---
title: "The Money-Burning Battle of the Vegetable Basket: Two Years of Losses Totaling 11.6 Billion, Are Dingdong and Miss Fresh Relying on IPOs to 'Stay Alive'?"
description: "Fresh food e-commerce is a crowded and extremely capital-intensive track. The two leading players in the home-delivery model, Miss Fresh and Dingdong Maicai, one an experienced veteran and the other an aggressive newcomer, have been fiercely competing in first-tier cities, and both filed their IPO prospectuses on the same day. However, their situations differ: Dingdong, which began aggressive expansion in 2020, is losing more and more, while Miss Fresh's revenue growth has stalled."
author: "李鑫、秦海清"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-07-03"
language: "en"
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# The Money-Burning Battle of the Vegetable Basket: Two Years of Losses Totaling 11.6 Billion, Are Dingdong and Miss Fresh Relying on IPOs to 'Stay Alive'?

> Fresh food e-commerce is a crowded and extremely capital-intensive track. The two leading players in the home-delivery model, Miss Fresh and Dingdong Maicai, one an experienced veteran and the other an aggressive newcomer, have been fiercely competing in first-tier cities, and both filed their IPO prospectuses on the same day. However, their situations differ: Dingdong, which began aggressive expansion in 2020, is losing more and more, while Miss Fresh's revenue growth has stalled.

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 _Fresh food e-commerce is a crowded track with many players, and it is also an extremely capital-intensive track. The two leading players in the home-delivery model, which focus on front warehouses and instant delivery, are Miss Fresh and Dingdong Maicai. One is a veteran of many years, the other an aggressive newcomer. One started in Beijing, the other in Shanghai, and then they engaged in fierce 'hand-to-hand combat' at the entrances of residential communities in first-tier cities, competing in ground promotion and user acquisition, and finally submitted their IPO prospectuses on the same day._
_The two companies are in different states. Dingdong Maicai, which began aggressive expansion in 2020, is losing more and more, while Miss Fresh has seen its revenue growth stall. With no clear path to profitability, whether raising funds in the primary market or going public to raise funds in the secondary market, it seems more like a way to 'stay alive.'_
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In 2015, renowned investor and founder of Capital Today, Xu Xin, said, "The internet is thriving, but it only accounts for 10% of total retail sales in society. You haven't yet captured the other 90%."
The remaining 90% is fresh food. Those who win fresh food win the world.
As the saying goes, "Food is the first necessity of the people." After all, everyone needs to buy fruits and vegetables every day. With rigid demand and high frequency, fresh food has become the traffic entry point that everyone wants to leverage, especially as online traffic becomes increasingly difficult to obtain.
Thus, this has become the most "crowded" track on the internet. Whether it's community e-commerce or fresh food e-commerce, whether it's the home-delivery model (Miss Fresh, Dingdong Maicai), the warehouse-store integration model (Hema), or the community group buying model (delivering to group leaders), the essence is to get people to buy groceries on the platform, ultimately driving sales of low-frequency, high-margin items like beverages, toilet paper, and small appliances.
But this is also an extremely capital-intensive track.
In 2019, there was a major shakeout in fresh food e-commerce, with many players burning through their funds and breaking their capital chains. Unexpectedly, the pandemic brought a new wave of vitality, and capital and the market went crazy again.
The two leading players in the home-delivery model, which focus on front warehouses and instant delivery, are Miss Fresh and Dingdong Maicai. **One is a veteran of many years, the other an aggressive newcomer. One started in Beijing, the other in Shanghai, and then they engaged in fierce 'hand-to-hand combat' at the entrances of residential communities in first-tier cities, competing in ground promotion and user acquisition, and competing in fulfillment and timeliness.** You deliver in 30 minutes at the fastest; I deliver in 29 minutes at the fastest.
In the end, they even submitted their IPO prospectuses on the same day.
But it must be said that the front warehouse model is a relatively heavy model, requiring continuous burning of money, money, and more money. The two prospectuses also show different states. Miss Fresh, established for 7 years, has not yet reached the "profitability" stage, and its revenue growth has almost stalled. The younger Dingdong Maicai is more aggressive, maintaining revenue growth, but behind this is continuous large-scale financing, burning money, and losses.
