Dingdong Maicai has accelerated the pace of listing in the United States, but the test has just begun. On June 23, Dingdong Maicai (DDL.US) submitted an updated version of the prospectus, planning to issue 14 million ADS shares in this IPO, with the issuance range of US$23.5 to US$25.5 per ADS. Based on the upper limit of the issuance price range, Dingdong Maicai’s IPO can raise up to US$410 million.
Behind Dingdong Maicai’s eagerness to go public for blood transfusion is the continuous losses in recent years. The net losses in 2019 and 2020 were 1.87 billion and 3.18 billion yuan respectively. The situation did not improve in the first quarter of 2021, with a net loss of 1.38 billion yuan. A year-on-year increase of 475%. It is worth noting that the pre-warehouse model of Dingdong’s main grocery shopping is also quite controversial, with high costs and large losses, which puts a severe test on the profitability of the company.
With the addition of Internet giants, community group buying is becoming fierce, creating new challenges for Dingdong grocery shopping and further squeezing the living space. However, even if Dingdong Maicai has a single customer acquisition method, a single business model, and an unclear profit model, even if it goes public, it is still unknown when it will make a profit. From the perspective of the industry, many fresh food e-commerce platforms currently do not have outstanding characteristics in terms of product types, service experience, and distribution, and are in the stage of burning money to cultivate the market and consumption habits. This model that has not formed core competitiveness, I am afraid It cannot last forever. Product quality, service system, logistics level, and customer stickiness are the factors that determine the future development of the platform.
In the fresh food track, Dingdong grocery shopping can be described as “speeding” expansion. However, behind the unveiled data, the unavoidable embarrassment is consecutive years of losses.
From the perspective of operating data, Dingdong’s total revenue increased from 3.88 billion yuan in 2019 to 11.34 billion yuan in 2020, and the total revenue in the first quarter of 2021 was 3.802 billion yuan. From the perspective of GMV, from 2018 to 2020, the GMV of Dingdong Maicai increased from 742 million yuan to 13.03 billion yuan at a compound annual growth rate of 319.2%, which was higher than the industry average compound growth rate of 114.6% over the same period.
Along with the increase in revenue from Dingdong’s grocery shopping year by year, its losses have continued to deepen. The prospectus shows that Dingdong Maicai has a net loss of 1.873.4 billion yuan in 2019 and a net loss of 3.176.9 billion yuan in 2020. If you look at the quarterly data, Dingdong Maicai’s losses have also increased quarter by quarter: from a net loss of 270 million yuan in the first quarter of 2019 to a net loss of 1.38 billion yuan in the first quarter of 2021.
The main reason for the loss of Dingdong Foods is that the cost is too high, the bulk of which is the performance cost. The performance costs of Dingdong Maicai from 2019 to 2020 are 1.936.9 billion yuan and 4.0442 billion yuan, accounting for 49.9% and 35.6% of the company’s current operating income, respectively.
At the same time, from 2019 to the first quarter of this year, the net cash value of Dingdong’s grocery shopping activities was 964 million yuan, 2.056 billion yuan and -10.15 billion yuan, all of which were negative.
“Fresh food e-commerce is a game of’running faster than anyone else’.” “Community economic analyst Huang Sheng told Caijing’s new media reporter that in the face of increasingly fierce competition, after all, only after listing can we get enough ammunition from the capital market to consume opponents.
However, despite the fierce artillery fire, Dingdong itself cannot produce ammunition. Even if it goes on the market, this situation is difficult to improve. “The biggest problem with Dingdong grocery shopping is cost and profitability. It is currently difficult to find a balance between the two. Therefore, the fresh food e-commerce industry, including Dingdong grocery shopping, has successively exposed the news of getting together IPO to’buy blood’. “In the opinion of Zhu Danpeng, an analyst in the Chinese food industry, fresh food e-commerce companies must not only rely on capital blood transfusion to expand the scale of their own hematopoietic blood supply. They are determined by four key dimensions: product quality, service system, logistics level, and customer stickiness. The future of fresh food e-commerce platform development is the core competitiveness of the platform.
The pre-warehouse model has been questioned, heavy subsidies and customers test corporate profitability
At present, the business model of fresh food e-commerce is roughly divided into multiple models such as pre-warehouse model, community group buying, platform-to-home, and store-to-home. Among them, Dingdong Shopping is one of the representatives of the “front warehouse” mode of operation.
It is understood that the model is to cover consumers within 1-3 kilometers of the surrounding area by setting up front warehouses around the community or cooperating with offline supermarkets, retail stores, etc., and quickly deliver fresh products within 1 hour after placing an order. To consumers. As of March 2021, Dingdong Maicai has more than 950 front-end warehouses across the country.
However, Dingdong’s “magic weapon” for buying food—the pre-warehouse model, has improved the consumer experience for consumers, but its internal potential flaws have gradually been exposed. Because the pre-warehouse model is based on the asset-heavy and operational model, in addition, the lack of offline stores leads to scarce offline traffic and the need to reinvest in subsidies to obtain customers, which puts a severe test on the profitability of the company.
