| BBB Research Institute, author | Li Xiaowei, supervising producer | Meow Zimi
It is difficult to do fresh e-commerce, in China, and in the United States.
This sounds like a false statement. Some industry analysts are too optimistic that fresh e-commerce has run through several rounds in China, fighting for money bags in the first half and supply chain in the second half. But the "fresh e-commerce first stock" killed you to death, and in the end it was not a lose-lose situation.
Similarly, around 2020, the epidemic has prompted the rapid penetration of service forms such as takeaway errands in the United States, and many fresh e-commerce companies have ushered in an exponential growth stage in the history of corporate growth.
First, "Instacart" orders soared by 500% that year, and the valuation of multi-party capital followed up reached 39 billion US dollars, becoming the most popular unicorn in recent years; then "GrubMarket", which switched from the C-end to the B-end, announced the completion of the E round of financing and began to plan for the IPO, while younger players, founded in 2015, fresh e-commerce "Weee!" It also recently announced the completion of a recently announced $425 million Series E round of financing.
As a fresh e-commerce company that focuses on meeting the needs of ethnic minorities, in providing differentiated and competitive goods, although Weee! has certain advantages, it seems to face many challenges, and in the context of the extremely thin profit margin of fresh category e-commerce, how companies reduce costs and increase effects should be paid long-term attention.
According to eMarketer and other statistics, the total sales volume of fresh e-commerce in the United States ushered in a 54% surge in 2020, but then directly fell back to a flat state.
Whether it's veteran Walmart or Amazon Fresh, or up-and-coming Insacart and Weee! , the problems they face are similar. After eating the dividends of the surge in demand under the epidemic, what should be the next step for North American fresh e-commerce?
01 The industry outbreak is ten years late?
Heard an interesting saying. The development of this wave of fresh e-commerce in the United States is too easy, because it can copy China's operations, and the business model of copying from China may take root in Silicon Valley.
The second half of the sentence is fine, but the first half is too one-sided. People who say this sentence probably don't know that in the 90s of the last century, the American fresh e-commerce began to toss.
To be precise, at that time, it was still an O2O fresh food platform WEBVAN was founded in 1996, as a grocery retailer, it took only 2 years to publicly IPO, and the valuation once rushed to 8.5 billion US dollars.
But the popular WEBVAN began to deviate from reality after the infinite scenery: it used 40 million US dollars to build a warehouse, burned 1.2 billion US dollars in 2 years, and soon went bankrupt.
Many business schools and consulting firms have repeatedly taught and discussed WEBVAN as a failed entrepreneurial case. There is certainly the arrogance and ambition of the founders, such as Louis Borders himself once said, "I never considered that this is a $1 billion company, either make $10 billion or have no money left", which makes WEBVAN lack of control over risk for a long time.
This is, of course, an epic investment failure in the North American capital circle. At that time, the limelight once smelled "fresh discoloration", and the stereotype caused the seed projects of fresh e-commerce to not be docked to investment institutions in the United States for a long time.
It wasn't until 7 years after WEBVAN went bankrupt that Amazon carefully began to test the waters. This may be the reason why the public believes that the outbreak of fresh e-commerce in the United States is ten years late.
Amazon also did not have the idea of "big ambitions", first testing slowly in its base camp Seattle, and then feeling mature, but only pushed to another city, Los Angeles.
But the existence of WEBVAN is still groundbreaking. For example, as early as the last century, WEBVAN had a panoramic plan for "smart logistics and warehousing". They intend to replace manual sorting operations with batch robots, using algorithmic mechanisms to reasonably match "user addresses and transportation routes".
And Larry Liu, a young entrepreneur, may have heard the story of WEBVAN, or maybe not. But one thing, he is particularly sensitive to his grasp of risk control. This fresh e-commerce company, which was established in the early days with community group buying as the model, quickly made transformation adjustments when it found possible risks and bottlenecks in community group buying.
Why can't community group buying work? According to past observations, overseas Chinese use WeChat to buy daily necessities and food is a high-frequency behavior, as long as the regiment leader is well organized and the quality of things is good, the collection is definitely no problem. At the same time, it can also retain a group of loyal users.
Shen Han, the founding partner of the iFly Fund who had early contact with the founding team, once mentioned in a video sharing that the group purchase model relies too much on the responsibility of the head of the group, "such as Weee! The founding team including Larry is a very responsible group leader, but if the team leader expands to ten people, dozens of people, the quality of service cannot be guaranteed."
Although Weee!'s earnings figures were already good in the early days, Shen Han decided to be cautious out of concerns about "service scalability".
Shen Han thought carefully, Larry and the team did not give up. They struggled to change careers, and Larry was relegated to the house, a Hubei man who loves lotus roots and fish, believing that the local appetite of ethnic minorities in North America is far from being satisfied, which means that he still has a great chance.
