Burning money to speed IPO, daily excellent fresh and Ding Dong to buy vegetables

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one is for change, the other is for running.
 ”

There is no lack of controversy in every field, but the same day’s submission of the prospectus still contributed a dramatic scene to the capital market.
On June 9, in the atmosphere of keen competition for “first share”, Youxian and dingdong successively submitted their prospectuses to the sec. Both of them are star enterprises of fresh e-commerce track, and their business models are also centered on “front position”. In addition, the data presented in the two prospectuses are also in line with the external expectations of fresh e-commerce players: continuous loss and negative operating cash flow.
Source: sec
But this does not affect the market’s enthusiasm for fresh e-commerce. The vast online space for fresh food, the increasingly common online shopping habits of consumers, and the transformation space brought by the redundancy of traditional fresh food supply chain, all attract the attention of capital and entrepreneurs.
The future is bright and the road is tortuous. Compared with other standardized commodities, fresh products are delicate. The platform should not only be open online, but also be solid in supply chain, SKU richness, warehousing and distribution. Such a high threshold, enough to clear a number of funds is not strong enough, the foundation did not do thick players.
This is also the development trend of the industry in the past few years. After the reshuffle, daiiyouxian and dingdong, which used to be the core of the warehouse buying mode, have come to the IPO stage. However, through the two prospectuses, we can find that the dilemma faced by daiiyouxian and dingdong has not fundamentally changed. The pressure and bottleneck are still there, and they have chosen completely different ways to break the situation.
Ding Dong comes from behind
Daily fresh strategy

Although it was established later than daiiyouxian (daiiyouxian was established in 2014, started the front position real-time retail business in 2015, and dingdong bought vegetables was founded in 2017), dingdong bought vegetables showed a more fierce growth momentum.

According to the prospectus, from 2018 to 2020, the total daily revenue of Youxian was 3.55 billion yuan, 6 billion yuan and 6.13 billion yuan respectively. Dingdong’s sales revenue in 2019 is 3.88 billion yuan, but this index will increase to 11.34 billion yuan in 2020, which will surpass the daily quality of fresh food, and the gap is still widening.
In the first quarter of this year, the daily revenue of Youxian was 1.53 billion yuan, down slightly from the same period last year. Dingdong’s sales continued to grow, with revenue of 3.8 billion yuan in the first quarter, up 46% year on year.
There is also a decline in the number of “effective users” of daily excellent fresh products. According to the definition of daily premium, “effective user” refers to the “transaction user who pays more than the cost of selling products”, that is, the user who can really make money on the platform. From 2018 to 2020, the number of annual effective users of daily Youxian was 5.08 million, 7.17 million and 8.68 million, but it dropped to 7.9 million in the first quarter of this year.
Photo source: Daily Youxian prospectus
The decline in performance may be related to the decrease in the number of superior fresh pre positions per day. According to the prospectus, as of March 31, 2021, daiiyouxian has established 631 forward positions in 16 cities in China. However, if you look up the public reports of the previous two years, the description of the number of front positions of daily excellent fresh products is 1500, with a significant gap.
On the other hand, as of March 31, 2021, dingdong has established more than 950 front positions in 29 cities. Behind the increase and decrease, the 7-year-old is cautious and emphasizes “effectiveness”, while the 4-year-old is expanding and catching up. The two attitudes reflect the different development paths of the two platforms, which is also reflected in the financial indicators of both sides.
Budget carefully in the game of natural burning money

In terms of income structure, daily excellent fresh food is very similar to Ding Dong’s. The former’s revenue sources are “online platform product sales revenue” and “other revenue” (mainly membership fees and vending machine sales revenue), while the latter’s revenue sources are “product revenue” and “service revenue” (mainly membership fees).

