For online grocery shopping, we need more patience and time. But 2020 is destined to be a fierce competition.

In 2020, "selling vegetables" will eventually become a hot topic of continuous discussion. Whether for industry development or market competition, a critical moment may be coming. From an industry perspective, fresh e-commerce is becoming a major trend, but the growth rate remains to be seen. In terms of market competition, competition between current models and between giants will be even more brutal this year. Any company that has not yet reached the shore faces a huge crisis. Today, let's look at two keywords in the "selling vegetables" track: the cake and the scramble.

-01- A 300 billion yuan cake Fresh e-commerce continues to expand A recent report by QuestMobile on China's mobile internet during the "war on epidemic" showed that fresh e-commerce platforms achieved rapid user growth. Before the epidemic, the overall daily active users (DAU) of fresh e-commerce in China were less than 8 million. During the peak of the epidemic outbreak during the Spring Festival, the DAU broke through 10 million, and after the Spring Festival, it exceeded 12 million again. Another set of data shows that in Q4 2019, in terms of user scale growth, Hema Fresh and Miss Fresh were at the forefront, with growth rates of 43.9% and 17.3% respectively. Miss Fresh continued to grow its user base in 2019, reaching 11.52 million MAU in December. Comparing these two sets of data, we can see that fresh e-commerce has already achieved high growth since last year, and the epidemic has accelerated the industry's development.

We believe that in 2020, the penetration rate of fresh e-commerce will continue to rise, and the cake will continue to expand. Previously, it was estimated that fresh e-commerce would exceed 300 billion yuan in 2020. Based on the current pace, this figure should not be a problem. However, in terms of market competition, Hema, Miss Fresh, Dingdong Maicai, Suning Caichang, Meituan Maicai, JD Maicai, Duodian DMALL, etc. are all increasing their efforts. At the same time, we have seen that some previously participating players, including some relatively large companies like Dailuobo, have already fallen. Obviously, the money-burning war this year will be even more intense.

**-02- **The "moment of contest" for fresh e-commerce This epidemic has taught consumers a lesson and will accelerate market progress. It can be said that this year is a critical year for competitors. Once they fall behind, they will face elimination or acquisition. At present, the entire track in first-tier cities is gradually showing a pattern led by head players such as Hema and Miss Fresh. But with Meituan, JD.com, etc. increasing their efforts, and the entry of Pagoda and Sinopec, it is still too early to say who will win.

1. Hema Recently, Hou Yi, President of Hema Business Group, said: "Hema Mini is the 'ultimate model' for fresh e-commerce," and officially announced the "double 100" plan for Hema Fresh standard stores and mini stores this year. "Hema's innovations are all derived from scenarios, and then based on consumer pain points, we find the best solutions from scenarios. This is our logic for new business formats." Hema Mini is a small-store format launched by Hema last year. It has a different product structure from Hema Fresh, but continues Hema's online-offline integration model, allowing both in-store consumption and free delivery within 1.5 kilometers. As of now, Hema Mini has opened 6 stores in Shanghai. This year, it will also replicate in batches in Beijing, Shenzhen, Guangzhou, Hangzhou, and other places where Hema has mature store systems. Hema Mini started relatively late, but its achievements have been surprising. Previously, Hou Yi, President of Alibaba's Hema Business Group, praised Hema Mini's performance in a post.

Hou Yi said, "Hema Mini's sales per square meter exceeded that of Hema's large stores within three months of opening," and listed several advantages of Hema Mini compared to Hema's large stores, such as lower logistics and distribution costs, online orders exceeding 50%, and investment costs only one-tenth of large stores. "Hema Mini will soon become profitable. After Hema Mini accelerates its expansion, it can completely replace front warehouses." It can be seen that Hou Yi has confidence and ambition for Hema Mini.

According to "Retail Business Review," Hema Mini, as a downsized version of Hema, has two data points to consider together: fresh food sales account for up to 70% of Hema Mini's sales, and online sales exceed 50%.

It can be said that Hema Mini will be Hema's killer weapon in the "fresh e-commerce" battle.

2. Miss Fresh Recently, Miss Fresh CEO Xu Zheng stated that Miss Fresh's business revenue in February exceeded 1 billion yuan, about 300% of the monthly average. From a market perspective, Miss Fresh maintains industry-leading market share, revenue growth, user scale, and profitability, with nearly 25 million monthly active users on APP + mini-program. Miss Fresh's approach is to set up sorting centers in cities, penetrate communities based on order density, establish front warehouses, and form a circular coverage network with a radius of three kilometers. The city sorting center will allocate fresh products to front warehouses in advance, and then deliver them to community users. To date, over 4 years, Miss Fresh has deployed 1500+ front warehouses in more than 20 cities, each covering a 3km radius, with delivery times of "2-hour ultra-fast delivery" and one-hour delivery for members. It has also launched its 2.0 version of front warehouses. Compared to the 1.0 version with an average area of 100-150 square meters, the 2.0 version, which has been scaled since 2019, has significantly increased storage area to 300-400 square meters. The daily order peak can reach 2000 orders. The use of more intelligent systems has further improved operational efficiency, with annual sales per square meter reaching 100,000-120,000 yuan, 5-6 times that of traditional offline stores.

