Fresh food e-commerce platform Dingtone has once again shrunk its market scope. On May 22, the Dingtone grocery shopping app carried out "service adjustment" in Chengdu and Chongqing: when targeting the above areas, the APP announcement showed that the site will stop the delivery service at 18:00 on May 29, 2023.
Dingtone also said that the adjustment will not affect the company's normal operation in other regions. In the future, the company will increase investment in supply chain, food research and development and processing, and will maintain in-depth cooperation with excellent food enterprises including Sichuan-Chongqing region.
In February this year, Dingtone Grocery proposed the "Big Health Prefabricated Dishes 2.0", focusing on the concepts of low oil and low salt, and set its prefabricated vegetable sales target at 5 billion yuan, this year's sales target is 100 million yuan, and is currently recruiting regional distributors, channel providers and other partners.
The operation of the front warehouse does "subtraction" and the prefabricated vegetables do "addition", which has become an important strategic adjustment of Dingtone Grocery at present. Coincidentally, another fresh food giant, Hema Xiansheng, has also rolled up pre-made dishes - in April this year, Hema established a pre-made vegetable department, and it was included in the first-class department of Hema along with its own brand and large imports; In May, Hema launched the Prepared Dishes Ecological Alliance in Shanghai, and announced that it will open a new category structure with prepared dishes as the core in October this year, which is expected to be about 5,000 square meters.
The logic of fresh e-commerce traffic has changed
Since 2012, the domestic fresh e-commerce industry has entered a golden period of development, and with several years of development, the retail market size and penetration rate of the entire industry are also growing steadily.
In 2020, the scale of the domestic fresh retail market exceeded 5 trillion yuan, of which the B2C transaction scale of the fresh e-commerce industry was 458.5 billion yuan, with a penetration rate of 6%. It is expected that the scale of fresh e-commerce transactions this year will reach 1,197.1 billion yuan, and the penetration rate will increase to about 19%.
On the other hand, the rigid demand and high frequency of fresh products themselves also mean that it is an important source of traffic for Internet enterprises. This is why the Internet giants represented by Ali, Jingdong, Meituan, and Pinduoduo have never stopped exploring the fresh food track.
However, in the process of capital, large factories and entrepreneurs frantically grabbing the market, fresh food e-commerce has disappointed the market.
According to surging news reports, in the secondary market, the stock price of Daily Fresh has evaporated by 99%, and the share price of Dingdong Grocery has also evaporated by more than 90%. According to the enterprise investigation, at present, the founder of Daily Fresh has been restricted from high consumption and has become a dishonest executor.
In addition, there are countless domestic "fallen" fresh food e-commerce platforms. Taking 2022 as an example, lazy people and the sea, Yipin fresh, fruit e-commerce, etc. have not been able to sustain. The Internet giants that once shouted "no ceiling" on the fresh food business have adopted strategic contractions, typical such as JD.com's JD Seven Fresh and Meituan's Little Elephant Fresh.
In fact, the root cause of this situation is that the current domestic agriculture is still dominated by the small-scale peasant economy, which in turn leads to the characteristics of large and mixed quantities of fresh agricultural products, serious homogenization, low gross profit margin, and difficult to control losses.
For fresh food e-commerce operations, controlling costs has always been the top problem of the front-end warehouse model.
The so-called front warehouse is to rent a warehouse within 3 kilometers of the residential community, arrange sorters, distribution personnel and other positions in the warehouse, send fresh dishes to the warehouse for storage, and after consumers place orders, the warehouse personnel complete the "last mile" delivery.
For an instant retail platform such as Dingtone, if you want to achieve fast and accurate delivery efficiency, it means a large number of delivery personnel and high-density front-end warehouse distribution. According to industry insiders, the performance cost of the front warehouse is 10 yuan to 13 yuan, while the platform e-commerce only needs 5 yuan to 6 yuan.
This asset-heavy operation model has long compressed the profit margin of the platform, which is a long-term problem faced by fresh food e-commerce. Therefore, if the front-end warehouse model wants to make a profit, there are only two paths, one is to increase the order volume, the other is to increase the unit price of customers, and the third is to reduce the performance cost.
Looking at the fulfillment cost first, when the picker salary and distribution cost are basically fixed, which means that the fulfillment cost is difficult to reduce significantly. In the first quarter, Dingtone had an adjusted net profit of $6.1 million and an operating loss of $50.1 million, a significant improvement from $461 million in the same period last year.
However, this level of profit scale is not safe, and in order to cope with the various challenges that may arise in the future, Dingtone must increase its profit margin as soon as possible. Withdrawing cities and reducing costs are naturally the most direct and effective methods.
The second is to increase the number of orders, but if it is not a large platform such as Meituan and Douyin with user base repurchase or strong algorithm support, if you want to attract traffic, you can only rely on burning money to reduce the unit price of customers, but in today's capital winter, who can still "burn money"?
Perhaps, increasing the unit price of customers has become a more willing path for fresh food e-commerce platforms. For example, in addition to fresh food drainage, Pupu's core categories have gradually shifted to beauty department stores, with higher customer unit prices and more lucrative profits. And Dingtone can also get better gross profit margins by adding pre-made vegetables - referring to peer companies, it can be found that the gross profit margin level of pre-made vegetables is at least about 10% higher than that of ordinary fresh products, while the average gross profit of the fresh industry is only about 15%.
