---
title: "Too Late to Misunderstand Fresh Food Home Delivery"
description: "During the COVID-19 pandemic, fresh food home delivery demand surged, prompting retailers like Fresh Legend and Rainbow to rapidly develop their own delivery services. The article analyzes whether this demand will persist, the challenges of supply chain and logistics, and the trend of retailers building self-operated delivery systems over third-party platforms."
author: "房煜"
publisher: "New Distribution"
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published: "2020-04-08"
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---

# Too Late to Misunderstand Fresh Food Home Delivery

> During the COVID-19 pandemic, fresh food home delivery demand surged, prompting retailers like Fresh Legend and Rainbow to rapidly develop their own delivery services. The article analyzes whether this demand will persist, the challenges of supply chain and logistics, and the trend of retailers building self-operated delivery systems over third-party platforms.

Source: Ten Billion Consumers (ID: gjgc168) Author: Fang Yu. This article is reproduced with permission. For authorization, please contact the original source.

Two weeks ago, Wang Wei, founder and chairman of Fresh Legend, posted a video on his Moments. The video showed empty streets at night, with no people or cars, and the caption read: "I'm going to delivery, where my brothers and sisters are fighting."

During the epidemic, due to a surge in orders, logistics centers became the busiest places for many retail companies. Scenes of everyone delivering goods were not uncommon. Recently, Tan Xiaohua, general manager of Rainbow's Digital Operations Center, also received condolences from friends after a report titled "General Manager Delivers Goods in Private Car." "My colleagues are more tired than me," she told Huxiu.

For retailers that are not professional logistics companies, home delivery involves not only logistics and supply chain departments but also technical teams. Wang Wei also publicly praised the team responsible for launching Fresh Legend's home delivery service.

On February 4, 2020, Fresh Legend proposed launching its own home delivery service. It took only one day; by February 5, hundreds of stores were able to deliver to homes via their own app and mini-program. In the southern China market, to cope with the surge in orders during the epidemic, Rainbow Supermarket took two days to develop its own mobile app picking system to improve backend picking efficiency. Recently, examples of urgently launching and improving home delivery services are everywhere. Also on February 5, Carrefour's "1-hour delivery" was integrated into Suning.com's app, offering 1-hour express delivery to users within 3 kilometers of stores. In addition, retailers such as Yonghui and Benlai Life also launched targeted home delivery services.

**Wait! Isn't home delivery the specialty of JD Daojia, Meituan, Ele.me, and others? Why are many companies still gritting their teeth and doing it themselves?**

Home delivery is a system that requires coordination among products, supply chain, and logistics. It affects the whole system. Once launched, companies will continue along this path. **Regarding the future of fresh food home delivery, another core controversy is: Will this hot demand continue after the epidemic?** There is significant disagreement within the industry. Some believe this is a turning point for fresh food retail. During the epidemic, many fresh food supermarkets and front-warehouse companies saw order growth of 300%. Others think it's just a flash in the pan.

Huxiu believes that major public events will have a long-term impact on people's cognition and habits. On February 4, the cooking app Xiachufang crashed due to server overload. This also shows that during the epidemic, a large number of potential "seed players" flocked to the kitchen. On Douyin, videos teaching young people to cook also increased.

Lin Yilun teaches people to make spinach egg soup on Douyin.

During this period, grabbing food in the middle of the night was not a game but a daily routine for many people to eat. This is naturally abnormal. It's important to note that the concept of new retail has been touted for three years, and 30-minute home delivery (or half-hour living circle) is one of the few fruits of those three years. The extended question is: **Is fresh food home delivery still an instant consumption? If so, when demand peaks, how can the supply chain not fail?**

After this battle, fresh food home delivery is clearly an inevitable trend. If you don't agree, you can go to sleep. What needs to be studied is, in the lively fresh food home delivery track, who will be the winners and who will be the losers?

**-01- Will Fresh Food Home Delivery Demand Decline?**

Before answering this question, we must first explore a premise: Will the demand for fresh food itself decline? It is certain that this epidemic has strengthened people's safety and hygiene awareness. Many people, for safety and hygiene reasons, prefer to cook at home. Even if they don't have time or are not skilled, they still want to cook at home more simply and quickly.

