Depth: "outside the epidemic" is popular. Can grabbing vegetables turn over fresh e-commerce?

The following article comes from leopard change by Zhang Mengyi

The leopard changes

At present, meituan is changing its "living method", but it obviously needs to experience pain.


With the rebound of the epidemic in Beijing, many people also began to "store vegetables" on shopping platforms in case of trouble.

Fresh e-commerce platform orders quickly burst. As of 12:00 noon on April 24, the overall order volume of dingdong to buy vegetables in Beijing soared by 50%, with the most obvious rise in the epidemic affected areas such as Longtou and Panjiayuan. Some users reported that at about 9 o'clock that night, the supply of some commodities on platforms such as box horse, daily excellent fresh food, dingdong shopping and meituan shopping was insufficient, and the distribution capacity was also tight. By the morning of April 25, the delivery brothers of multiple online fresh app were fully booked.

This scene looks very familiar. Since April, while staying at home and living in isolation, Shanghai residents have been frantically "grabbing vegetables" on the shopping app. Liang Changlin, CEO of dingdong shopping, personally sent a circle of friends to teach users how to improve the success rate of grabbing vegetables. Even Xu Xin, the queen of investment, was worried about bread and milk.

Under the huge purchase demand, fresh e-commerce seems to have ushered in a long lost good day, with the number of daily living users, orders, downloads and other indicators rising rapidly. Affected by the surge in orders, at the beginning of April, Ding Dong's share price of buying vegetables and daily excellent fresh food continued to rise. Daily excellent fresh food rose by more than 72% for four consecutive trading days, while Ding Dong's purchase of vegetables completed a 100% increase in three trading days.

Before the outbreak of the epidemic in Shanghai, fresh e-commerce was still mired in losses, layoffs and food safety problems. Today, the doubts about fresh e-commerce have not dissipated. The dividends brought by the epidemic are short-lived and can not reflect normal consumer demand. Ding Dong, which focuses on the front warehouse mode, only made a profit for the first time in Shanghai. The gross profit margin and order volume of other low-level cities are far less than that of Shanghai. It is still very difficult for front warehouse players to expand to second and third tier cities.

"Leopard change" noted that at present, the heat of the capital market has fallen. As of the closing on April 22, Ding Dong's share price of vegetables was reported at $5.15 and Youxian was reported at $0.927 a day, which has fallen from the high in early April.

On the other hand, fresh e-commerce is also looking for the "second curve" and has an eye on the popular prefabricated dishes. Can prefabricated dishes bring "money scene" to fresh e-commerce?

01

After the "epidemic popularity" of fresh E-commerce

Affected by the epidemic in Shanghai, the orders of fresh e-commerce and the number of daily living users have soared. Dingdong, which is based in Shanghai, has performed particularly well.

According to the fresh e-commerce data released by questmobile, in March this year, due to the impact of the epidemic, the number of active users, monthly download users and per capita use of fresh e-commerce app increased. Take dingdong's shopping for vegetables as an example. In March, dingdong's daily living users of vegetables exceeded 5 million, up 66% month on month, and its monthly living users were close to 45 million, up 28% month on month.

Stimulated by huge user demand, the performance of fresh e-commerce in the capital market has also rebounded. Since April, the share price of fresh e-commerce has rebounded strongly, and the share prices of dingdong shopping and daily excellent fresh have risen sharply against the trend since the low point.

However, in the face of massive orders, the transportation capacity of fresh e-commerce is somewhat inadequate. Many Shanghai consumers admitted that they mainly rely on community group buying to buy their own vegetables. The success rate of buying vegetables on e-commerce platforms is very low, and the categories they can choose are also very limited.

Qingqing has been living at home in Shanghai for more than a month. When it comes to buying vegetables on the e-commerce platform, she calls it too difficult: "I usually add the vegetables I want to buy into the shopping cart in the early morning. I go to the new shopping cart once at 5:30 in the morning, and I will add another shopping cart. I have to enter the payment interface at 5:55, otherwise I can't get in later. I start crazy payment at 5:59, but I can't buy them generally, and only two or three of 100 people can grab them."