With no clear path to profitability, whether raising funds in the primary market or going public to raise funds in the secondary market, it seems more like a way to "stay alive."
**Dingdong Maicai is losing more and more, while Miss Fresh's revenue growth has stalled**
Miss Fresh, founded in November 2014, quickly rose to become a unicorn in the industry through its innovative front warehouse strategy, starting with fruits as an entry point and reaching a valuation of $1 billion in three years. In August 2017, it even announced overall profitability in first-tier cities.
The so-called front warehouse means that e-commerce companies build warehouses closer to consumers, such as near communities or offices, so that users can receive goods in a shorter time after placing orders. This improves delivery efficiency and naturally enhances user experience. There is no need to rent storefronts; only warehouses are needed.
But the front warehouse is also a relatively heavy business model.
Three years later, Dingdong Maicai, which also uses the front warehouse model, started with vegetables as an entry point. It had been building strength in the Yangtze River Delta and other areas, but driven by the pandemic in 2020, it began rapid expansion.
According to the prospectus, Dingdong Maicai's GMV in 2018 was 714.7 million yuan, when Miss Fresh was 6.6 times that. But by 2020, Dingdong Maicai's GMV increased by 177% year-on-year to 13.0322 billion yuan, 1.7 times that of Miss Fresh, whose GMV growth in 2020 was nearly stagnant.
In terms of revenue, the two companies' revenue mainly comes from two parts: one is revenue from selling products, and the other is membership fees. Membership fee revenue is very small, with Miss Fresh's share rising from 1% to 2% in 2020, while Dingdong Maicai's share remained around 1%.
In 2020, Dingdong's revenue increased by 192.2% year-on-year to 11.336 billion yuan, while Miss Fresh's revenue increased only 2.1% year-on-year to 6.13 billion yuan. Dingdong Maicai's growth rate was 91.5 times that of Miss Fresh.
By quarter, **Miss Fresh's revenue growth weakness is more obvious, with revenue basically unchanged over the past 9 quarters.**
In the first quarter of 2021, Miss Fresh's revenue was 1.53 billion yuan, a year-on-year decline of 9.4%. Although the company explained that the pandemic in the first quarter of last year brought a delivery peak for Miss Fresh, in comparison, Dingdong Maicai's revenue grew 46% to 3.8 billion yuan in the same period.
In terms of gross margin, the trends of the two fresh food e-commerce companies are quite different.
In 2019, the gross margins of Miss Fresh and Dingdong Maicai were 8.7% and 17.1%, respectively, a difference of 6.4 percentage points. By 2020, Miss Fresh's gross margin had increased significantly to 19.4%, only 0.3 percentage points behind Dingdong Maicai.
Miss Fresh explained that the increase in gross margin was mainly due to the pandemic changing consumers' shopping habits. In the first quarter of 2020, Miss Fresh's gross margin once reached 30.2%.
As the pandemic eased, Miss Fresh's gross margin dropped rapidly. In the first quarter of 2021, Miss Fresh's gross margin was 12.3%, while Dingdong Maicai's gross margin was 18.9%, similar to 2020.
Of course, **both fresh food e-commerce companies are still in losses, but Dingdong Maicai is losing more and more, while Miss Fresh's annual losses show a narrowing trend.**
Dingdong Maicai's net losses in 2019 and 2020 were 1.87 billion yuan and 3.17 billion yuan, respectively, and in the first quarter of this year, it lost 1.385 billion yuan. Miss Fresh's net losses from 2019 to 2020 were 2.91 billion yuan and 1.65 billion yuan, respectively, narrowing slightly, and in the first quarter of this year, it lost 610 million yuan.
For fresh food e-commerce, the number of users determines the revenue ceiling, and having enough people placing orders is key. The total number of orders and the average order value determine GMV growth.
In terms of user data, in the first quarter of this year, Dingdong Maicai had 69.7 million orders, with an average of 6.9 million monthly transacting users. Among them, 20% of monthly transacting users were Dingdong members, contributing 47.0% of GMV. The average revenue per order in the first quarter of 2020 was 70 yuan, but as the impact of the pandemic faded, this figure dropped to 54 yuan in the first quarter of 2021.