So we see that semi-finished products are being favored by many, and many fresh food and catering companies are focusing on this. Recently, Missfresh partnered with Youcai and Shuhai, a B2B vegetable supplier, to ensure the supply of prepared dishes. Dingdong Maicai adjusted its product structure, opening a "New Year's dishes" section, and launched semi-finished and pre-prepared dishes from well-known catering brands like Xiaonanguo. In short, **even if fresh food demand declines after the epidemic, it will still be significantly higher than before the outbreak.** Cooking at home or eating at home will become the first choice for more people, including office workers.

With this in mind, let's see whether fresh food home delivery will continue to grow.

The core issue is: Is this surge in home delivery orders a transfer of existing demand or an increase in new demand?

**On one hand, there is an increase in user base. Both young and middle-aged, and even elderly, have been forced to use home delivery services. On the other hand, note that the average order value for front-warehouse companies has increased significantly.**

According to interview information, Missfresh's average order value can reach around 120 yuan. Dingdong Maicai claims its average order value surged by 70%. If calculated based on the previous 60 yuan, it would be exactly 102 yuan, also crossing the 100-yuan threshold. Previously, when discussing the front-warehouse model, a major criticism was the average order value. Because the front-warehouse model prioritizes timeliness, and fresh food is the most typical necessity requiring timeliness. In the past, the industry believed that the consumption amount for a family of three from kitchen to table tends to be stable, and promotions couldn't increase it much. This was a deadlock. But no one expected this deadlock to be easily resolved now. This actually means that the habit of one purchase for multiple consumptions is quietly forming.

Where else does the increase come from? It also comes from the driving effect of fresh food on other products. That is, with fresh food for three meals as the core, it also drives sales of daily necessities like FMCG and general merchandise. In this regard, Missfresh was an early mover. Based on 3,000 SKUs in front warehouses, it increased SKUs to over 10,000 by deploying city warehouses. Expanding around the core fresh food category is also the logic of offline hypermarkets: fresh food attracts traffic, and general merchandise makes money.

From the situation during the epidemic, supermarket hypermarkets' home delivery business also achieved good growth. Walmart told Huxiu that its O2O channel overall sales increased 4.4 times compared to the same period last year (2020.1.24~1.31 vs 2019.2.5~2.11). Among them, orders for the "Walmart Home" mini-program increased 15.2 times.

It's worth noting that Walmart Home was just launched last year, so the year-on-year growth is astonishing. Due to the sudden epidemic, customer demand for fresh food categories surged, and order volume increased significantly. In the first week after the Spring Festival (1.31~2.6), compared to the week before (1.17~1.23), fresh food orders on the "Walmart Home" mini-program increased by over 120%.

Of course, behind the growth there are challenges. The biggest difference between home delivery and in-store is that it naturally has a service attribute, requiring seamless integration between supply chain (B2B) and logistics fulfillment (C2C). The supply chain ensures goods are available, and logistics ensures delivery. Only then can users have a reassuring experience and form stable habits. These two things are still testing the home delivery track.

**-02- Does Fresh Food Home Delivery Really Require Grabbing Food in the Middle of the Night?**

During the epidemic, consumers' tolerance for delivery time greatly increased, giving merchants more room to adjust. Missfresh used to deliver within one hour, but now the assessment cycle for riders has been adjusted to two hours. However, shortages of staff and goods still plague fresh food home delivery. A typical phenomenon is that many people get up in the middle of the night to grab food and go out early to pick it up.

Based on interviews and spontaneous feedback from consumers online, Huxiu found that supermarket hypermarkets have relatively sufficient supply, but due to a lack of instant delivery genes, there is a serious shortage of riders. Interestingly, Hema, which had just done a wave of publicity by sharing catering employees, is also among them. Hema happens to be a representative of new retail and was the first in the industry to propose 30-minute delivery to the door, using its own riders.

