On June 9, Youxian and dingdong successively submitted Prospectuses for listing in the United States, competing for “the first share of fresh e-commerce”.
According to the prospectus, from 2019 to 2020, the total daily revenue of Youxian is 6 billion yuan and 6.13 billion yuan respectively. Dingdong’s sales revenue in 2019 is 3.88 billion yuan, which will increase to 11.34 billion yuan in 2020, exceeding the daily quality of fresh food, and the gap is still widening.
But at the same time, both are still in the red last year, the daily net loss of Youxian was 1.59 billion yuan, and that of dingdong was 3.18 billion yuan.
Daily Youxian and dingdong are both front position models. Peng Cheng, partner of grapefruit investment, said frankly that the so-called front position is a false proposition, “because the attraction of front position e-commerce to users is too weak and the cost is too high, which definitely leads to losses all the time, and it is impossible to make profits by enlarging the scale.”
Judging from the overall performance of the two prospectuses, Li Chengdong, founder of dolphin society, commented that “Ding Dong is more aggressive in buying vegetables, while daily excellent fresh food begins to pursue profits, and its style tends to be steady.”
For the two star companies of fresh e-commerce circuit to get together and go public, Li Chengdong thinks that it is a performance of “replenishing ammunition for a more brutal hand-to-hand battle in the future”, which also indicates that “the war of community retail and fresh products has just begun”.
Business Observer Lu Xinzhi further believes that “this may be the last battle for such specialized fresh food companies. Whether they can break through the competition and obstruction of various groups under the Internet giant will directly determine whether they have a chance to win.”“ And it’s very likely that the IPO will see results within half a year. ”
In this period, “you asked me to answer”, we invited people in the industry to discuss together.
In the fresh e-commerce circuit, capital is the deepest moat
@Li Chengdong, founder of dolphin Society
Ding Dong’s buying vegetables and daily excellent fresh products are just a sign that the war of community retail and fresh products has just begun.
In fact, discerning people can see that these independent community retail companies are all rushing to go public in a specific window period.
Whether it’s the daily excellent fresh food that aspires to become “the largest digital platform of community retail in China”, or the Ding Dong shopping that focuses on “fast”, they are all instant retail companies of fresh products, which used to focus on warehouse. They are on the same track as the hottest community retail business. It’s just that when the user’s consumption behavior is different, the platform’s solution to meet the user’s consumption behavior is different.
When the giants increase their retail sales in the community one after another, there is a view in the capital circle that in the future, only meituan and pinduoduo will be left in the fresh e-commerce circuit, and other companies will be eliminated from the market – obviously, this will affect the valuation of other fresh unicorns.
Therefore, they seize the time to replenish ammunition in case of more brutal hand-to-hand competition.
After all, one of the biggest barriers in this track is financing ability, and capital is the deepest moat.
Over the years, the capital supporting the company needs to see the light of arbitrage — Take dingdong as an example. By 2021, it has completed 10 rounds of financing, and only in 2018, it has completed five rounds of financing. On May 12, 2021, fresh e-commerce dingdong has just completed a $330 million D + round of financing. So far, the accumulated financing amount of dingdong’s D round has reached $1.03 billion.
From the perspective of the prospectus, dingdong’s buying vegetables and daily excellent fresh show high growth in revenue and Gmv. The daily excellent fresh, highlighted the gross profit margin, although still in the loss, but the loss range gradually narrowed.
They all have to tell the capital market: I am a high growth enterprise, I have the ability to make blood, the future market is promising, my prospects are very good, give me money, this will be the investment you will not regret in this life.
According to the prospectus, dingdong’s sales revenue in 2019 and 2020 were 3.88 billion yuan and 11.336 billion yuan (about 1.73 billion US dollars) respectively; In the first quarter of 2021, dingdong’s revenue was 3.8 billion yuan (about 580 million US dollars), compared with 2.6 billion yuan in the same period last year. It will lose 1.87 billion yuan in 2019, 2.44 billion yuan in 2020 and 1.38 billion yuan in the first quarter of this year
In 2018, 2019 and 2020, the adjusted net loss was 2.216 billion, 2.777 billion and 1.590 billion respectively, and the adjusted net loss rates were 62.48%, 46.27% and 25.93% respectively.
Judging from the performance of the two companies, dingdong is more aggressive in buying vegetables, while the daily excellent fresh food starts to pursue profits and go ashore, with a moderate style. In the future, these two companies may need to seek other modes to make large-scale profits in addition to the most important front positions.
In fact, HEMA eliminated all forward positions as early as 2020. Hou Yi, CEO of HEMA, pointed out that “forward position is a false proposition” and “there are problems in flow, gross profit competitiveness and daily loss.”
At present, in community retail and group buying, no company has occupied the monopoly advantage as meituan did in group buying. No matter meituan, pinduoduo, Didi, Ali or Jingdong, or Xingsheng youyou and Shihui, they can only say that they have their own advantages in individual regions.