In this regard, Ding Dong told leopard transformer that in order to meet the relevant epidemic prevention and control requirements in different regions, the guaranteed supply enterprises will also suspend the operation of some warehouses and site stores, resulting in the shortage of goods and transportation capacity. At present, commodity supply and transportation capacity are gradually recovering. For example, 70% of Ding Dong's pre warehouse for buying vegetables in Changning District of Shanghai are in normal operation, and hundreds of guarantee and supply personnel are making every effort to ensure material distribution.

However, it is still a question mark whether the strong consumer demand during the epidemic in Shanghai can continue.

Bao Yuezhong, a new retail expert, believes that during the epidemic control period, as long as you have the sales qualification, there is the possibility of order explosion on any platform. This sales data itself is not representative, and it is impossible to judge the future performance of an industry and field according to the market performance during the epidemic in Shanghai.

He said: "fresh e-commerce still needs to think about how to design the retail model after transferring from offline to online, whether to continue the development of business types according to categories, or form a new ecological retail model."

In addition, the price and cost of fresh e-commerce are very high. This is because fresh e-commerce used to focus on warehouse purchase mode, and there are no offline stores. It is necessary to cultivate consumers' habits through advertising and subsidies. Coupled with the timeliness requirements of distribution, the cost of performance and distribution is also relatively high. In order to cover costs, fresh e-commerce mostly targets middle-class income groups in high-speed cities.

Zero one think tank said in a research report that with dingdong's shopping saturated in the first and second tier cities, it will expand to the third and fourth tier cities. It is still unknown whether it can replicate Shanghai's successful experience in other low tier cities.

The research report shows that consumers' demand for high-quality fresh products in the third and fourth tier cities has not reached the level of the first and second tier cities, and the third and fourth tier cities are more in the output of fresh products. When community group buying enters low-level cities, the business model of front warehouse has inherent disadvantages.

02

Can't you tell the story of the front warehouse?

Due to the lack of self hematopoietic ability, the head players of fresh e-commerce have been questioned by the capital market since they were listed in the United States.

At the end of June 2021, Ding Dong, who landed on the New York Stock Exchange to buy vegetables, was listed and issued at a price of $23.5. After listing, the share price once soared to $46. As of the closing on April 22, Ding Dong's share price of vegetables was $5.15, with a market value of only $1.216 billion, down 88.8% from the highest point.

Similarly, in the US stock market, Youxian was also miserable every day. As of the closing on April 22, the share price was US $0.927, down 92.97% from the issue price of US $13.

Bad news followed. At the end of December 2021, it was revealed that Ding Dong had a large scale of layoffs in shopping, and the layoffs of procurement department, algorithm department and operation department were 50%, 30% and 30% respectively. On March 16, Ding Dong's shopping for vegetables was exposed to the existence of the front warehouse, using dead fish as live fish. On March 17, according to media reports, the daily Youxian Wangjing headquarters was pulled by the supplier to collect debts, and the company was reported to have owed nearly ten million yuan to the supplier.

Fresh e-commerce still has no hope of profit. According to the financial report of dingdong shopping, the company's net loss in 2021 was 6.429 billion yuan, further expanding compared with the net loss of 3.177 billion yuan in the same period in 2020. The cumulative loss from 2019 to 2021 was nearly 11.5 billion yuan.

From 2018 to the first three quarters of 2021, the total loss of daily Youxian reached 9.9 billion yuan. In the third quarter of 2021, the daily loss of Youxian was 947 million yuan, an increase of 101.69% year-on-year.

Under the huge loss, daily Youxian put down its obsession with the front-end warehouse, closed half of the 2000 front-end warehouses, told a new story of smart vegetable market and retail cloud, and focused on the business of b-end customers. However, it still needs time to test whether these strategies can achieve profitability.

Dingdong chooses to go to the end on the road of front warehouse. In less than three years, dingdong has settled in 36 cities and opened more than 1000 front warehouses.

But up to now, the profit prospect of front position is still uncertain. The front warehouse belongs to the heavy operation mode, and the distribution cost and personnel operation cost are much higher than those of traditional e-commerce platforms and community group purchase. However, the gross profit of fresh products is low and there are many kinds, which will lead to high performance cost and difficult to make money.