On the issue of shortages, several startup front-warehouse companies were also severely affected during the Spring Festival. However, Wang Jun, CFO of Missfresh, said in a recent media group interview that Missfresh's fresh food supply has increased from 500 tons per day to over 1,000 tons per day, and will be raised to about 1,500 tons in the future.

This shows that the fresh food supply during the epidemic is a "peak" stress test for both supply chain and fulfillment. It requires companies to have comprehensive and balanced capabilities to cope. Fairly speaking, supermarket hypermarkets and front-warehouse camps each have strengths and weaknesses. This time, it pushed companies to strengthen their internal capabilities and fill gaps.

There is also a compromise. On February 9, the State Council's Joint Prevention and Control Mechanism held a press conference in Beijing to introduce the production and supply of important living materials. Wang Bin, deputy director of the Market Operation Department of the Ministry of Commerce, said at the meeting: Some e-commerce platforms and large supermarkets have explored a vegetable package pre-sale model, where consumers order via WeChat the first day and pick up at the store the next day. This improves efficiency, reduces the burden on circulation companies, and reduces crowd gathering. It has been welcomed by consumers and is worth promoting everywhere.

When fresh food home delivery becomes next-morning delivery, the person most justified in saying "I knew it all along" is Zhang Hongliang, founder of Shixing Fresh. Shixing Fresh is the first startup in the industry to do the self-pickup fresh food model, persisting for eight years. During the epidemic, Shixing Fresh supplied over 100 tons of fresh food daily to 1,668 communities.

Zhang Hongliang has always believed that the front-warehouse model has flaws. Even with digital means, accurately predicting what each family of three in a community will eat tomorrow is still an impossible task. So Shixing Fresh has insisted on the pre-sale model.

With the spread of contactless delivery, fresh food smart cabinets have ushered in new development opportunities. Recently, media revealed that Yonghui Life's fresh food smart cabinets quietly appeared in communities in Binjiang District, Hangzhou.

Strictly speaking, contactless delivery is just a delivery step. Both instant delivery and self-pickup can achieve it. From the consumer's perspective, having more fulfillment options is good. The key is whether different models can find their own reasonable models. **The biggest inspiration from the pre-sale model is not on the C-end, but on the B-end's intensive distribution. Because of planned purchasing, companies like Shixing Fresh can deliver once to a community and then let consumers pick up their orders separately.**

In a previous article on front warehouses, the author spent a lot of space arguing that the so-called high loss rate is a false proposition for front warehouses, and the recent "instant sell-out" of dishes further proves this. However, the author also pointed out that high labor costs were the most headache-inducing problem for front warehouses at the time.

But now that order volume has increased, a solution that couldn't be preset has emerged: front warehouses can also do intensive distribution. Dingdong Maicai uses cars to deliver to communities in one trip, reducing costs.

This means that as long as order volume is large enough, the high labor cost problem of front warehouses has a glimmer of hope. But how many orders front warehouses can get also depends on whether the old supermarket chains agree.

From a supply chain perspective, several leading supermarkets performed very well this time. Their past supply chain accumulation played a key role. This supply chain includes technology, management, and logistics capabilities. But it must be admitted that it also includes industry connections and resource mobilization capabilities.

Wushang Liangfan supermarket in Wuhan, Hubei, has sufficient supply.

First, logistics. The front-warehouse model is essentially instant logistics, so the asset model is relatively light. But offline large supermarket retail companies will build a complete logistics system covering warehousing, transportation, and distribution, with the ability to mobilize trunk and branch line capacity.

Urban instant delivery only involves "branch lines." Because the last-mile delivery action itself has no threshold; as long as you can drive or ride a motorcycle. In the past, you needed to know the roads, but now with Baidu and Gaode, that's not a problem. But trunk logistics is different; not everyone can drive a 17.5-meter truck. Moreover, when you need a fleet, you may not find a reliable freight company.

