---
title: "Selling Groceries Is Really Hard"
description: "After being quarantined at home, my friend in Shanghai shared several grocery shopping apps in a subdirectory on WeChat Moments, joking about being a 'vegetable snatcher' in the magic city. The pandemic has seemingly boosted fresh e-commerce, but it's only an illusion because selling groceries is extremely difficult. On March 10, Chengxin Youxuan was fully shut down, and JD's Jingxi Pinpin also began major contractions, while independent fresh e-commerce companies face even harsher realities as capital withdraws early."
author: "最话团队"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-03-27"
language: "en"
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---

# Selling Groceries Is Really Hard

> After being quarantined at home, my friend in Shanghai shared several grocery shopping apps in a subdirectory on WeChat Moments, joking about being a 'vegetable snatcher' in the magic city. The pandemic has seemingly boosted fresh e-commerce, but it's only an illusion because selling groceries is extremely difficult. On March 10, Chengxin Youxuan was fully shut down, and JD's Jingxi Pinpin also began major contractions, while independent fresh e-commerce companies face even harsher realities as capital withdraws early.

After being quarantined at home, my friend in Shanghai shared several grocery shopping apps in a subdirectory on WeChat Moments. Red, orange, yellow, green—some reportedly require reservations, others need to be snapped up at specific times. He jokingly called himself a 'vegetable snatcher' in the magic city.
The pandemic has eroded many industries, but it seems to have boosted the fresh e-commerce business. However, that's only an illusion.
Because selling groceries is really hard.
On March 10, Chengxin Youxuan was completely shut down. According to The Most Talk, compared to other business lines like freight, Didi provided more internal job opportunities (HC) for the team that had fought hard in this multi-giant competitive market. Eleven days later, JD's Jingxi Pinpin also began major contractions, with business departments in multiple provinces and cities being disbanded.
In fact, whether in business or personnel, these fresh business lines sheltered within giants once received more resources and now have a way out. What's harder are the independent fresh e-commerce companies fighting alone. When they encounter difficulties, capital will withdraw from the battlefield earlier and more decisively than they do. When they suffer failure, it is total failure.
Since the second half of 2021, the news flowing through the fresh e-commerce track is no longer about who raised how much money or who virtually rang the Nasdaq bell in a grand hotel, but about losses, contractions, layoffs, and even explosions. From 2C fresh e-commerce to emerging community group buying, and even 2B supply chain service providers, almost none have been spared.
**To be fair, no failure exists in isolation. The essence of e-commerce business is efficient matching of people, goods, and places. So when e-commerce business develops poorly, the entire supply chain is also squeezed.**
"They owe us over three million yuan. Miss Fresh directly told our supplier company that they have no money now. Fortunately, we stopped losses in time in December 2021 and stopped supplying," lamented Liu Yang, a dairy supplier who had followed Miss Fresh for nearly five years. "There's no way. We sued Miss Fresh on March 19, and now we're waiting for the court hearing."
A verdict on the fate of fresh e-commerce may also be waiting in the near future.
******Capital**
What changes are happening in a company are not only known to senior managers; every employee has their own perception.
Employees at Meicai have at least two perceptions: first, the workplace has changed; second, they don't need to shout slogans as frequently.
A few months ago, Meicai conducted a large-scale layoff and moved its headquarters from Wangfujing Street to near Beijing Station. Although only a few kilometers apart, the environments are completely different.
Wangfujing Street is upscale and bustling. Meicai's office is directly opposite Apple's flagship store in Beijing, and diagonally ahead is Wangfu Central, filled with international luxury brands and Michelin-starred restaurants. The area around Beijing Station is also lively, but it's more down-to-earth and grounded.
**Speaking of being grounded, few industries require you to get your feet in the mud like the fresh produce industry. However, for a few years, Meicai seemed to be aiming for the clouds.**
According to reports, Meicai has received a total of 8 rounds of financing, with total financing amounting to 8.418 billion yuan, second only to Miss Fresh's 14.271 billion yuan financing scale.
Among them, 2018 was its brightest moment. In January, the company completed a $450 million financing from Tiger Global Management and China Media Capital. In October of the same year, it received an additional E+ round of 1 billion yuan from Shunwei Capital. After this round, Meicai's valuation reached $7 billion.
In the most successful years, Meicai set up its office in Wangfujing Yintai Mall, occupying four floors. Because Meicai founder Liu Chuanjun likes to study the "Selected Works of Mao Zedong," the company's meeting rooms were named after places like Jinggangshan.
"Jinggangshan" often hosted campaigns, which were self-created marketing nodes. "Big or small, there would be a battle every month or so," recalled a former Meicai employee. Whenever this happened, everyone would be organized to shout slogans.