Prepared dishes: Ask for traffic to the product
Some data estimate that the scale of the prefabricated vegetable market will exceed one trillion yuan in 2026. This is also the background of the rapid development of domestic prepared dishes, the popularity is not reduced, and the market is accelerating expansion.
From an economic point of view, compared with fresh food, prepared vegetables have higher gross profit and low loss, and the layout of various fresh food, refrigerated and frozen prepared dishes can help improve the profitability of the platform, increase the richness of goods, and also form market competition differentiation.
From the perspective of operating scale, fresh food retailers like Dingtone are currently difficult to compete with integrated supermarkets and e-commerce platforms in China, so they can only establish differentiated competitive advantages through their own brands, and at the same time can also cooperate with integrated supermarkets and e-commerce platforms to increase sales and profits, and adding pre-made dishes can play a strategic purpose of "killing two birds with one stone".
According to the Daily Economic News, in February this year, Shen Qiang, vice president and head of the Commodity Planning and Innovation Center of Dingtone Grocery Shopping, told reporters that Dingtone Grocery is transforming into a "food e-commerce". In his opinion, Dingtone has digital genes, first did digital retail, is actually the form of e-commerce, and wants to become a new generation of food companies in his heart.
It is understood that the current Dingtone Grocery Shop's own brands include Liangxin Craftsman, Dingtone Damanguan, Cai Changqing, and Baolo Workshop. At that time, according to Xu Zhijian, Chief Merchandise Officer (CMO) of Dingtone, Dingtone had incubated 18 independent brands on the platform, with a total of more than 1,200 products on sale.
In the first quarter of 2023, private label products, mainly prepared dishes, already accounted for 19% of Dingtone's overall GMV.
At the same time, the leading manufacturers entering the fresh food e-commerce track all want to get a piece of the pre-made dishes.
Meituan launched "Elephant Chef", which focuses on cooked and semi-finished dishes; Jingdong Supermarket said that it will build 20 pre-made vegetable brands with annual sales of more than 100 million yuan in the next three years; Zhao Jiayu, chief merchandise officer of Freshippo, revealed at the end of October last year that sales of fresh, standard and 3R (ready-to-cook, ready-to-eat, instantaneous) private label products have reached 35%. Zhao Jiayu even said that the business model is no longer the core competitiveness, and it is necessary to ask for traffic to goods.
Pre-made dishes seem to have become a "sharp weapon" for the transformation of fresh e-commerce, but this process is not easy.
Transform from efficiency warfare to service warfare
On the prefabricated vegetable track, including professional food processing enterprises, upstream agriculture, animal husbandry and aquatic products, quick-frozen food industry, offline catering brands, fresh food e-commerce and new retailers, the influx of super-suppliers has brought about uneven levels, homogeneity of products, low taste reproduction and quality and safety and other industry development pain points.
Some insiders believe that new retailers like Dingtone Grocery have Internet operation and big data integration capabilities, more subtle insights into consumer demand, and the accumulation of resources such as fresh supply chain and cold chain logistics, which can also allow them to achieve more comprehensive efforts and harvests in pre-made dishes than other players.
"The development of prepared dishes is irreversible and will quickly become the main category of fresh shopping." On May 9, Hou Yi, CEO of Freshippo, said in Shanghai that the key to the success of prepared dishes depends on the continuous progress of food technology and technology, and the biggest opportunity and challenge facing the industry is the degree of food reduction.
Based on this, Freshippo has adopted a variety of methods to improve the scientific and technological strength of prepared dishes, including the establishment of a pre-made dish alliance with leading central chefs, agricultural enterprises and universities in May this year, and jointly used technology to promote the quality upgrade of prepared dishes. At the same time, Hema is also working with partners to accelerate the introduction of advanced quick-freezing equipment that has been selling well in Japan for many years, and provide better taste instant noodles and fried rice in the domestic market.
At the beginning of this year, Dingtone took the lead in announcing that it had entered the "Great Health Prefabricated Dish 2.0 Era", and would launch the first batch of 5 series: "low-oil-free prefabricated dishes", "low-sodium and salt-free prefabricated dishes", "low-calorie prefabricated dishes", "clean formula prefabricated dishes" and "low-carbon/low-GI prefabricated dishes".
However, pre-made dishes may be the "antidote" for fresh e-commerce, but they are not "good medicine", and it depends on how the platform creates pre-made dishes. After all, the pre-made vegetable track has long been crowded with competitors, and its market size was only 12.7 billion in 2018, but it reached 419.6 billion last year.
"New Entropy" report analysis believes that the upstream agriculture and food processing industry associated with pre-made dishes will be a larger and more complex industrial system, and it also puts forward higher requirements for the fresh food platforms involved.
However, in general, whether it is Dingtone or Freshippo, the competitive intersection of fresh food platforms in recent years seems to be no longer limited to the distribution of regional front-end warehouses, and the core of operation no longer lies in the timeliness of performance and user flow, but in product development and supply chain capacity. In the future, in this track, fresh food e-commerce will shift from a simple "efficiency war" to a 'service war', and the industry structure may have a round of reshuffle.
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