Miss Fresh had 62.17 million orders in the first quarter, with 7.9 million effective users, and the average order value for core users reached 98.0 yuan, slightly higher than in 2020. In 2020, the average order value was 94.6 yuan, with an average of 8.2 items per order and an average price of 11.5 yuan per item.
**Supply chain determines costs, and fulfillment expenses remain high**
Dingdong Maicai and Miss Fresh continue to incur losses, behind which are huge expenses, as can be seen from their fulfillment costs.
The so-called fulfillment costs refer to the series of expenses incurred from the user placing an order to product delivery and after-sales service. Typically, these include costs related to product delivery and warehouse operations, as well as warehouse rent and depreciation. In the fierce competition in the fresh food e-commerce track, fulfillment determines user retention and repurchase rates.
**Supply chain determines costs. To be profitable, fulfillment costs must be reduced.**
According to the prospectus, Dingdong Maicai's fulfillment costs from 2019 to the first quarter of 2021 were 1.937 billion yuan, 4.044 billion yuan, and 1.484 billion yuan, respectively, with year-on-year increases of 108.8% (2020) and 76.4% (Q1 2021). The ratios of fulfillment costs to revenue were 49.9%, 35.7%, and 39%, respectively.
Miss Fresh's fulfillment costs from 2018 to the first quarter of 2021 were 1.239 billion yuan, 1.833 billion yuan, 1.577 billion yuan, and 440 million yuan, respectively. Year-on-year increases were 47.9% (2019), -13.97% (2020), and 6.03% (Q1 2021). The ratios of fulfillment costs to revenue were 34.9%, 30.5%, 25.7%, and 28.8%, respectively.
In comparison, Dingdong Maicai currently pays higher supply chain costs, so it loses more. **This is related to Dingdong Maicai's more self-operated approach, including self-operated front warehouses and self-operated logistics.** According to the prospectus, as of March 31, 2021, Dingdong Maicai had over 16,000 delivery personnel.
In contrast, **Miss Fresh adopts a 'self-operated + franchise' model for opening warehouses, and its logistics also integrates a crowdsourcing system,** which to some extent reduces supply chain costs, but it also brings a certain degree of uncontrollability.
Overall, due to economies of scale and technological improvements, the ratio of fulfillment costs to revenue for both companies has been gradually declining in recent years, but even so, the data is still around 30%, and there is a rising trend in the first quarter.
For example, Miss Fresh stated that the increase in fulfillment costs in the first quarter was mainly due to increased labor costs and more subsidies provided to riders during the Lunar New Year holiday.
In addition to fulfillment costs, sales expenses are also a key expenditure.
**Previously, in order to grab users, the two companies launched propaganda wars on the one hand, and on the other hand, they sent ground promotion personnel deep into residential communities, exchanging eggs and soy sauce for users.**
Although these tactics were effective in the early stage, as competition became more intense, the cost of acquiring users through offline ground promotion has also increased.
Dingdong Maicai's sales expenses continued to grow rapidly from 2019 to the first quarter of 2021, at 260 million yuan, 569 million yuan, and 318 million yuan, respectively, with year-on-year increases of 118.4% (2020) and 454.3% (Q1 2021). The ratios of sales expenses to revenue were 6.7%, 5.0%, and 8.4%, respectively.
In contrast, Miss Fresh's sales expenses shrank significantly. From 2018 to the first quarter of 2021, sales expenses were 795 million yuan, 740 million yuan, 589 million yuan, and 167 million yuan, respectively. Year-on-year changes were -6.97% (2019), -20.4% (2020), and 69.8% (Q1 2021).
Miss Fresh explained that the reduction in advertising and marketing personnel costs was mainly due to adopting more targeted strategies and improving per-capita efficiency.
Although it has been shrinking, Miss Fresh's ratio of sales expenses to revenue is significantly higher than Dingdong Maicai's, at 22.4%, 12.3%, 9.6%, and 11%.
For both Dingdong Maicai and Miss Fresh, these two expense items alone consume nearly 40% of revenue.
