and there were "layoffs" news, and even the news of arrears to suppliers.

According to Times Finance, this year's daily excellent fresh capital turnover problem, arrears to a number of suppliers, the largest amount of arrears is close to 10 million yuan.

On the other side, Dingdong's life of buying vegetables is also not good. At the end of December last year, someone posted on the social platform that Dingdong bought vegetables to open a "big layoff", and the proportion of layoffs in the purchasing department, algorithm department and operation department was 50%, 30% and 30% respectively.

However, Dingdong Buy Vegetables responded to the "China Times" and said that individual job changes belong to the company's normal organizational resource adjustment, and the recruitment needs of some positions are also being released normally, and the business is currently operating normally.

Hema, another big player in the front-loading warehouse mode, also closed 5 stores nationwide in March, and Hema, which was once called "no upper limit", was also ready for a "hard day".

Hou Yi, CEO of Hema, also choked on food for food twice in Succession in January and March this year, once saying "it is so tragic, tens of billions of funds are trapped in it" and "the era of relying on price subsidies to win competitive advantage is over", accompanied by a picture of the continuous decline in the stock price of Dingdong food. Another time said that it was "estimated to be about to burst the warehouse" and asked "Winter is coming, who is swimming naked?" ”

Even in 2020, when the fresh e-commerce blowout, the development of industry players is not optimistic: the annual net loss of Dingdong to buy vegetables is as high as 3.177 billion yuan, and in 2019 it was 1.873 billion yuan, and the loss was further expanded; the daily excellent fresh also had a net loss of 16.49 yuan. In 2021, the loss situation of the two companies has not changed.

According to the statistics of Founder Securities in August 2020, there were 4,000 fresh e-commerce entrants in the country at that time, 95% of which were loss-making, 4% flat, and only 1% profitable.

Among the 1% of profitable players, it does not include the front-end fresh e-commerce player leader Dingdong Grocery Shopping and Daily Fresh.

03

Although the surge in orders has brought huge traffic to the fresh e-commerce platform, it has also brought great pressure.

On the one hand, higher requirements are put forward for supply. Taking Shanghai as an example, according to dingdong buy vegetables on March 14, its vegetable supply has increased from more than 600 tons per day to more than 1,000 tons, the supply of meat, eggs and milk has increased from 400 tons to 700 tons per day, and the supply of rice and flour grain and oil has increased from 120 tons to 300 tons.

On March 28, after the epidemic prevention upgrade in Shanghai, the supply of daily excellent fresh also increased, the supply of vegetables increased to 5 times that of usual, the grain and oil of fruits, meat and eggs and rice noodles increased by 4 times, and the stock of people's livelihood commodities such as potatoes, apples, eggs and noodles increased to 8 to 10 times of the usual level.

On the other hand, it also poses greater challenges to capacity. Local employees are likely to be affected by the epidemic isolation and cannot arrive at work normally, and many fresh e-commerce platforms have to call employees from other places, and even restart the shared employee model used during the epidemic in 2020 to ensure normal delivery of goods.

The sharp arrival of orders has caused frequent performance problems on various fresh e-commerce platforms.

Recently, some Shanghai residents complained in the community group buying group that they had a hard time grabbing dishes in the morning, and in the afternoon they received a call from the fresh e-commerce platform, saying that they could not deliver and needed to be refunded.

In a group purchase link on April 7, Dingdong Neighborhood Group attached an apology statement: "Since April 5, our performance has not been ideal. And said: "We are too eager to serve the neighbors who can't buy vegetables, quickly and blindly expand the pick-up point and increase the number of sellable orders, and are not fully prepared, resulting in a series of performance problems." From April 7, the Dingdong Neighborhood Group will suspend the opening of the group, and the orders from the 5th to the 7th will be refunded: "Until we have a more stable performance ability, we will start the next step." ”

But the question is, when the epidemic is stable and people return to normal life, the behavior of freezer hoarding is bound to cool down, and how many orders in short supply can Dingdong leave? Coupled with the continuous smooth flow of offline channels, the number of fresh e-commerce customers will encounter a new test, and the relatively high unit price will once again face competition in the offline market.

Fresh e-commerce companies, which have been briefly revived in the epidemic, are facing the torture of how to turn losses into profits, and it is not time to breathe a sigh of relief.

Resources:

"Daily Fresh Arrears, Suppliers Cut Off Supply", Retail Business Finance

"2022, Fresh Retail "Too Big Bump"", Mantis Observation

"Dingdong buys vegetables to deny the big layoffs, and the competitive advantage of burning money for quantity is waiting to be proved", Xiaoxiang Morning Post

"Hema lianguan 5 stores, fresh e-commerce rout, listed giants are chased by suppliers for tens of millions of debts", Times Finance

Ai Media Consulting "2021 China's Post-epidemic Era Fresh E-commerce Operation Big Data and Development Prospect Research Report"

"After the epidemic, can fresh e-commerce still encircle users?" Titanium Media

"Dingdong buy vegetables Shanghai to achieve profitability Liang Changlin: The front warehouse is not the ultimate model of fresh e-commerce", Beijing News

"Fresh e-commerce, a "good business" that does not make money? , China News Weekly

"Visiting the daily excellent fresh front warehouse 2.0: 100,000 ping effect, targeting the first place in East China", interface news