Second, resource mobilization and integration. In Hefei, Wang Wei recently made a very creative move. He tried the front-warehouse model and thought it didn't work. But it gave him a big inspiration: to find a balance between being close to consumers and being intensive. **Compared to intensive distribution, Wang Wei's approach is intensive warehousing. Every 10 stores are backed by a small city central warehouse. It's like a "front warehouse" for stores, but this warehouse is B2B.**

Wang Wei's thinking is clearly that of a traditional offline retail player. Why do large supermarkets have a complete warehousing and distribution system? Besides their own logistics needs, it's also because of large procurement scale and long turnover time, but the benefit is the ability to transfer goods across regions. Wang Wei calls this "inventory fault tolerance." The lower the fault tolerance, the worse the flexibility. At present, this seems to be a weakness of front warehouses and a strength of offline large supermarkets.

Of course, supply chain advantages also refer to differentiated products. For example, Suning Carrefour pointed out that in the sales of mid-to-high-end products, Suning Carrefour has certain advantages over peers. Data shows that Carrefour's average order value is about 30% higher than peers.

**-03- Home Delivery: Self-operated or Third-Party?**

Fresh food home delivery is hot, and even Tencent, an internet giant seemingly unrelated to fresh food, has gotten involved. Following Fuzhou, Tencent launched the Tencent Smart Retail mini-program in Shenzhen. The first batch of beta merchants includes Yonghui and Missfresh. This mini-program has an express home delivery module.

Note that Tencent is not helping merchants deliver. The usual operation is to jump to the merchant's page, and the merchant delivers by itself. Of course, merchants can also choose third-party logistics. But the general idea is that the decision is in the merchant's hands.

During this period, Meituan, Ele.me, and JD Daojia all announced significant increases in their delivery orders through various channels. However, Huxiu, through multiple verifications, found a striking trend: more and more leading merchants are choosing to do home delivery themselves.

This is related to the increasing importance that leading retailers place on online home delivery business. Yonghui Supermarket President Li Guo told Huxiu: "We firmly believe that home delivery is an inevitable trend in market development. Using the complementary advantages of large stores + small stores, combined with the business model of in-store + home delivery, we can obtain the greatest value at the lowest cost."

Outside a Yonghui Supermarket store in Beijing, staff hold a QR code, urging customers to order via WeChat mini-program for home delivery.

In an interview with the self-media "Third Eye View Retail," Lin Yongqiang, chairman of Fujian Guan Supermarket, also said that home delivery will become a standard feature for supermarket companies in the future. It's worth noting that when talking about Guan Supermarket's home delivery business, Lin Yongqiang said that online home delivery currently accounts for 5% of business, but this number only includes self-operated home delivery, not third-party platforms.

The examples listed at the beginning of this article also show that different types of supermarket retailers, such as Yonghui, Suning Carrefour, and Fresh Legend, all tend to "go it alone" in this matter. Some business formats are naturally not interested in home delivery, let alone third-party services. For example, convenience stores, which are also urban commercial infrastructure.

An industry insider also said that companies like Meituan are aware of this problem internally. For them, further mining long-tail merchants is more important. A recent merchant recruitment notice from JD Daojia indicates that JD Daojia is also expanding the scope and types of merchants it connects, not just limited to high-frequency scenarios like supermarkets and convenience stores.

**Why, under the surface prosperity of home delivery business, is there a trend of supermarkets seeking to "go it alone" in home delivery?**

When discussing this, Tian Rui, CEO of Suning Carrefour, told Huxiu: "On third-party platforms, they treat us more as merchants. They are platforms, but we at Suning believe we are also a platform. Why not use our own traffic well?"

Tian Rui pointed out that home delivery is a business with strong experience. Only by doing it yourself can you accurately grasp user information and achieve the best experience. On the other hand, Tian Rui also said that generally, merchants won't put all their products on third-party platforms; SKUs will differ.

Tan Xiaohua, who drove her private car to deliver goods, also told media: "Customers must be in our own hands. Supermarket is a traffic business. Why divert traffic to others? We have products, technology, and customer flow."

From this, we can analyze several reasons:

First, third-party home delivery platforms have a gap with customer expectations in terms of operational refinement, product understanding, and traffic allocation. This can be compared to centralized e-commerce platforms, which are still matchmaking models.