In terms of proportion, the main income of daily excellent fresh and dingdong vegetables is online product sales (accounting for more than 90%). Corresponding to the main source of income, the operating costs of daily excellent fresh and dingdong vegetables are also mainly the purchasing costs of platform goods.
According to the prospectus, the “operating cost” of daily excellent fresh products includes the purchase price of products, the cost of product processing and packaging, and the warehousing freight, among which the purchase price of products sold is the largest component of the revenue cost. Ding Dong bought vegetables in the prospectus directly to the “cost of goods sold” as the expression of cost expenditure.
In 2019 and 2020, the daily operating cost of excellent fresh food is 5.48 billion yuan and 4.94 billion yuan, and the gross profit rate is 8.7% and 19.4%. Over the same period, the cost of selling dingdong vegetables was 3.22 billion yuan and 9.11 billion yuan, with gross profit rates of 17.1% and 19.7%. Obviously, with the growth of daily excellent fresh and dingdong vegetables, as well as the investment in the field of supply chain, the bargaining power of both sides is improving.
In addition to the purchase cost, the performance fee is another major expense of daily excellent fresh and dingdong vegetables. The cost mainly includes the rental and operation cost of the warehouse and the labor cost of the delivery staff. The forward warehouse mode can provide faster delivery speed, but the corresponding warehouse capacity means high cost, and it is also a difficult problem to control the fresh loss. For a long time, this model was synonymous with “burning money”.
According to the data disclosed in the prospectus, Youxian and dingdong have achieved certain results in improving the operation efficiency of the front position and controlling the cost. From 2019 to 2020, the performance fee rate of daily excellent fresh food will be reduced from 30.5% to 25.7%, while the performance fee rate of dingdong vegetable will be reduced from 49.9% to 35.7%.
But even when the cost and expense are under the best control, the total cost of purchasing goods and the cost of performance alone has obviously exceeded the overall income of daily excellent fresh and dingdong vegetables. In other words, so far, if you want to continue your main business, you still have to rely on external blood transfusion.
You have to keep burning money
It’s just a different direction

According to the prospectus, from 2018 to 2020, the adjusted net loss of daily excellent fresh is 2.22 billion, 2.78 billion and 1.59 billion respectively, and the adjusted net loss rates are 62.5%, 46.3% and 25.9% respectively; On the other hand, from 2019 to 2020, the net loss of dingdong’s vegetable purchase is 1.87 billion yuan and 3.18 billion yuan respectively, with the net loss rate of 48.3% and 28.0% respectively.

Although the loss margin has narrowed, the businesses of the two platforms are still unable to make their own blood. From 2018 to 2020, as well as the first quarter of 2021, the daily cash flow of Youxian has been negative. Similarly, from 2019 to 2020, as well as the first quarter of 2021, the operating cash flow of dingdong shopping is the same.
Photo source: Daily Youxian prospectus
Photo source: Ding Dong’s vegetable shopping prospectus
On the book, as of March 31, 2021, the daily cash and cash equivalents of Youxian and dingdong were 1.84 billion yuan and 4.41 billion yuan respectively. According to a rough estimate of the operating cash flow of the two companies in the first quarter, such reserves obviously won’t last long.
Photo source: Daily Youxian prospectus
Photo source: Ding Dong’s vegetable shopping prospectus
It is a necessary choice for them to shock IPO and get more financing channels. In response to the significant difference in business attitude, Youxian and dingdong also have different focuses on the purpose of IPO fund-raising
According to the prospectus, daiiyouxian will use 50% of the funds raised to upgrade its front position retail business, 20% to expand its intelligent vegetable market business, and 20% to develop its retail cloud business;
Dingdong will use 50% of the funds raised to improve the penetration of existing markets and expand new markets, 30% to invest in upstream purchasing capacity, and 10% to invest in technology and supply chain systems.
  • According to the prospectus, daiiyouxian will use 50% of the funds raised to upgrade its front position retail business, 20% to expand its intelligent vegetable market business, and 20% to develop its retail cloud business;
  • Dingdong will use 50% of the funds raised to improve the penetration of existing markets and expand new markets, 30% to invest in upstream purchasing capacity, and 10% to invest in technology and supply chain systems.
In short, daiiyouxian has expanded its front and started to do to B business, while dingdong is sticking to the battlefield of “selling vegetables”. It is trying to achieve large-scale in the process of constantly conquering cities and lands, and correct the account of front position.
Front position is too difficult, no one knows how long it will take to burn money, and no one knows whether there will be a turnaround. Unlike giants, start-ups can rely on other cash cow businesses to support a money burning business. Under the current pressure, whether to stop the loss in time to find another way out or to hope for a miracle, Youxian and dingdong have made their own choices.
However, no matter how to choose, the uncertainty ahead has not changed, and it is still doubtful whether the mode of forward position can go through.
Author: Wu Hongjian; Source: capital detective (ID: deep)_ The reprint has been authorized. Joining the community: Cherry (wechat: 15240428449); Business cooperation: Amy (wechat: 13701559246). Recommended reading “five questions” of hyaluronic acid   |  Sugar crisis|   100 billion light food   | | |  |  |  Collagen Peptide  |  Daily new walnut stew: Isee trend  |  Editor’s  |  Reader’s  
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Burning money to speed IPO, daily excellent fresh and Ding Dong to buy vegetables
作者:吴鸿键;来源:资本侦探(ID:deep_insights),转载已获得授权。
加入社群:Cherry(微信:15240428449);
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