Amidst the controversy, Hema Xiansheng, which uses the same pre-warehouse model as Dingdong Maicai, has taken the lead in abandoning this model. In March 2020, Hema officially announced the abandonment of the pre-warehouse model and officially replaced the pre-warehouse business with the mini business. The 70 Hema small stations that have been deployed earlier have all been upgraded to Hema mini.
Hou Yi, CEO of Hema Xiansheng, spent a year testing the pre-warehouse model and opened more than 70 pre-warehouse format Hema small stations, but finally found that this model is difficult to get through. In his view, the pre-positioning model is a false proposition. There are problems with traffic, gross profit competitiveness, and daily loss, and it is impossible to make a profit.
However, Liang Changlin, the founder and CEO of Dingdong Maicai, believes that in an ideal state, each front-end warehouse will operate for more than one year, the daily order volume will reach about 1,000 orders, and the average customer order price will exceed 65 yuan. After the single cost, the operating profit of each order is expected to exceed 3%, and you can make money.
Independent analyst Cai Bingzhen pointed out that community group buying is more about the “province” in the pursuit of how fast and better the province is, while the pre-warehouse model is more about “fast” and “good”, that is, the quality of service and the success in the field of fresh food e-commerce. The key factors are still unclear. If fresh food e-commerce companies want to survive for a long time, they will test their abilities in the five aspects of warehousing and distribution system, fresh food supply, group leader operations, user operations, and cash flow management.
Bao Yuezhong, Chairman of Baum Enterprise Management Consulting Co., Ltd. believes that the front-end warehouse alone may not be able to support the healthy development in the future. It is necessary for the platform to “marry” the front-end warehouse to the store and to the home, that is, the edge of the city extends to the community or city close to the user. Center, forming a systematic model plan, which may be a systematic model path to be realized in the future.
Giants enter the game to fight the industry to usher in the knockout
In the fresh food e-commerce track, there are not only vertical fresh food e-commerce companies such as Dingdong Maicai, but also Internet giants entering the track with a community group buying model, which poses a new challenge to the front-storage players and further squeezes the small and medium-sized enterprises. The living space of the player.
The reporter combed and found that in 2020, Internet giants such as Pinduoduo, Meituan, and Didi will enter the game one after another. In June of the same year, Didi launched Orange Heart Optimal and officially entered the community group buying track; in July, Meituan issued an announcement on organizational adjustments, established an Optimal Business Department, and accelerated the expansion of the team within 3 months; then, Pinduoduo launched Buy more food; In November, Ali’s Hema launched Hema Optimum in Wuhan.
In addition to Internet giants entering the fresh food track, traditional supermarkets are not to be outdone. Traditional supermarkets such as Yonghui, Carrefour, RT-Mart, and BBK have successively tested the community group buying business. For example, BBK also launched the community group buying small program “Xiaobu Youxian”, Yonghui launched the community group buying small program “Yonghui Community GO and so on.
The community group buying model has also won the favor of capital. On March 31, Shihui Group completed the D round of financing with a financing amount of 750 million US dollars, which was jointly led by Alibaba and DSTGlobal. In particular, Xingsheng preferred to complete a $3 billion Series D financing in February this year, led by Sequoia Capital, followed by Tencent, Fangyuan Capital, Chunhua Capital, and Evergrande.
Zhang Yi, CEO and chief analyst of iiMedia Consulting, pointed out that the attractiveness of the community group buying track to Internet giants lies in the fact that the sales category of community group buying is rigid demand, the cash flow continues, and the market continues to sink, which is expected to reach 100 billion yuan in 2022. level. Especially during the epidemic prevention and control period, the retail form of community group buying highlights its natural advantages. Community group buying platforms are growing explosively. If community group buying can be done well, the cash flow and financial data of companies will be very good.
With the addition of Internet giants, community group buying is becoming fierce. Major platforms are recruiting group leaders and enclosures, and competition has entered the “deep water zone.”
“In the future, the fresh food market will present a situation where multiple formats such as supermarkets, community group purchases and other types of business coexist.” Mo Daiqing, director of the online retail department and senior analyst of the E-commerce Research Center of the Net Economics, believes that for fresh food e-commerce, Only with guaranteed supply chain channels and high-quality resource allocation can consumers buy cost-effective products; at present, many fresh food e-commerce platforms do not have outstanding characteristics in terms of product types, service experience, and distribution, and It is always in the stage of burning money to cultivate the market and consumption habits. This model without forming core competitiveness may not last forever.
In Cai Bingzhen’s view, fresh food e-commerce has the characteristics of a cellular scale effect of same-city services. In the future, as competition becomes more fierce, a phenomenon of coexistence of regional segregated platforms and national platforms will coexist within a certain period of time. In addition, there are too many players on this track, which is also a waste of social resources. Players who cannot keep up with their cash flow in the future will leave or be merged in large numbers.Return to Sohu to see more
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