In the money burning growth period in which the whole industry trades profits for scale, the overall loss is still the normal in the short term. In the context of the formation of user habits and stricter supervision, capital and supply chain are the biggest barriers and moats in this industry, and the supply chain also needs to be built on the basis of capital.
It will take time to verify who can stand out.
Forward position is a false proposition, it is impossible to rely on large-scale profits
@Peng Chengyou investment partner
We always think that forward position e-commerce is a false proposition. Because the attraction of front position e-commerce to users is too weak and the cost is too high, it must be losing money all the time, and it is impossible to make profits by enlarging the scale.
Weak user attraction
The income contributed by the members of dingdong and the core users of daily excellent food accounted for 47% and 69% of the total Gmv. But in terms of the number of people, dingdong’s members and daily core users account for 22% and 19.7%.
Suppose that 50% of the people in a community have used dingdong or daily app to place orders. Only 11% and 10% of the community’s core users are core users, far less than 25% of Yonghui’s.
The main reason for the low penetration of users is that there are too few SKUs. In 2020, dingdong will be 57 million, 4000 per day. Yonghui has 15000-20000 SKUs. Front position e-commerce gives Yonghui too few choices. Although there are more than 3000 SKUs than Japanese convenience stores, the products of Japanese convenience stores are generally exclusive fast food products, which can quickly solve a meal. And the vast majority of front warehouse e-commerce are raw materials that need cooking.
At the end of 2020, after Ding Dong realized this problem, he began to expand his SKUs. In 2021, there were 12500 SKUs in Q1. But Q1’s revenue growth was only 45% over the same period, the lowest ever. When the epidemic broke out, people had no choice to shop, which raised the base.
It is easy to think that the low penetration of users is caused by the higher price of goods sold to users by e-commerce due to the half-hour door-to-door service. But if we analyze the gross profit of e-commerce, we will be surprised to find that the commodity price of the front warehouse is lower than that of the supermarket!
Compared with the gross profit rate, dingdong is 1% lower than Yonghui and 6% lower than jiajiayue! The daily quality of fresh food is surprisingly low, only 12%, 1% lower than the lowest retail gross profit rate in the world!
Daily fresh strategy seems to be through lower gross profit to bring more sales, to reduce other costs to profit. But the daily excellent fresh guest list is only 93 yuan, dingdong is 53 yuan. Every day Youxian sacrificed 7% of gross profit in exchange for 0.75x increase in customer orders. And Costco’s customer list is total food 2.5x!
If commodities are not attractive, they can be optimized through adjustment and R & D. But the cost is hard to come down. In particular, the cost of performance exceeds the gross profit! If the performance cost is deducted, the gross profit rate of dingdong will drop to – 20% and – 17% every day! I really want to serve the people. Considering the forthright coupon discount of e-commerce, e-commerce in front position loses – 35 ~ 39% for each order sold! How do you feel a little lucky? Chinese chives cut capital to feed consumers.
The most terrible cost of performance cannot be greatly reduced in scale. 60% of its performance cost is in the distribution personnel. Brother can deliver 60 ~ 70 orders a day, and 120 orders can be delivered when the scale is large? Then it’s not brother, it’s Peter Pan. In the past few years, both of them have seen a sharp drop in performance fees, but in Q1 of the 21st year, they rebounded, indicating that the trend of sharp decline is not sustainable.
What’s the future of e-commerce?
What kind of business should be the future of front position e-commerce? We think we should have a whole set of combination boxing.
1. Offensive: half an hour delivery service + high quality goods + more SKUs to attract high-end customers. Increase the unit price of customers.
2. Defense: reduce promotion and marketing costs, vigorously develop members and reduce marketing costs. Reduce the performance cost of each order by increasing the customer unit price. Assuming that the cost of performing each order can be reduced to 15 yuan, the 100 yuan customer order can achieve the profitability of the supermarket. If it’s 12 yuan per order, the customer order is 80 yuan.
3. Auxiliary: to achieve high quality goods can not do without the support of suppliers. If it is purely relying on social suppliers, commodity homogeneity, consumers will feel slaughtered. Therefore, only the increase of exclusive commodities is possible. Ding Dong is now developing the “Kwai Chi” vigorously, and East China allegedly 3 of the 10 orders will be bought. But we don’t think it will have a significant impact without 2-3 years. Take box horse as an example, it took 3-4 years to achieve 50% exclusive goods.
Retail is a long run. Judging from the amount of performance cost, gross profit rate and other indicators, the endurance of daily excellent fresh food is certainly not as good as Ding Dong’s. The question is, can Ding Dong win the box horse in this long-distance race? Even if you don’t lose, what’s the market value with a 3% profit margin?
What the industry is afraid of is not supervision, but the lack of supervision
@Founder of community group buying qiangge new gradient
Fresh e-commerce is a competitive track, which needs a large amount of money to ensure the market share. At present, Youxian and dingdong are facing the threat of Internet platform giants such as meituan, pinduoduo and HEMA. On the one hand, their revenue is growing rapidly, on the other hand, they are unable to make profits, so they have to seek listing.
