---
title: "The Battlefield Contracts Again: Dingdong Maicai Exits Xiamen"
description: "Dingdong Maicai recently announced it would stop delivery services in Xiamen after October 8, 18:00, with almost no products available on the app and no delivery slots. The company stated this is a normal business optimization and adjustment, and it plans to focus resources on profitable regions."
author: "杨柳"
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published: "2022-10-13"
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# The Battlefield Contracts Again: Dingdong Maicai Exits Xiamen

> Dingdong Maicai recently announced it would stop delivery services in Xiamen after October 8, 18:00, with almost no products available on the app and no delivery slots. The company stated this is a normal business optimization and adjustment, and it plans to focus resources on profitable regions.

Not long ago, Dingdong Maicai's Xiamen station announced that it would stop delivery services after 18:00 on October 8. Currently, in the Xiamen area, there are almost no products on the Dingdong app, and delivery times cannot be reserved. If users still have a balance in their accounts, they can contact customer service through the "Customer Service and Help" section in the app to assist with refunds and card cancellations. Moreover, the community groups for each station have also been disbanded, marking a thorough retreat. Dingdong Maicai responded, saying, "The recent changes at the Xiamen station are normal business optimization and adjustments, and they do not affect the company's operations and development. The company has made reasonable arrangements for the affected station employees based on their wishes." Insiders revealed that Dingdong plans to concentrate superior resources on regions where profitability is visible.

**01 Can a local powerhouse outcompete a newcomer?** Before Dingdong Maicai entered the market, Xiamen's fresh produce market was not barren; on the contrary, it was bustling. Players like C, Pupu, and Yonghui had been competing fiercely for a long time, with others like Yuanchu Daodao and Meituan also having a presence. Especially Pupu Supermarket, a low-key company, has consistently kept Dingdong Maicai at bay, making customer acquisition difficult. Dingdong Maicai's fate in Xiamen may have been sealed from the start. On May 31, 2021, Dingdong entered Xiamen with a massive investment, opening nearly 30 front warehouses and adjusting its offerings to local dietary habits, including a full range of fresh products such as vegetables, soy products, aquatic products, and seafood, with categories numbering in the thousands. This was a war without gunpowder, as Dingdong and Pupu fought fiercely in Xiamen for over a year, competing on promotions, prices, and delivery. Now, the result is clear: Dingdong has left quietly. Pupu, as the first mover, has operated in Xiamen for years with deep-rooted influence. Both companies overlap significantly in the front warehouse model and fresh produce track. From a business perspective, at least in the fresh produce sector, consumers do not have absolute brand loyalty, so Dingdong had a chance to establish itself and then surpass Pupu. But why did it ultimately fail? Pupu Supermarket was founded in 2016 and is considered a local Fujian enterprise, primarily operating in Fuzhou and Xiamen. Even when expanding to Shenzhen, Chengdu, and other cities, it remains in first- and second-tier cities. It started earlier than Dingdong, making it a predecessor. In its early days, Pupu's front warehouses were only 300-500 square meters, but now they are generally around 800 square meters. With larger spaces, SKUs have increased from 3,000 to 3,500. In 2021, its GMV was 15 billion yuan, with 316 stores. In July this year, Pupu's average daily orders were around 1.1 million, and it plans to open 400 stores by the end of the year. Besides abundant products, Pupu is unrivaled in delivery speed. Many retail fresh produce platforms tout half-hour delivery, but from user experience, delivery within an hour is already considered fast. Pupu delivers on its promise, with no pressure to deliver within half an hour, because it builds front warehouses near customers' homes. "30-minute express supermarket" has become Pupu's slogan. Offering a wide product range and timely delivery can win over most consumers, but Pupu felt that wasn't enough. They also place a rare emphasis on humanized service. After delivering goods, Pupu's delivery personnel proactively ask if customers have trash to take away. Products purchased from Pupu can be returned or refunded not only if they are spoiled but also if they don't taste good. Additionally, various daily necessities, cosmetics, mother and baby products, and more can be purchased from Pupu. With such a convenient and fast online mall, consumers have no reason not to choose Pupu.