The atmosphere was sometimes very heated. Another former employee remembered that this made the neighbors and security guards at Yintai Mall feel uncomfortable, thinking it was very different from other companies, and frictions occurred from time to time.
However, what followed was the capital ebb in 2019, which buried many fresh e-commerce companies. Xianlaiduo, which received tens of millions from Hillhouse Capital and IDG, broke its capital chain in November 2019 and left quietly. Qingnian Caijun, which raised 30 million, was withdrawn by investors on the eve of profitability. Ji Ji Xian also announced financing failure.
So, after October 2018, no capital invested in Meicai again. Therefore, it had to adapt to a different survival model: relying on one order at a time to keep the company alive, rather than burning cash.
In the eyes of former employees, this was a difficult journey. Meicai's business model is to supply restaurants, but large restaurants generally have stable suppliers and high requirements for standardized dishes; even a potato may have specifications.
It is widely acknowledged in the industry that Shuhai has achieved a relatively high degree of standardization in the industrial chain. Although it does not focus on building an internet platform, its customer base is mostly large chain restaurant brands, such as Manling Porridge and Fengmao BBQ, which can provide stable orders and predictable purchase volumes. Moreover, Shuhai was born with a silver spoon, as it was spun off from Haidilao.
But for a long time, Meicai did not solve the problem of dish standardization well, making it difficult to become a supplier for large chain restaurant brands. The vast majority of its customers were small restaurants, such as Huangmenji Rice. These small restaurants have unstable purchasing patterns and are very price-sensitive. If the price is a bit higher, the owner might go to the farmers' market themselves, which is Meicai's dilemma.
Even in the supply chain for small and medium-sized restaurants, Meicai quickly encountered strong rivals. In 2018, Meituan also established a B2B business unit called Kuailv, which soon engaged in street battles with Meicai in multiple cities, even offering Meicai employees double salaries. In the past, entire city warehouse teams were "poached" by Kuailv. Later, many Meicai employees flowed to other fresh produce track companies, such as Jingxi Pinpin.
**Objectively speaking, without capital transfusion, it is already remarkable that Meicai has survived to this day. A current Meicai employee told The Most Talk that the company's core goal now is to make money on its own.**
******Squeeze**
What changes are happening in a fresh e-commerce company are not only known to the company itself but also not a secret to those upstream in the industry chain.
They are the distributor groups that have been immersed in this industry for many years. Although many e-commerce platforms advertise direct sourcing from the source, a large amount of goods still comes from these merchants commonly known as "middlemen."
The reason is simple: in the fresh produce market, the most upstream farmers and manufacturers are extremely sensitive to cash flow and have historically had low tolerance for accounts receivable.
Especially farmers. To ensure supply and have farmers grow the desired agricultural products, purchasers even need to sign bottom-price clauses with farmers, meaning that if the market is good at the time of purchase, they buy at a high price; if the market is bad, they still buy at the bottom price.
But the attitude of terminal platforms towards distributors is different. After distributors purchase goods with cash and deliver them to the fresh e-commerce warehouse, they usually have to endure a longer or shorter payment period.
Liu Yang acknowledges the existence of this payment period, feeling that in a sense it is the reason for distributors to exist; otherwise, the terminal platform could just purchase directly.
But what he cannot tolerate is that Miss Fresh's payment period has become longer and longer. "In 2017 and 2018, the initial payment period was T+7 days; in 2019, it was T+30 days; in 2020, it was T+75 (with supply chain finance available, with fees paid by Miss Fresh); in 2021, it was T+75 days, and we paid 3% of supply chain fees ourselves; in 2022, it is T+105 days. This payment period is unacceptable to me. The general industry standard is 30-45 days, monthly settlement."
But when Liu Yang decided to stop cooperating with Miss Fresh, he found that the payment period was extended indefinitely because after 105 days, he still hadn't received payment.
Upon inquiry, Miss Fresh staff told him that they now prioritize settling payments for distributors who are still supplying.
This is not a problem unique to Liu Yang.
On March 13, on Black Cat Complaint, a netizen also filed a complaint saying, "Miss Fresh has owed a huge amount of payment for more than half a year," involving an amount of 1.1 million yuan.
The netizen even uploaded two screenshots of "backend settlement bills."
He wrote: "Miss Fresh owes us over one million yuan in payment, the earliest from April 2021. The huge payment has been owed since July 2021, and it hasn't been settled for more than half a year. When I asked the finance department, they said to ask the purchasing department to apply; the purchasing department said to urge finance; they passed the buck. When I asked in the supplier group when payment would be made, I was kicked out of the group as soon as I sent the message. When I told the purchasing department that I would take legal action and send a lawyer's letter, they said that was fine."
For this complaint, Miss Fresh replied at 11 a.m. on March 15, but the reply content has been hidden.
