The spring of Dingdong grocery shopping is not necessarily the spring of the front warehouse.
Written by Lu Yao.
In 2017, Liang Changlin, who had been in Shanghai for nearly 5 years, went to a community called Dahua Jinxiu Huacheng on Jinxiu Road to do research. This large community is located between the inner and middle rings of Pudong, which belongs to the first-line area of the city, and the straight-line distance to the popular business districts of Lujiazui, Zhangjiang and Qiantan is only 6 kilometers. He noticed that many owners in the community needed errand services, and half of the orders were "Please help me buy a grocerie at the vegetable market." ”
It was also in this year that Liang Changlin founded Dingdong Grocery Shopping. In the future, in his words, only one thing has been done, which is to sell vegetables in the front warehouse: establish a warehouse in the closest place to the consumer, radiate the area within 3 kilometers of the surrounding area, and distribute the items from the general warehouse to the front warehouse, after the user places an order, the vegetables and fruits will be delivered to the home within an hour, and the biggest feature is to improve logistics efficiency.
Liang Changlin believes that "offline stores start quickly, but the ceiling is low, a fresh food store is 10,000 yuan a day, and only about 3 million yuan a year." A 300-square-meter front warehouse with higher revenue. According to the calculation of 2,000 orders a day, the unit price is 60 yuan, and the annual revenue is 43 million yuan, which is equivalent to a four-star hotel with a profit of more than 10%. At the same time, some people estimate that if you want to achieve full coverage of a first-tier city, you will even need hundreds of front-end warehouses.
According to this logic, the front position is a business that relies on scale effect to cash. But the controversy lies precisely here: compared with traditional stores, the refrigeration method used for pre-storage of goods is costly and costly; On the other hand, even if the scale problem is solved, it is necessary to ensure that there are enough demand orders and repurchase rates, and if its leverage cannot leverage the profits, it is not a good business.
From 2019 to 2022, Dingdong had a net loss of 18700 million yuan, 31800 million yuan, 64300 million yuan and 80.7 billion yuan, accounting for 483% has narrowed to 3 year by year3%。However, judging from the latest financial data, the revenue in the fourth quarter of 2023 is close to 5 billion, and the net profit margin will reach 03%。Although the number is small, if you add the earnings of the first four quarters, it means that Dingdong has achieved an annual profit for the first time.
The model of selling vegetables in the front warehouse was indeed run through by Liang Changlin.
In the past, he believed that the offline store was a logarithmic model, and the front position was an exponential model, but the company has been dormant so far, and it has not yet reached the time of exponential harvesting. The more important focus is actually still to come, 0How much room for growth is left behind the meagre 3% interest rate is another suspense he leaves for now and beyond.
Where does the front warehouse make money selling vegetables?
2022 is a very special year for fresh e-commerce.
The industry's first stock of Daily Youxian, which burned 14 billion yuan in 7 years, was out, and Dingdong Buycai, which burned 11.5 billion yuan in 3 years, made its first quarterly profit, and Meituan Maicai also suspended its expansion plan. With the large-scale withdrawal of cities, the optimization of warehouse locations, the reduction of single-warehouse distribution riders and other adjustment measures, the industry seems to have gone through the stage of large-scale expansion.
To a certain extent, at this time, Dingdong's profits from buying vegetables are saved. The number of urban layouts has been reduced from 37 to 27, the number of riders at a single station has plummeted from 20 to famous, and the delivery radius in some areas has been expanded from 3 kilometers to more than 45 minutes, as the expansion of the delivery area will be lower than the cost of opening new stores.
In the fourth quarter of this year, Dingdong's grocery fulfillment expenses decreased by nearly 300 million compared with the same period last year, which is also the core reason why it was able to make a profit of 49.88 million.
Liang Changlin said that only by squatting down can he jump far, so the company began to change its positioning in the external caliber, from a fresh e-commerce platform to a manufacturing-oriented, technology-based retail enterprise. At that time, among the players who sold vegetables in the front warehouse, in addition to Dingdong to buy vegetables, there were also Pupu Supermarket and Meituan to buy vegetables, but the latter two platforms no longer simply sell fresh food, but have added a lot of department store supplies.
In the eyes of the outside world, a time-only integrated supermarket often means lower losses, more flexible distribution, more generalized SKUs, higher order value and gross margin, and greater market opportunities. Therefore, in contrast, Dingdong Grocery Shopping, which still retains more than 60% of fresh vegetables and fruits, also retains Liang Changlin's stubbornness in his business. The face has changed, the lining has not changed, and there is a lesson from the past such as Daily Youxian, and the market is still not optimistic.
So what should Dingdong rely on to make money when buying groceries? In fact, the answer was given at the beginning of its existence.