For example, the green leafy vegetables that Chinese people love to eat, there is A Choy sold in fresh supermarkets, but if Hangzhou cabbage and Shanghai Qingquan are called A Choy, this means that you do not understand the eating habits of this ethnic group deeply enough.
Scanning Weee!'s merchandise, some seasonal products are indeed relatively rare. With Shen Dacheng's snow vegetable edamame, the dialect known as "roasted" flat shoots, plus Xinjiang's fried rice noodles, Yilin's plum dried vegetables, making a table of local food collection is not a problem.
Shen Han later changed his mind when he met with Larry. The customer base is clear, the product circle is fixed, and this thing looks much brighter. In March 2019, Weee! reached a $10 million Series A+ round of financing, with goodwater Capital, iFly, VC, Microlight Venture Capital, Silicon Valley Bank and others.
After that, Weee! The speed of financing continues to accelerate, the well-known investment institutions XVC and VMG led the B and B+ rounds of financing totaling nearly 50 million US dollars, XVC has also invested in American cuisine before, which is always sensitive to fresh food. The Series C funding round was followed by DST Global.
March 2021, Weee! Another $300 million Series D financing was completed, followed by a $425 million Series E financing by Weee! in March of the following year, led by SoftBank Vision Fund and followed by Greyhound Capital.
02 Ability to select products is crucial
In fact, behind the rise of Weee!, the larger context is the rapid growth of the Asian-American population. This huge user base has become an important basis for the development of many Asian e-commerce platforms.
According to the Pew Research Center's analysis of the official U.S. demographics, between 2000 and 2019, Asian-Americans were among the groups with the highest population growth rates of any ethnic group in the United States. During that decade, the Asian population in the United States grew by as much as 81 percent, nearly tripling from 10.5 million to 18.9 million.
A number of Asian e-commerce platforms led by Weee!, whether they focus on fresh groceries or lifestyle, almost all of their base camps are concentrated in California, which is also because in California, the white community is no longer the mainstream. According to Statista' statistics, the number of Hispanic and Latino residents in California has surpassed that of white residents in 2019, while the Asian-American group has approached 6 million.
The 2019 California population, by ethnicity, is from Statista
Homesnack compiled a U.S. community survey that found that in 2021, california-based Cupertino, Milpitas, Monterey Park, Walnut, Temple City, Rosemead, Arcadia, San Gabriel, San Marino and Fremmont had the largest number of Asian-American groups, with communities from China, the Philippines and India having the highest numbers.
Looking at the Asian e-commerce communities and platforms in North America that are oriented to Chinese and international students, they have also moved towards a path division in the past decade.
Founded in 2015, the Asian shopping platform "Yamimi YaMI" started with snacks and beverages, expanding products in accordance with the path of pure shelf e-commerce, from fast food seasonings to kitchen appliances; "North American Money Saving Express" is famous for discount information, but e-commerce shopping this piece was first started with skin care and beauty, fashion wear, a bit like "opened up the e-commerce of the little red book"; and in 2011, the popular "foodie team" as the content community main restaurant / food recommendation, its e-commerce business section is more like a KOL's "" Good things recommended".
Most of the subsequent chinese e-commerce models have not exceeded these paths. "MAYGO Per Purchase Mall" has its headquarters in Silicon Valley, for overseas Chinese to do cross-border e-commerce, "Little Red Mall" focuses on Japanese and Korean beauty and food, in addition to the United States, but also open to Canadian Chinese and overseas Chinese.
So, if Weee! is a minority-focused fresh e-commerce company, as it claims, the differentiation from other players needs to be more distinct.
After all, the category of "fresh" is not enough to make users pay. Since the outbreak of the epidemic, Yamimichaeus Yami has also launched a fresh e-commerce section in March 2020, covering major Chinese concentrations such as Los Angeles and New York; MAYGO has also tried to introduce third-party supermarkets to provide fresh categories.
If the scope of comparison is expanded to offline Asian supermarkets, Weee!'s category advantage may not be so large.
In Los Angeles, for example, H-mart, Zion Market contract almost all the Korean goods you want to buy, Mitsuwa is simply a paradise for Japanese goodies, while Chinese supermarkets such as Shunfa, Dahua 99, and Hawaiian Seafood Market are so rich that they are ridiculed as "flying in the sky, swimming in the water, and nothing you can't buy." Any one of them jumping out of the online delivery business will be as rich as Weee!, which may weaken Weee!'s ethnically specific appeal to some extent.
Moreover, the performance of the fresh e-commerce platform in the United States in this period can also be remarkable.
Amazon Fresh and Walmart and other big players, the former emphasizes the delivery time, the delivery time is accurate to 2 hours, and free delivery fees for members; the latter has more than 3,000 self-pick-up points offline, whether you live in the city or the countryside, 90% of the users in the United States can be covered.
The fresh e-commerce rookie Instacart has penetrated the United States at full speed in the way of buyers "help you buy". This is a semi-similar model of domestic "running errands", such as when you specify certain goods from a nearby supermarket, the buyer will start to help you quickly attack and deliver to your door.