Objectively speaking, Miss Fresh's practice of squeezing distributors is also a helpless move. The upstream and downstream of the industry chain are interdependent. No company with abundant cash flow would be willing to break the rules of the game. Moreover, the payment period and profit margins are balanced. Once e-commerce needs a longer payment period, they need to offer higher purchase prices.
It is understood that in the current market landscape, community group buying offers the shortest payment period, generally T+7 days. "Relatively speaking, Meituan Youxuan pays back quickly, but the prices are pressed very low. Of course, relatively speaking, Miss Fresh offers normal supply prices, not too high. But payment is nowhere in sight," Liu Yang said.
This was also indirectly verified by Jin Yu, partner of Songxiaocai, a fresh B2B company.
On March 22, Jin Yu told The Most Talk that the procurement models of general supermarkets, Dingdong, Meicai, Kuailv, and other platforms typically have a payment period of 1-2 months. The community group buying model is about 1-2 weeks. He further explained that community group buying requires extremely low prices and has a large volume in the early stage, so a short payment period is used to occupy less upstream capital.
Miss Fresh's cash flow is clearly being tested. Since its listing in June 2021, its quarterly cash decreased by more than $100 million, and operating cash flow also showed a net outflow of $100 million.
As of September 30, 2021, Miss Fresh's book cash was only $383 million.
******Losses**
But losses are not unique to Miss Fresh.
Among the current industry leaders, Miss Fresh had a net loss of 974 million yuan in the third quarter of 2021, while Dingdong Maicai's net loss in that quarter exceeded 2 billion yuan.
On March 14, Hou Yi, CEO of Freshippo, posted on WeChat Moments, saying that Dingdong Maicai "is estimated to be about to blow up... Relying on investors' capital for disorderly expansion and price subsidies to win the market is not sustainable."
This is not the first time Hou Yi has "attacked" Dingdong Maicai. Earlier this year, Hou Yi posted a screenshot of Dingdong's stock price on social media with the caption: "So tragic, tens of billions of funds trapped inside, almost no leeks. It's like a Titanic hitting an iceberg. Everyone knows the ship is about to sink, but there's no way. The era of winning through price subsidies is over."
However, recently, Dingdong Maicai released its fourth-quarter 2021 earnings report. The company achieved revenue of 5.48 billion yuan in the fourth quarter, a year-on-year increase of 72.0%, and full-year 2021 revenue was 20.12 billion yuan, a year-on-year increase of 77.5%. The company also announced that the Shanghai region achieved overall profitability in December last year.
Industry insiders point out that Dingdong Maicai's profits came at the cost of giving up expansion.
In the third quarter of last year, Dingdong Maicai adjusted its strategic approach to "efficiency first, with scale in mind." At that time, analysts suggested this indicated that Dingdong's expansion pace would slow down.
In the fourth quarter, Dingdong Maicai's new front warehouses dropped sharply to 25, only about one-tenth of the increase in the third quarter. In addition, Dingdong Maicai increased its efforts in developing private label products and R&D on the supply chain system to increase profit margins.
Under the combined effect of these measures, Dingdong Maicai successfully reduced costs and improved gross margins in the fourth quarter, with net losses narrowing by 12.04% year-on-year.
As another "Titanic," Miss Fresh has taken a different approach to avoid the iceberg.
On March 8, media reported that Miss Fresh signed an agreement with foreign investment institution Yorkville Advisors, which will subscribe to $300 million worth of Miss Fresh shares over three years. Yorkville Advisors, founded in 2001, primarily provides debt structuring, bridge financing, asset-backed loans, and equity financing.
It is worth noting that this is not a good time for any Chinese concept stock to refinance. From a total market value of $2.274 billion at listing, Miss Fresh's market value had fallen to $350 million by the close on March 22, a decline of about 85%.
**But regardless of whether these fresh e-commerce companies adopt operational or capital measures, the impact of the retreat of price subsidies on the industry is hard to avoid.**
On the one hand, since 2021, due to the crazy subsidy war in community group buying, policies have left almost no room for various fresh e-commerce companies to lower prices or promote. On the other hand, against the backdrop of consecutive years of losses, these companies can no longer bear the burden of subsidies.
And how can consumers who were attracted by subsidies and came for profit not scatter when the profit is gone?
2022 may be a year of deep reshuffling for the fresh e-commerce industry. The true capabilities of platforms will be tested in the fire, such as urban expansion capabilities, operational capabilities, supply chain management capabilities, and quality control and delivery capabilities. Whoever does well will gain more users; whoever does poorly will gradually be abandoned by users. (At the request of the interviewee, Liu Yang is a pseudonym)
Source: The Most Talk FunTalk (ID: gh_29e3081c421f)
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