Like the Daily Youxian founded by Xu Zheng in Beijing, Dingdong was born in Shanghai, which is also a first-tier city. It is fair to say that the front warehouse solves the "good" and "fast" in "more, faster, better, and more saving", and people save the step of going to the vegetable market to buy vegetables and spend more money to buy more precious time.
According to the calculations of some brokers, the e-commerce fresh products, including the front warehouse, are 120%-136% of the offline supermarkets, and the unit price of Dingdong groceries is about 60 yuan, which is more than half of the general household consumption. Therefore, in the subsequent expansion, Liang Changlin has a clear boundary of the business, and he will prefer cities with many young people and a fast pace of life, such as Shenzhen; At the same time, it is believed that in most cities, at least three to four out of ten people want a better life, so slower cities such as Shijiazhuang and Hefei are ranked behind.
He mentioned in an interview that Dingdong Grocery will let go of users who can only pick wool, and will not rely on buying traffic for growth, but use good goods to achieve repurchase. In addition, in Liang Changlin's vision, Dingdong must be difficult to redo grocery shopping, and when there are ten processing plants, it will continue to add three super factories of more than 100 acres that year.
You have to believe that the key issue is not to issue coupons, but to find those people who really have the pursuit of quality of life. "When more and more people are willing to pay more premiums for online grocery shopping, it means that the market has accepted the underlying logic of Dingdong grocery shopping.
But as we all know, the process is far more difficult than you think.
Scale, can it change from a cost item to a profit item?
Selling more expensive vegetables in first-tier cities, or selling more expensive fresh food to a small number of people in a region, is a low-frequency application to look for in high-frequency scenarios. Typically, a larger sample space is often required to increase the likelihood of a low-probability event occurring. Many people have also asked Liang Changlin the same question: How to look at the scale of Dingdong grocery shopping?
He believes that a track with fierce competition and needs to burn money, investors and shareholders are more interested in scale, and the company continues to grow until it becomes the industry leader, so that it can have more capital support, and then have the ability to make money. Coincidentally, when Xu Zheng invested in Daily Youxianla, he was also good at telling the scale story to the investors, depicting a grand picture covering 100 cities, 10,000 front warehouses, and allowing 100 million families to buy vegetables.
Throughout 2020, Dingdong is in a radical expansion stage, covering 27 cities such as Beijing, Nanjing, and Guangzhou, and on the eve of listing, it plans to invest hundreds of millions of dollars to build a comprehensive fresh body, expanding from 700 front-end warehouses to more than 1,000.
Xinmu has theoretically interpreted the "double flywheel model" that can support the growth of Dingdong Buying, attracting new users with a better user experience, and further driving the increase in procurement. Another flywheel is the analysis of existing data to further optimize operational details and improve operational efficiency.
Until after the listing, Liang Changlin was still convinced that "talking about various profits without scale is not the business logic of people in the Internet era." According to ** report, Dingdong's expansion strategy in the front warehouse is to spin off and fission the mature old warehouse, cooperate with the offline fierce push, mobilize 3-5 times the number of people to sweep the building in the area of the new front warehouse, as well as online fission promotion and high subsidies to attract new customers.
But in the fresh food industry, scale doesn't mean efficiency increases, nor does it mean that there will be huge economies of scale. In the first three quarters of 2019-2021, Dingdong's net loss was 187.3 billion yuan, 317.6 billion yuan, 53300 million yuan, with a cumulative loss of 10.3 billion yuan, and the large-scale backlash has brought about an increase in losses year by year.
On the one hand, the most typical example is the classic conclusion of Hou Yi, the founder of Freshippo, that "the front position is a false proposition", he believes that the front position cannot solve the three problems of fresh food, namely the unit price of customers cannot go up, the loss rate is too high and the gross profit is low. These are determined by consumer habits and the market, and the front position cannot be changed.
Ideally, if the daily order volume of each warehouse that has been operating for more than one year exceeds 1,000, the customer unit price remains at 50 yuan, and the gross profit is 25%, then the annual revenue is 16.59 million yuan and the gross profit is 4.15 million yuan. But on the other hand, a front warehouse needs at least one person in charge, more than 5 sorters, and more than a dozen delivery workers, and their monthly salary is usually 6k-1About 2k, plus the usual cost of water, electricity, sanitation and rent, as well as the depreciation of the warehouse and about 20% of the loss of goods, it is difficult for the revenue to cover the cost.
According to a person in charge of the front warehouse, in addition to the early equipment, self-built logistics investment, there is a steady stream of maintenance and depreciation loss in the later stage, the cost is snowballing, getting bigger and bigger day by day, and there are also huge system information development teams including the operation headquarters, as well as marketing and other specific expenses that cannot be known.