The future path of this industry has been verified to be feasible. It can be compared with the early stage of traditional e-commerce such as Jingdong and pinduoduo. The early market investment and the cultivation of user habits will inevitably bring about a loss. As long as the loss is to provide value, it is reasonable.
As for the increasingly strengthened government supervision, it is good news for the whole industry. As industry practitioners, what we are afraid of is not the government supervision, but the lack of supervision; To strengthen the supervision of emerging things can ensure the healthy and fair development of the whole industry, rather than blindly engaging in price war, or even creating a bad competitive environment in which inferior currency is replaced by good currency.
As for the future of community group buying business, it should be said that “the future is bright and the road is tortuous”. This is an industry that needs long-term accumulation, and it is also an industry that pays great attention to development strategy. Therefore, the future of this industry is full of stars and imagination, and countless opportunities will be born.
As practitioners, they should always adjust measures to local conditions and choose their own characteristic road according to their own advantages and actual situation. They can cut in from high and low consumption groups, from regional cultural consumption, or from category characteristics. No matter what kind of road they choose, improving the organization’s internal management ability and supply chain professional ability is always the same core.
The war of community group buying will be intensified in the future
@The third vision of the talents in the field of science and technology
Due to the convenience of the downstairs dingdong storage point and the low price of vegetables, I can’t remember when I went to the vegetable market last time.
From this point of view, once a thing rises, especially when it meets the needs of most people, containment and suppression can not solve the problem. Although we all know that the fate of community group buying in the future may be similar to that of the takeout industry, and consumers and food suppliers will eventually become leeks to be cut, many people still can’t resist the immediate interests and temptations, and can’t help placing orders.
According to the prospectus of dingdong, the total revenue in 2020 will exceed 11.3 billion yuan, and Gmv will reach 13 billion yuan. From 2018 to 2020, the compound annual growth rate will be 319.2%. The growth rate will rank among the top five in the industry, and its market share will also reach 10%;
On the other hand, last year’s revenue reached 6.1 billion yuan and Gmv reached 7.6 billion yuan, with a compound annual growth rate of 26.9% from 2018 to 2020.
The financing amount of the two head community group buying enterprises is billions of US dollars. The investment institutions behind dingdong’s buying vegetables are today capital, Sequoia Capital, CMC capital and other well-known institutions. Behind daiiyouxian are Goldman Sachs Group, Tencent, Tiger Fund, Lenovo Group and other well-known institutions.
The optimistic capital shows that the track has a bright future. Even if there are policy restrictions and the pressure of public opinion, as long as the capital does not withdraw, the competition will only intensify in the future.
If the success of this dingdong vegetable shopping and daily excellent fresh IPO is bound to stimulate other peers to rub their hands and stir up feelings, and a new community group buying war may be on the verge of breaking out.
To put it bluntly, community group buying is also a game of capital. As long as we don’t step down from the stage, everyone feels that they have a chance and want to give it a go. Whether this is a good thing or a bad thing for the whole industry depends on different opinions.
@Lu Xinzhi time business observer, PE partner
Generally speaking, the emergence of multiple listing in an industry often means a signal that the growth of the industry has reached a bottleneck period, and it will be too late to raise funds without listing, because the following financial statements may be very ugly. This time, the fresh runway or simply speaking, the field of community shopping will soon enter the final stage.
In fact, although this runway is supplemented by macro figures, for example, at present, the scale of China’s fresh food consumption market is 5 trillion yuan, while the penetration rate of fresh online consumption is only 6%, community group buying still has broad growth space in the future. However, this is a hard bone that is not easy to chew down.
It can be said that Youxian and dingdong started early and have been working hard for several years. However, the hard-working market has attracted the hard core competition of the giants.
Fresh e-commerce, especially its social group buying segment, has attracted almost all Internet giants such as Alibaba, Tencent, Jingdong and pinduoduo. What these tycoons are interested in is, first of all, the huge traffic behind the industry. Fresh e-commerce has a high-frequency consumption scenario with just demand, as well as a broad space for traffic growth in the future, especially in the field of community group buying. The customer acquisition cost is very low, with an average of only about 5 yuan, which is regarded as a must by the major giants.
In this way, it’s hard for companies that only work in this field, such as daily excellent fresh food and dingdong shopping, to expect to survive in this track, then cancel subsidies and gradually make profits!
The reality is quite cruel. From the perspective of the prospectus, the revenue growth of daily Youxian has stagnated, and the number of users has declined. What’s more, the capital is tight and the gross profit rate is falling.
Therefore, this financing listing can supplement a batch of ammunition, and it will also be the last battle of this kind of special fresh companies. Whether they can break through the competition and obstruction of various groups under the Internet giant will directly determine whether they have a chance to win. And the IPO is likely to see results within six months.
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