Second, from a user experience perspective, third-party home delivery achieves order consolidation across different merchants, which is also a fatal flaw, making the category richness of third-party platforms superficial. **More bluntly, the richness of third-party platforms is actually the number of merchants, not the richness of product categories. A real example: when I bought scallions, ginger, and garlic at a Walmart store on a platform, and needed to buy a bottle of rice vinegar at a Yonghui store, these are still two orders and cannot be delivered in one trip.**

Third, the core conflict is: Who owns the user digital assets accumulated through home delivery services? No retailer is willing to hand over this asset. Especially when leading retailers are strengthening their own membership systems, if they can directly face users and cultivate user habits and awareness, why bring in an intermediary?

So, under the surface prosperity, the trend of leading retailers and third-party platforms going their separate ways is irreversible.

A delivery order at a Suning Carrefour store is packed.

On the other hand, the integration of WeChat mini-programs has accelerated this separation. At a recent State Council joint prevention and control mechanism press conference, Wang Bin, deputy director of the Market Operation Department of the Ministry of Commerce, specifically mentioned this phenomenon.

At the meeting, Director Wang, on one hand, called on citizens across the country to minimize going out and to order fresh food and daily necessities via WeChat; on the other hand, he highly praised this new retail business model that relies on the WeChat ecosystem and connects online and offline, affirming its contribution to residents' daily life convenience and health protection during the epidemic, as well as to merchants' operations and social epidemic prevention and control.

**It should be noted that, from an industry perspective, this may be the first large-scale wave of omnichannel self-construction since the first round of self-built e-commerce platforms by offline retailers, and it is also a rare window for corporate transformation.**

Relatively speaking, same-city delivery is a lighter asset model compared to JD's nationwide B2C e-commerce model, with a shorter construction cycle. Now that Tencent is entering smart retail, using community marketing and private traffic, the threshold for companies to build their own home delivery services has been greatly lowered.

The main difficulty is that retailers need to cross over to become urban instant logistics service providers. Where does the capacity come from and how to manage it? In addition, does the "left hand and right hand" problem (online-offline interest conflict) encountered in the first round of e-commerce still exist?

The customer base for home delivery overlaps with in-store customers but is still different. As Yonghui Supermarket President Li Guo said: "For online and offline, it's always about products. The difference in customer groups is in product selection. Taking Yonghui as an example, we differentiate customers by adjusting product structure, and through differentiated product operations, we increase customer visit frequency and online brand cooperation, forming a two-way traffic channel, thereby strengthening the integrated development of online and offline."

Regarding the independence of the home delivery business system, let's listen to Missfresh's advice. Missfresh CFO Wang Jun emphasized that the core of a front warehouse is that it must have an independent warehouse.

He explained: "I think whether it's supermarket home delivery or front-warehouse home delivery, the most effective way is to build an independent warehouse. For example, RT-Mart's home delivery is also within the warehouse, setting aside a separate area similar to a front-warehouse model. Whether it's a front warehouse or an in-store warehouse, the result is the same."

Wang Jun emphasized that this has barriers. In a 300-square-meter warehouse with 3,000 SKUs, achieving sufficient stocking, high-speed turnover, turnover days of 1.5 days, sell-out rate before the evening peak of no more than 10%, and overall loss rate below 1% is basically unrealistic in traditional retail. The only solution is digital retail." **That is to say, whether it's a front warehouse or supermarket home delivery, it's essentially a process of digital advancement for retail companies. This is the industry significance of retailers polishing home delivery services.**

The author understands that Wang Jun is emphasizing that within a company, home delivery services must have an independent system, not just adding a 30-minute delivery on top of store products.

This point has actually been agreed upon by many offline supermarket companies doing home delivery. Huxiu once visited Wumart's Lianxiangqiao store, which transformed its original back warehouse directly, using front-warehouse logic to adjust the warehouse layout and flow, rather than using full-store picking for home delivery.

But when a warehouse is shared by both in-store and home delivery businesses, many new issues arise, such as which products need to be broken down in the warehouse for easy picking for home delivery.

Therefore, home delivery will become a truly independent new business format. Perhaps within three years, everyone will accept and see this fact. The premise is to understand and correctly answer the three questions raised in this article.


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