Craving "fresh produce" isn't easy? Fresh food e-commerce is under obvious pressure

Over the past year or so, fresh food e-commerce has been a major hotspot, with almost all mainstream e-commerce players doing fresh food e-commerce business, plus dedicated fresh food e-commerce companies like Benlai Life, and even SF Express, which started out in logistics, is now doing e-commerce too; but at the same time, fresh food e-commerce is under obvious pressure, and since the beginning of this year fresh food e-commerce companies have been shutting down one after another across the country, while few of those that survived are doing well. Data from the Qianzhan Industry Research Institute shows that as of before October this year, among the more than 4,000 fresh food e-commerce companies nationwide, only 1% were profitable, 4% broke even, 88% were losing money, and the remaining 7% were posting huge losses.

Although fresh food e-commerce "looks beautiful," it is not easy to do well, and from the supply chain to the delivery chain to product profit margins, it is a "major test" for e-commerce players. For consumers who now want to sit at home and eat fresh things through e-commerce, it really is not easy...

　　Supply and delivery chain: the chain is too long and the costs are too high

The original purpose of fresh food e-commerce is to let consumers quickly get fresh food, local specialties and so on. The fresh food chain is relatively long and needs to start from the food source, which may come from all over the country and even the world. This requires integrating the supply chain. Judging from the current situation, fresh food e-commerce generally relies on cooperative suppliers in various locations.

But this chain can be very long, and suppliers must not only have presentable goods but also qualifications for food and other aspects that comply with national regulations, and more importantly, they need to be equipped with a relatively complete online platform. Relatively speaking, large comprehensive e-commerce players and more mature e-commerce players have fairly complete supply chains; e-commerce players that came from logistics, such as SF Express, have successively launched Heike, SF Home, SF Best and so on, and recently also launched the B2B Dawutu e-commerce platform, with their advantage lying in logistics and delivery, while some e-commerce platforms appear to have very few suppliers.

Compared with suppliers, logistics and delivery, especially cold-chain logistics and delivery, are even more critical. Fresh goods can easily spoil, but a pure e-commerce platform can hardly achieve full logistics coverage on its own, and most rely on cooperation with logistics companies for delivery. After Suning took a stake in Yiguo Fresh recently, Yiguo Fresh became the supplier for Suning's launched brand "Su Xiansheng"; conversely, it can make use of Suning's logistics, warehousing and store resources.

And because logistics is not under the control of a pure e-commerce platform, the service of the logistics partner becomes very critical. Consumers often complain that fresh food delivery is not timely enough, and that goods become moldy and spoiled because logistics is not up to scratch. Goods loss also adds to e-commerce costs.

　　High-end pricing: only a 32% gross margin can make money?

Due to the characteristics of the supply and delivery chain, it has already become the norm for fresh food e-commerce products to be priced on the high side.

But high-end prices do not necessarily completely fill the e-commerce cost "hole." In particular, e-commerce volume and unit price are a seesaw that is unstable and hard to balance: if targeting ordinary users (B2C), the gross margin is relatively large, but the volume of a single order is small and not very stable; if targeting group users (B2B), orders are relatively stable and volume is guaranteed, but the gross margin may not be high enough, and it still relies on more volume. This contradiction is a problem almost all fresh food e-commerce players have to consider.

Benlai Life CEO Yu Huafeng has publicly said that Benlai Life is expected to achieve break-even only by 2018. The implication is that for more than a year to come, Benlai Life will still be in a stage of loss and imbalance. In particular, if the B2C business is to achieve break-even, the product gross margin may need to reach more than 32%; and if the order volume is too small, even a 38% gross margin may not achieve break-even.

If this gross profit is compared with fresh food in ordinary supermarkets, the profit is absolutely unimaginable. Conversely, this means that only high-end offerings can afford high prices, and consumers who can afford fresh food e-commerce are "either rich or noble," belonging to a relatively high-end group with economic strength.

Starting in April this year, in Shanghai, Shenzhen and other places, "Meiwei Qiqi," "Guoshi Bang," "Yizhuo Wang" and others successively closed their fresh food businesses. Wang Ningyuan, an internet industry researcher at China Investment Consulting, said publicly in an interview that the main difficulty for fresh food e-commerce is whether it can balance supply chain management, platform operation and logistics, and that fresh food e-commerce costs remain high, product prices are relatively high, and the number of consumers willing to buy is relatively small. Behind a successful e-commerce player, supply chain management, platform operation and logistics must all support it together, and none can be missing.