This is clearly reflected in the financial data of Ding Dong, the number one player in the front warehouse. From the perspective of performance fee, although the performance fee rate of dingdong shopping decreased gradually, from 60.78% in the first quarter of 2019 to 36.45% in the second quarter of 2021, its sales fee and management fee rate still increased. Taken together, the performance fee still accounts for a large proportion, greatly swallowing the profit space.

Taking the first quarter of 2021 as an example, the average customer unit price of dingdong vegetables reached 61.7 yuan, and each order contributed 54.5 yuan of revenue, of which the performance fee was 44.2 yuan. The proportion of performance fee in revenue alone reached 71.64%, and the gross profit was only 7.2%.

Northeast Securities Research Report shows that the performance cost of the front warehouse mode is as high as 10-13 yuan / order, which is about three times that of the traditional central warehouse e-commerce, about two times that of the platform e-commerce and about six times that of the community group purchase. According to iResearch consulting data, the operating cost and performance fee of daily Youxian in 2020 account for 93.4% of the total cost.

The front warehouse has no offline platform drainage, and the cost of pulling new products is high. Once the platform cannot increase subsidies and attract new customers, the revenue growth will slow down rapidly. Coupled with the large investment in early construction costs and slow growth, it is conceivable that it is difficult to make profits.

Still take dingdong shopping for example. In the first quarter of 2020, the company's revenue grew by more than 40% month on month, but by the first quarter of 2021, it had dropped to about 5%. At the same time, the company's losses increased quarter by quarter due to increased investment.

In terms of gross profit margin, Ding Dong's gross profit margin reached 26.66% in the first quarter of 2020, but by the second quarter of 2021, the gross profit margin had dropped to 14.61%. The decline in gross profit margin was mainly due to the increase in subsidies.

Therefore, the front warehouse needs to have a certain order density and consumption amount in order to cover the initial cost. The price of fresh e-commerce in the front warehouse mode is expensive, while the consumption capacity of low-line cities is limited. They pay more attention to cost performance than service quality. They may not be willing to pay a premium for time and convenience. The customer unit price and consumption frequency are difficult to compare with big cities such as Shanghai.

Many people in the industry believe that the front warehouse model is difficult to go out of the first tier cities, and it is difficult to make profits in other cities as in Shanghai.

Regardless of the performance efficiency, the supply chain foundation of fresh players in the front warehouse mode is not stable. In this regard, the traditional supermarket has more significant advantages in the fresh supply chain, which can provide consumers with richer products. At the same time, the digital ability of these traditional fresh food retailers is also improving.

In Bao Yuezhong's view, no matter what kind of retail model, the key is whether it can provide consumers with the products they need and bring better cost performance and experience. However, the problem is that "compared with offline fresh food operators, dingdong shopping and daily excellent fresh food have no significant advantages in supply chain and products. At present, the commodity system of this kind of fresh e-commerce is much weaker than that of large-scale suppliers, and the supply chain system is still being explored and established gradually. It is difficult to say whether it can retain customers".

Does the business story of front warehouse make sense? China Merchants Bank Research Institute believes that "at present, most of the mainstream community fresh e-commerce are still in the stage of burning money and fighting for scale. Although the performance efficiency and supply chain capacity have improved to a certain extent with the growth of scale, they have not yet reached the stage of fine management. The moment of full profitability is still far away."

In addition, Alibaba, meituan and pinduoduo are also making continuous efforts in fresh e-commerce with a strong capital base. In contrast, the head players of the front warehouse established by the entrepreneurial team do not have the background to burn money for a long time. How to win this money burning war under the fierce competition of giants is a common problem faced by dingdong shopping and daily excellent fresh food.

03

Is prefabricated food a life-saving straw?

Fresh players who are confused about the way ahead have been eyeing the prefabricated vegetable outlet recently as another outlet to improve customer unit price and consumption stickiness.