In addition, different cities have different eating and consumption habits, for example, people in Wuhu, who live near the river, tend to care more about the freshness of ingredients and have higher requirements for fresh transportation. In addition, there are regional differences between the north and the south, for example, northerners love meat more than the south, although Chengdu is an inland city, but the love for aquatic seafood is not low, so in the process of localization of commodity structure, it will also bring a lot of internal management problems to Dingdong to buy vegetables.
In the early days, Dingdong was stationed in the Shanghai area, and the repurchase rate could reach about 70%, but with the expansion of its territory, this number is declining. According to the "Late" once reported, the gross profit margin of this business must reach 30%-35% to break even, although Dingdong was the closest one at that time, but its profits were obtained by reducing personnel, reducing delivery and subsidies, and improving human efficiency.
In the process of contraction, squeeze out the sporadic
In 2022, Dingdong will close its sites in Zhuhai, Tangshan, Xuancheng, Tianjin, Xiamen and other places one after another; Around 2023, the operation of Chengdu, Chongqing, and southwest markets will be suspended, and a total of 38 stations in Guangzhou and Shenzhen will be closed. At present, there are 25 cities that have been opened on the Dingdong shopping app, including Suzhou, Shanghai and Beijing, of which Jiangsu and Zhejiang occupy the majority, shrinking by nearly 30% compared with the 37 cities at the peak.
The front-end players, including Meituan Maicai and Pupu Supermarket, have not experienced a large-scale contraction, but the progress of their business has slowed down significantly, among which Meituan Maicai has been renamed Xiaoxiang Supermarket, which has opened only 11 cities including Shanghai and Dongguan, and some businesses have been preferentially replaced; Pupu supermarkets are mostly concentrated in the southern coast of Guangdong and Fujian, and only cover 8 cities.
In this context, Dingdong Grocery achieved profitability for the first time in five years, and basically overturned the business assumption of using front-end warehouses to achieve an indiscriminate large-scale effect, and then achieve profitability.
In 2023, Dingdong will achieve GMV219700 million yuan, although the scale decreased month-on-month, due to the more focused business area, the overall customer unit price and GMV scale in East China increased significantly year-on-year.
In addition to various cost reductions, Liang Changlin emphasizes "private label" more often than before. In fact, as early as a few years ago, he mentioned that it is necessary for people to change from "going to Dingdong to buy vegetables" to "buying Dingdong's vegetables", and to some extent, this has also become a key part of the future imagination of Dingdong Food.
According to ** statistics, Dingdong Maicai once had as many as 151 self-owned ** chain brands, covering four categories: meat, prefabricated dishes, rice noodles and soy products. Many commodities are self-operated factory R & D and production, on the one hand, it can optimize the standardized quality, on the other hand, it can eliminate channels and marketing costs, and reduce costs, such as self-operated farms, meat product cutting farms, and self-processing and production can increase the gross profit margin by 10% to 30% compared with purchasing from brand merchants.
According to the official disclosure, in the fourth quarter of 2023, the user penetration rate of private label products has reached 736%, contributing more than 20% of GMV, which is actually the target set for the second quarter of 2022.
But in any case, the strategic positioning of Dingdong Grocery is indeed extending from "front-end fresh e-commerce" to a food company, and they even opened Dingdong's outlet store under the first class. From this point of view, Liang Changlin's range of opponents has naturally been expanded, compared with Meituan, Pupu and fresh food stores in the past, and now there is Hema and a large number of supermarkets to compete.
On the other hand, new problems have also emerged, Shen Qiang, vice president of Dingdong Food, said that because the factories of its own brands are around big cities, when expanding to low-tier cities, the factory's first-class capacity cannot be synchronized quickly, and the richness of goods due to depreciation is far less than that of the first line.
In this way, "in the future, we cannot rule out the possibility that Dingdong's products will be sold by other stores." A former employee of Dingdong Grocery analyzed that "in the past, we were doing the third-tier market, and we struggled to find the right group of people, but if we follow such a brand model, we may not need to find it in the future." ”
In the past, when answering questions such as "why does Daily Youxian need to find other models" and "why does Hema not do well in front of the warehouse", Liang Changlin has never expressed doubts about the front position, and it is still the case today. In the past year, after layoffs, downsizing, integration, and withdrawal from the city, Dingdong has almost become the only seedling in the front warehouse fresh e-commerce.
But what is different is that the market may be forcing him to accept the fact that the front position is "fat", and it is a business that he did not consider "small but beautiful" in the past, because there is no second company in the entire industry that can provide a more successful reference. The two most important things in front of the company right now are to survive and to prove that it can continue to be profitable.