**02 Can profitability be achieved?** Pupu's advantages are one thing, but Dingdong Maicai's nationwide layout is indeed too scattered. Many industries may first burn capital to race for territory and then monopolize business, but the fresh produce and instant delivery track is difficult to conquer by simply throwing money at it. Dingdong Maicai has expanded too broadly in the past, bearing more market pressure. Dingdong Maicai has also realized the need for adjustment. Besides the Xiamen retreat, since May this year, Dingdong Maicai has closed operations in cities including Xuancheng and Chuzhou in Anhui, Tangshan in Hebei, and Tianjin. Now, only 27 cities remain where orders can be placed normally on the Dingdong Maicai app, with 18 in the Yangtze River Delta region. Overall, Dingdong Maicai's strategy has shifted from "scale first" to "efficiency first." In the Q4 earnings call last year, Dingdong Maicai founder and CEO Liang Changlin stated, "The average order value in Shanghai exceeds 66 yuan. As Dingdong's product strength improves, the average order value will further increase, user repurchase rates and order density will also grow, thereby further diluting fixed costs of sorting centers and front warehouses, and improving fulfillment efficiency. In the second half of the game, Dingdong Maicai hopes to expand user scale more vertically rather than horizontally in the early stage, retaining as many high-value users as possible." So, the niche e-commerce track for fresh produce and daily necessities to home is not a business that earns money effortlessly. The costs of front warehouses and delivery alone are impossible to ignore, and finding the break-even point is difficult. From a direct cause perspective, Dingdong's defeat in the Xiamen market is due to insufficient order volume, making it impossible to amortize fulfillment costs. This also indicates that in non-first-tier cities, the market may only accommodate one player, and it is inevitable for others to shrink their "battlefields" except for the ultimate winner. After "cutting off an arm to survive," the effect of cost reduction and efficiency improvement has been significant. In Q2 this year, Dingdong Maicai achieved revenue of 6.634 billion yuan, a year-on-year increase of 42.79%; net loss was 34.5 million yuan, a year-on-year decrease of 98.22%. However, this is calculated under non-GAAP, but overall, stage-by-stage profitability is within sight. After achieving overall profitability in Shanghai in December 2021, the Yangtze River Delta region, which Dingdong focuses on, achieved a positive operating profit margin of 3.7% in the first half of this year. Liang Changlin confidently stated, "We will achieve full profitability by the end of this year."

**03 The front warehouse model is difficult to penetrate lower-tier markets** Dingdong Maicai's retreat from Xiamen may raise a more critical question: Can the front warehouse model work in lower-tier markets? Liang Changlin once explained, "The average order value in Shanghai exceeds 66 yuan. After one year of operation, each front warehouse can achieve 1,000 daily orders. After deducting fulfillment costs, the operating profit per order is expected to exceed 3%. As product strength improves, the average order value will further increase, user repurchase rates and order density will also grow, and the fixed costs of sorting centers and front warehouses will continue to be diluted, further improving fulfillment efficiency." The advantage of front warehouses is that they can extend the reach of supermarkets to the end of communities. As an international metropolis, Shanghai has a high population density and strong consumption power, making the front warehouse model easy to satisfy. However, warehouse space is limited, which restricts the variety and quantity of products, leading to some storage losses. Moreover, instant delivery requires a dense network of points, and nearby riders must respond immediately after orders are placed. Even with big data support, operating costs remain high. Although lower-tier cities are smaller, they may not have such a large demand for "instant" services. For example, Hema has abandoned the front warehouse model in favor of an integrated store-warehouse model, using stores to support warehouses. Hema CEO Hou Yi has repeatedly stated, "The front warehouse is a false proposition; its model is unreasonable. Unless large-scale logistics fees are charged to recover logistics costs, profitability might be possible, but in today's landscape, no player has achieved profitability." Hou Yi directly pointed out the biggest problems with front warehouses: fulfillment costs without scale effects and sales expenses with some scale. In the fresh produce industry, where gross margins are already limited, leveling these two costs requires some imagination. Additionally, he unflinchingly compared front warehouses to platforms selling low-priced, primary agricultural products. The surplus value they can extract from the entire fresh produce supply chain either requires restructuring the chain or restructuring the products. Especially in lower-tier cities, front warehouses are unfamiliar to consumers. Perhaps "small-town youth" have stores right at their doorstep, and for items they can't buy, they resort to online shopping. The so-called "instant" demand is not strong enough, let alone issues like average order value and repurchase rates. Currently, it seems difficult to scale operations in lower-tier cities. Without scale, amortizing fulfillment and sales expenses is out of the question. If no new growth points are found in the supply chain or products, front warehouses may indeed be less lively than wet markets and more costly. Moreover, even in smaller cities, there are always food delivery platforms like Meituan and Ele.me, which are also partnering with various convenience stores and mom-and-pop shops to encroach on the instant delivery market. The logic of capital is simple: first secure a position, then gradually increase average order value to improve gross margin. Once profitability is achieved, optimize fulfillment costs by increasing order density. In a positive cycle, individual points, regions, and even the entire group will become profitable. The problem is that front warehouses, whether in big cities or small towns, are not the only or optimal choice for consumers. Consumers have fallen in love with home delivery, and many traditional supermarkets have had to accept home delivery services. Any retail format that offers home delivery will inevitably compete with front warehouses. **Perhaps front warehouses offer the retail industry a space for imagination, but from another perspective, the front warehouse track is also showing characteristics of regional operations.** In such fierce competition, if the market is not large enough, local supply chain resources are naturally insufficient. In a winner-takes-all scenario, there's no need to struggle. Players have a tacit understanding: concentrate forces, withdraw from unprofitable cities, focus on their own advantageous regions, and they can go further and wait for more opportunities.

Source: Cayman 4000 (ID: kaiman4000) Author: Yang Liu

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