Prefabricated dishes are one of the hottest outlets at present. According to tmall, during the "double 11" period in 2020, the sales turnover of prefabricated dishes, including semi-finished dishes and fast-food dishes, increased by about 2 times year-on-year. Guohai Securities believes that in the next six or seven years, the total market scale of domestic prefabricated dishes at the b-end and C-end can reach 50000 to 6 trillion yuan.

As early as the beginning of 2021, Ding Dong launched the prefabricated dishes category when buying vegetables. According to Ou Houxi, the person in charge of Ding Dong's buying vegetables and prefabricated vegetables, the 30 day user retention rate of prefabricated vegetables has reached about 80%. In the user portrait, dingdong prefabricated dishes are mainly people aged 30-45, mainly white-collar workers. Compared with single users, there are more family users. The data show that at present, the sales of prefabricated vegetables bought by dingdong account for 14.9% of the whole Gmv.

Ding Dong told leopard variety that the company continued to enrich and optimize the commodity structure by focusing on the eating scene, starting from the fresh category. For example, by developing more high-quality private brand commodities, including commodity development in various scenarios such as prefabricated dishes, hot pot and baking, on the one hand, it can optimize the profit space and improve the customer unit price; on the other hand, it can enhance the user stickiness and improve the repurchase rate with high-quality and differentiated commodities.

During the epidemic period, as the last camp to ensure community distribution, fresh e-commerce's brand and channel exposure were at a high level. There was no doubt about the advantage of selling prefabricated vegetables during this period.

Zhu danpeng, an analyst of China's food industry, said that fresh e-commerce can connect consumers and brands for the last kilometer. In terms of making prefabricated dishes, fresh e-commerce has more advantages than other enterprises in terms of service system, customer stickiness and convenience. Before the national standard of prefabricated dishes comes out, it is a good choice for fresh e-commerce to rush for prefabricated dishes.

However, the sales of prefabricated vegetables on the fresh e-commerce platform are mainly driven by the epidemic. After the epidemic, it is difficult to say whether the consumer population of prefabricated vegetables will fall sharply. It is difficult to say whether we are willing to eat prefabricated vegetables at such an expensive price.

On the other hand, the prefabricated food itself is also a heavy investment project. If you want to ensure profits, the best choice is to build your own supply chain, but there are many SKUs for prefabricated food, so it is very difficult to build your own supply chain system.

Leopard change notes that although dingdong has built its own dingdong Guyu Songjiang processing plant, there are only production lines for large circulation products such as noodles and pastry. According to insiders, the research and development of prefabricated vegetables needs to be equipped with quick-frozen technology and hardware, and this investment will cost at least hundreds of millions of yuan.

Wang Dongming, an analyst in the catering industry, also believes that the investment in the production and supply chain of prefabricated vegetables is very large. "If the investment is amortized, it is difficult for prefabricated vegetables to make a profit. The reason why fresh e-commerce does direct purchase from the source is that the profit is not high. The high gross profit margin of prefabricated vegetables of fresh e-commerce does not mean making money. If you want to make money, you need scale effect, continue to expand production and investment in a few years." Fresh e-commerce, which has suffered serious losses, will face no small challenge if it wants to continue to burn money on prefabricated vegetables.

At present, there are a variety of players joining the prefabricated dishes, from Haidilao and Xibei in the catering industry, to Mo Xiaoxian in the self heating food track, and then to completely independent stores and brands such as tongue tip workshop, as well as fresh e-commerce and traditional cuisine contracting factories. Among all players, some are good at sales channels, some are good at brand operation and marketing, and some have advantages in the supply chain.

The main advantage of fresh e-commerce lies in channels. "Most of the fresh food electric platforms can only be defined as sales channels, not as prefabricated food brands, but more to cater to the outlet of prefabricated food. With the channel layout of professional prefabricated food brands, the advantages of fresh food e-commerce in prefabricated food will be partially weakened." Cai Hantong, CEO of kitchen powder topping, said.

At present, the C-end consumer market of prefabricated vegetables is still far from popularization. Fresh e-commerce, which is eager to make money, is far from the time of harvest.

Source / LEOPARD transformer (ID: baobiannews)

Author / Zhang Mengyi