3. Meituan Maicai Data shows that during the Spring Festival, "Meituan Maicai" sales in Beijing, Shanghai, Shenzhen, and Wuhan were 2-3 times higher than before the festival. According to financial reports, among Meituan's new businesses, the "vegetable market" field also has room for imagination. Meituan Maicai adopts an "APP + convenience service station" model. Community residents within 1.5 kilometers can place orders through the Meituan Maicai App for "mobile ordering, delivery to home," with delivery in as fast as 30 minutes. It is a self-operated front warehouse model, essentially no different from Dingdong Maicai and Miss Fresh. Currently, we see that Meituan has given the grocery business an entrance on its homepage. Although Meituan started relatively late, based on Meituan's own channel and traffic advantages, it will develop relatively quickly. According to QuestMobile data, as of December 31, 2019, Meituan's DAU reached 69.8586 million, about to break the 70 million mark.

4. Suning Caichang Convenience stores + vegetable markets are also a major hotspot. Suning Xiaodian, 7-Eleven, Lawson, etc. have all ventured into selling vegetables in convenience stores. Convenience stores + selling vegetables may become a hot area in the "last mile competition" in the next 2-3 years. For in-store pickup, let's take Suning Caichang as an example. Suning Caichang creates a "one-click ordering" entrance for consumers through the Suning Xiaodian APP and mini-program. Consumers can place orders before 9 pm on the same day through the "Suning Caichang" entrance in Suning Xiaodian, and pick up fresh vegetables at the nearest Suning Xiaodian at 7 am the next day. Suning Caichang is a typical in-store pickup model, relying on more than 10,000 Suning Xiaodian outlets. Of course, it is not ruled out that Tmall Xiaodian and JD Convenience Stores will also make efforts in this field.

5. Pagoda In addition to these head players, another community fresh food giant, Pagoda, announced its entry into "selling vegetables." From selling fruits to fresh food, Pagoda's ambition is evident. In April last year, Pagoda founder Yu Huiyong announced the entry into the fresh food field, expanding product categories from fruits to fresh food, and released Pagoda Group's independent fresh food platform - Baiguo Xinxiang. He also proposed developing 50 fresh food ingredient products in 2019, with a sales target of over 100 million yuan. As of now, let's look at the data: Pagoda has nearly 4,500 offline stores. Its WeChat mini-program has 22 million users, registered consumer members over 53 million, more than 8,000 WeChat groups, covering over 4 million people. It is truly the "King of Community Stores"! So Pagoda's confidence in selling vegetables lies in:

First, based on its steady layout in fruits, it has established strong barriers in supply chain and channel networks. Therefore, Pagoda has natural advantages in expanding into vegetable categories. Second, it chooses an online-first model. It is understood that Pagoda's online sales accounted for 25% of total sales in 2019. Currently, we see that buying vegetables has been given a first-level entrance on Pagoda's mini-program. Third, for its existing consumer base, it maintains a high-end route in product selection. Currently, in Pagoda's private domain traffic, consumers have more demand for repurchasing more categories. Moreover, relatively speaking, the quality of members belongs to the middle class and above, with very high-quality groups. Pagoda expects that its vegetable business will be fully deployed in more than 80 cities where Pagoda has a presence by March this year. From February to the end of April, daily orders for vegetables are expected to exceed 100,000. It can be seen that Pagoda has natural advantages in grafting onto community physical stores. However, online customer acquisition will be a difficulty it faces.

6. Sinopec Easy Joy Previously, Sinopec launched the "Anxin Maicai" (Safe Vegetable Shopping) business, leveraging its many gas station outlets and fast supply channels. How does it work? Customers place an order through the "Easy Joy Refueling" APP's "One-click Refueling," and then select "Vegetable Gift Box Combination" on the "Deliver to Car" page to purchase. From successful payment to the refueling attendant delivering the goods to the trunk. Although Sinopec also bases its vegetable business on Easy Joy convenience stores, this consumption scenario is quite different. Convenience stores' survival environment is based on communities, office buildings, shopping malls, etc., while gas station convenience stores' specific consumption environment tests the matching of categories. Despite having more than 27,000 stores, for the "supermarket" to become normalized, this path still needs to be polished slowly. The hardest part is cultivating consumer habits.

According to "Retail Business Review," this epidemic has accelerated the development of "online grocery shopping." But even to reach 10% of online penetration, there is still a long way to go.

After carefully analyzing these different models and the resources and advantages behind each company's operations, although they are quite different, we believe there are several key points:

Focus on online traffic. This epidemic has sent a positive signal: the volume of online grocery shopping by consumers born in the 60s and 70s has surged. Once consumption habits form, their enjoyment of online price comparison will be even more exciting than offline.

Community is the core. The replication cost of large-store models is high, and whether it's MINI stores, front warehouses, or convenience stores, they are essentially community-centric, with faster expansion speed. Density effects will be key to competition. Even if Hema MINI plans to open 100 stores this year, we believe the speed is still slow.

The ultimate battle is in the supply chain. Only by truly gaining advantages in the supply chain can there be long-term competitiveness. Consumers ultimately look at cost-effectiveness. For the high loss rate of fresh food, efforts must be made in every link of the supply chain and operations.

As for profitability, among the more than 4,000 entrants, 95% are losing money. But this is not the stage to pursue profitability. Only when scale advantages become prominent (supply chain advantages, reduced operating costs, etc.) will there be opportunities for significant profits.

For online grocery shopping, we need more patience and time. But 2020 is destined to be a fierce competition.

Source: Retail Business Review (ID: lssync) Tips will be paid 400-2000 yuan once adopted.