**Competition in the vegetable basket is becoming increasingly fierce**
In recent years, as traditional e-commerce traffic has peaked and customer acquisition costs have risen, new retail models led by front warehouses and community group buying have emerged one after another. As representatives of front warehouses, Dingdong Maicai and Miss Fresh have always been questioned: Can this model make money? How long can they run by relying on large-scale financing?
In terms of expansion speed, the model of front warehouse + instant delivery to home is currently concentrated only in first-tier, new first-tier, and a few second-tier cities.
These places have higher resident incomes and faster-paced lives, and consumers are willing to pay a premium for convenience and timeliness. The community group buying model that emerged during the pandemic in 2020, relying on giants and capital, has rapidly expanded from second-tier cities to the whole country, not only sinking into county towns but even attacking the first-tier strongholds of Dingdong Maicai and Miss Fresh.
For white-collar workers in first-tier cities, using instant delivery costs a bit more, but it delivers faster and provides better service, which is more likely to increase user stickiness and repurchase rates.
As of March 31, 2021, Miss Fresh's 12-month and 24-month repurchase rates were 71.1% and 76.0%, respectively. Since its inception, users who purchased Dingdong membership had repurchase rates of 64.2% and 70.5% at the 12th and 24th months, respectively.
The front warehouse model naturally has two major advantages. First, it has high sales per square meter because front warehouses do not set up retail stores, do not need public aisles, and can fully utilize shelf space, making the space utilization of front warehouses three times that of other models under the same area. Second, compared to high-traffic prime locations, the cost of front warehouses is much lower than other models.
But the disadvantages of front warehouses are also quite obvious.
**The core criticism is that the area is not large, the variety and quantity of products are limited, and the average order value cannot be raised.**
As of the first quarter of this year, Dingdong Maicai had 12,500 SKUs, of which over 5,700 were meat and seafood SKUs, and over 6,700 were daily chemical products, accounting for 53.6%. Miss Fresh had 4,300 SKUs, with an additional 20,000 SKUs available for next-day delivery.
Due to the high fixed investment of front warehouses, a certain population density is needed to spread fixed costs, so this model is more suitable for development in first- and second-tier cities. As of the first quarter of this year, Dingdong Maicai had covered 29 cities nationwide, while Miss Fresh covered 16 cities in China. Currently, there are 49 first-tier, new first-tier, and second-tier cities in total. It is foreseeable that if existing cities cannot become profitable, continuing to sink into lower-tier cities will likely increase losses.
In addition, **front warehouses will also face competition from models such as store-warehouse integration and community group buying.**
Store-warehouse integration is also deployed in first- and second-tier cities. Unlike front warehouses, store-warehouse integration runs both offline store sales and online sales in parallel. Its main advantages are high delivery efficiency, richer product variety based on large stores, and a good customer shopping experience. Typical companies include Hema Fresh, 7Fresh, and Xiaoxiang Fresh.
Community group buying is mainly deployed in second- and third-tier cities, with communities as units, where mothers or small store owners act as group leaders to establish online distribution. The platform provides goods, logistics, and warehousing. This model mainly uses pre-sales, with procurement based on sales, and mostly uses next-day or every-other-day delivery. Compared to front warehouses, delivery efficiency is lower. But the advantages are also obvious: low customer acquisition costs through acquaintances, and no store or front warehouse operating costs, so product prices are low.
If front warehouses continue to sink into lower-tier cities, they will directly face competition from community group buying models, such as Xingsheng Youxuan and Duoduo Maicai.
**With continuous business losses and negative cash flow, the two companies are not well-off and have been relying on large-scale financing to sustain themselves.** According to the prospectus, as of the first quarter of this year, Dingdong Maicai had 4.409 billion yuan in cash on its books, while Miss Fresh had 1.844 billion yuan.
In reality, Dingdong Maicai is in a slightly better position. Since April this year, it has received a total of $1.03 billion in Series D and D+ financing, while Miss Fresh has received nothing this year.
With cash flow unable to turn positive, whether continuous financing is a long-term solution is a huge question mark, and going public will not solve this puzzle.
Source: Baobian (ID: baobiannews)
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