Dingdong Maicai’s performance in the U.S. stock market on June 30, the second day it went public, can be described as a counterattack: the maximum intraday increase exceeded 95%, and the circuit breaker was triggered twice due to the rapid increase within an hour of opening. . This is in sharp contrast to the decline that it almost broke the day before. There is even speculation that it was the American retail investors who mistakenly took Dingdong Maicai’s stock code (DDL) as the Didi stock code (DIDI) listed on the same day and took its stock price to the sky.
The reason for this speculation is that, on the day before, even though Dingdong Maicai rose 19.1% at the opening, its share price fell and even fell below the issue price of US$23.5. The final closing time was $23.52, which exceeded the issue price by only $0.02.
Dingdong Maicai is able to stop the car on the edge of the break. Perhaps it should be thanked that it has become the “first share of fresh food e-commerce” listed on the Nasdaq competitor, Daily Youxian.
On June 25, Daily Youxianmei’s stock went public, which plunged 37% during the intraday market, fell below the issue price of $13, and closed at $9.66. The U.S. stock market did not pay for the “first share” story this time. Its stock price fell for three consecutive days. As of the close of the 29th, the total daily market value of Youxian was US$2.037 billion, which was down from its initial market value of US$3.2 billion. It’s over 1/3. The capital journey of domestic fresh food e-commerce companies has a bad start. Dingdong Maicai, which ranked at the bottom, reduced the scale of its IPO financing by 70% before barely holding onto the issue price.
The embarrassing performance of the two companies in the capital market reflects that capital is not optimistic about their business model. The two are representative of the pre-warehouse model in the fresh food market. The so-called pre-warehouse model is to reduce the size of warehouses and build them in places close to consumers. After consumers place an order online, the delivery staff can deliver the goods to the consumers in a shorter time.
This warehouse allocation model itself is somewhat controversial. After Hema Xiansheng’s founder and CEO Hou Yi tried this model, he eliminated the pre-warehouse business “Hema Xiaozhan” and upgraded it to the Hema mini store format. The warehouse attribute of the front warehouse has no traffic, and the operator needs to spend more money in other places to obtain traffic. He believes that pre-positioning is a false proposition. Low customer unit price, high loss rate, and low gross profit margin have all become the factors that cause the loss of this business model.
During the epidemic period, people’s demand for fresh product distribution surged, which led to the growth of the fresh food distribution industry. Dingdong Maidai took advantage of the momentum to expand out of first-tier cities, and set out to build front-end warehouses in second- and third-tier cities. As of March this year, Dingdong Maicai, originated in Shanghai, has covered 29 cities across the country and has 950 front-end warehouses. Xian has 631 pre-warehouses in 16 cities across the country. This number has been reduced, and the number of pre-warehouses reached 1,500 in 2019).
More pre-storage quantity means higher cost. According to CNBC reports, an analyst Kevin Xiang said: “Daily Youxian and Dingdong Grocery is still far from the break-even point.” They believe that the two business models cannot achieve good economic benefits across the country. The two companies have been losing money. Analysts said bluntly: “Despite IPO financing, Daily Fresh Food and Dingdong Maicai may still run out of funds by the end of this year.”
When they burned money to make ends meet for fresh food distribution, the rise of the community group buying model has put Daily Fresh Food and Dingdong Shopping into a deeper predicament. This new retail model attracted a lot of Internet giants to join last year, earning enough market attention. Didi’s Orange Heart Selection, Meituan’s Meituan Selection, Pinduoduo’s Duoduo Shopping, and JD’s Prosperity Selection are all squeezed into the track. This is not only a struggle in the community group buying arena, but also a chaos in the entire fresh food market. Bucket.
The mode of community group buying without the distribution link can further reduce costs, and the reduction of cost makes the price of community group buying more competitive, especially for my country’s huge sinking market.
The markets in first- and second-tier cities have been carved up, and the reaping of traffic dividends is nearing completion. At this time, the sinking market has become a battleground for strategists. The consumption habits and lifestyles of one billion people can be reconstructed. The giants all want to penetrate this market in their own way and harvest more new traffic. Win more profits. This is also the reason why Internet giants ignore the opposition from all sides and enter into a number of melees at all costs.
In business competition, there is a rule: “The boss fights with the second child, and the third child is often the last to die.” Internet giants are fiercely fighting in the field of community group buying, and they all want to be bosses. The strong capital accumulation makes them affordable for protracted wars, and there are enough ammunition for them to burn money. The war may leave several giants stuck to each other in the end. Situation.
In such an environment, Daily Fresh Food and Dingdong Shopping are undoubtedly the third child of the rule. The cost of the pre-warehouse operation model makes platform commodity prices uncompetitive in the sinking market, and they are far from the rivals of networking giants in terms of burning money. Affected by the giants, consumers who have formed a fixed consumption habit will most likely not look to other alternative models. As the market is squeezed, irreversible losses will make capital gradually lose confidence in them. They may be alive, but they will never be the favored one in the capital market.
Dingdong Maicai’s stock price rise is not a long-term trend. If there is no new story to tell, it may be difficult for it to be a friend of time as its founder Liang Changlin wishes. (Fortune Chinese Network)