In terms of Weee!'s current positioning, if you focus on minorities, optimizing the selection is a must-do and long-term thing to do, because only product differentiation can stand out from the crowd.
And if the focus is on the four words "fresh e-commerce", then Weee! has more to do.
03 Fresh e-commerce is not easy to do
Why? Because people who have done the fresh e-commerce track understand that this may be the most difficult category for e-commerce.
First of all, the net profit margin is low, and it is very low. It is not a simple fresh product + e-commerce model, not pure retail, it needs more scheduling, integration and management capabilities of the upstream supply chain, and also needs the active cooperation of downstream warehousing and logistics.
The current model is to do their own business, which also means that they have their own big warehouse. But given the delicacy of fruits and vegetables, warehousing is not an easy task.
Almost all fresh e-commerce companies have to face the loss of products, including natural losses, storage losses, sorting losses and distribution losses, etc. Various losses may affect the initial cost of the platform, usually the total loss is controlled at 8%-10% to preserve the capital, if it can be reduced to less than 5%, it is very good.
Generally speaking, natural losses cannot be avoided when large-scale fresh e-commerce platforms receive goods from large farmers or agricultural cooperatives, both at home and abroad. However, due to the improvement of the rough processing level of "local farms" today, some farms in the United States can directly provide products packed with plastic wrap and boxes, and the natural loss of non-bulk agricultural products is negligible.
If it is also fresh with dirt and unpackaged non-standard products, the sorting process and packaging process will definitely produce losses. Uncertainty in the distribution process can also cause losses, such as strawberries being bumped, such as high temperatures that cause seafood to deteriorate.
The loss of storage may be the biggest problem that the platform will face after building its own warehouse, because poor control will reduce the profit of several points. According to people close to Weee!, the platform's current storage losses are nearly zero.
Authenticity or not is not discussed, but from public information, it can be found that Weee! has recruited an expert named Julie, who has been engaged in food cold chain management in Germany, and perhaps TA's joining is possible for Weee! to effectively control storage costs.
The matter of own warehouse, domestic fresh e-commerce is not afraid. Logistics warehouse, transit warehouse, front warehouse, the concept of warehouse play a clear, but also according to the front-end needs flexibly digestion and adjustment of inventory, improve turnover rate. But the united states local fresh e-commerce in this matter has a different idea.
Veteran player Walmart has a lot of money, naturally does not care about storage costs, Amazon Fresh with a small warehouse model, the cost can also be carried, GrubMarket, the main B-end business O2O model farm direct procurement model, self-opening warehouse is not necessary, the rising star Instacart is more lightweight, simply cut the warehouse directly, the product "hidden in other people's supermarkets", as long as the buyer can drive to buy the fresh food that users want.
But Weee! sticks to the big-broth model. In San Francisco, weee! In 2021, Weee!'s warehouse in New Jersey moved to a 67,000-square-meter site, four times the size of the original.
For the overall user living location in the United States is relatively scattered, the pressure on logistics costs will not be small. That's why Walmart tends to do self-pick-up points for a long time, and Instacart relies almost entirely on a large number of individual buyers, who are more like a group of gig workers, saving the company a huge amount of manpower expenses.
At this point, Weee! is currently choosing to work with part-time drivers on platforms such as Uber to ease delivery pressures. Drivers report their travel routes a day in advance, and Weee! matches them based on the order address and driver's trajectory. At present, the average driver can deliver about 10 orders per hour.
Given the controllable cost of warehousing logistics and the reduction to almost zero losses, Weee! is indeed attractive to C-end users.
Generally speaking, the low profit margin of fresh e-commerce determines that if they want to provide better services, such as delivery to home, they need to charge users to dilute this cost. Even if it is an ordinary shopping platform, it generally takes more than 49 or 69 US dollars to be free shipping, and as a fresh e-commerce company in the industry, it usually requires a single order amount of more than 100 US dollars to start delivering.
This has allowed more industry players to rack their brains to make money on other paths. GrubMarket transformed a large number of businesses into B-ends, helping farmers build a more optimized management system, and Instacart began to rely on charging merchants to achieve an overall balance of payments.
In the past 2021, instacart, a star company that has occupied half of the North American fresh and grocery delivery market, has also begun to slow down sales growth significantly. Bloomberg Second Measure data shows that 2021 is only 12 points higher than the 237.5% growth in 2020. According to Bloomberg, Instacart's valuation has also been cut by 40 percent as a result, and the IPO is currently being suspended, at least as stated in their own company statement.
Perhaps, when the epidemic pressed the accelerator button for the North American fresh e-commerce company in that fortuitous moment, perhaps the players involved in it should not only rejoice, but should plan ahead.
You know, the market surge in 2020 will not be the norm, when the production and life gradually enter the normalization, people's activity in the fresh e-commerce platform may return to the past overnight, which is the thing to be vigilant about.