The fresh produce e-commerce boom has pitfalls, and yet another player exits the stage
Fresh produce e-commerce is said to be an industry riding the wave of the boom, yet it has now dragged many entrants down with it. The fresh produce sector, which demands extremely strong expertise in management and control and carries high costs for logistics and warehousing, may in fact also be a big pitfall. Recently, reports surfaced that the Shanghai fresh produce e-commerce platform Yizhuo.com had delisted all products from its App, and its headquarters had been emptied out.
A steady stream of casualties
After fresh produce e-commerce players such as Meiweiqiqi and Guoshibang exited one after another, reports recently surfaced that Yizhuo.com had been revealed to have delisted all products, with no one answering its phones and its company headquarters already emptied out. After logging into the Yizhuo.com App, a Beijing Business Today reporter found that the featured article on the homepage was still from August, and the shopping function under the promotional articles was no longer usable. Yizhuo.com App customer service staff said the platform is currently undergoing business adjustments, fresh ingredients had indeed been delisted, and users' coupons could temporarily not be used. But he also said the company had not gone bankrupt, and the platform was expected to relaunch its related fresh ingredients purchase business in two months, and the coupons in users' hands would also be usable normally.
Public information shows that Yizhuo.com was founded in June 2015 and is affiliated with Shanghai Shiwei Trading Co., Ltd., with fruits, vegetables, meat, poultry and eggs as its main categories, and previously mainly served consumers in Shanghai, Jiangsu and Zhejiang. By building a buyer team and its own logistics, it provided users with fresh ingredient push notifications, sales and delivery services. According to public information, Yizhuo.com was invested in and incubated by the private equity firm "Kaiming Investment", but the initial investment amount was not disclosed.
Although whether Yizhuo.com will really go bankrupt has not yet been confirmed, the fresh produce e-commerce sector that had been developing vigorously has recently been hit by repeated cold snaps. In April this year, Meiweiqiqi was revealed to have gone bankrupt, becoming the first case of a large domestic fresh produce e-commerce company going bankrupt; in July, Tiandayuanyuan announced the concentrated closure of its offline stores; in August, Guoshibang announced through its WeChat official account that it was officially closing down.
A boom or a pit?
From the entrepreneurial frenzy to today's cold snap, the repeated setbacks of fresh produce e-commerce are inseparable from the decline in capital's attention. Some media, citing a former employee of Yizhuo.com, said the platform's bankruptcy was due to funding problems, but this claim has not been confirmed by Yizhuo.com.
Looking at other fresh produce e-commerce players before this, Meiweiqiqi said in an internal notice before its bankruptcy that due to serious operational difficulties, it no longer had funds to pay employee salaries. Youth Caijun, a semi-prepared clean vegetable e-commerce company once tipped to be "preparing for bankruptcy liquidation", also fell into a crisis of a broken capital chain due to investors "reneging" on their commitments.
E-commerce analyst Li Chengdong said most fresh produce e-commerce companies are still in a loss-making state, and when their own ability to generate cash is insufficient, problems will naturally arise during a capital winter without external capital support. At the same time, fresh produce e-commerce platforms need relatively large upfront investment in areas such as the supply chain, and without a sufficiently large scale to attract capital's attention, the platform is very hard to sustain.
In fact, behind this is a lack of core competitiveness among fresh produce e-commerce companies. As far as the domestic fresh produce e-commerce industry is concerned, quite a few vertical fresh produce e-commerce players still find it hard to escape the limitation of only doing "errand business". Taking seizing the "last mile" as the entry point, they attract consumers with selling points such as convenience and cheapness through methods like "pushing hit products". But as the fresh produce e-commerce industry gradually matures, large e-commerce platforms such as Tmall, JD.com and Suning have successively stepped up their rural e-commerce businesses, opening up sales channels for rural fresh produce through direct sourcing from production areas, rural specialty stores and crowdfunding, dealing a huge blow to the price advantage of vertical fresh produce e-commerce platforms. At the same time, as community vegetable stores, supermarkets and fruit stores and other offline fresh produce physical retail outlets keep improving, smaller fresh produce e-commerce platforms find it increasingly hard to maintain a unique advantage in terms of product categories, convenience and other aspects.
"The fresh produce e-commerce industry long ago passed its initial entry period, and has now entered the final stage of competition." In the view of e-commerce observer Lu Zhenwang, CEO of Shanghai Wanqing Business Consulting Co., Ltd., the fundamental reason fresh produce e-commerce keeps seeing casualties is that the industry as a whole is still in a loss-making state. Capital focuses more of its attention on large platforms, and independent small platforms lack supply chain and traffic advantages, making it very hard for them to find a way out.
Data from the China Agricultural Fresh Produce E-commerce Development Forum shows that among the more than 4,000 fresh produce e-commerce companies nationwide, only 1% have achieved profitability, 4% broke even, 88% are losing money, and the remaining 7% are suffering huge losses.
Still far from profitability
Although fresh produce e-commerce companies are exiting one after another, this does not mean the industry is declining.
Lu Zhenwang said that looking at the overall industry situation, fresh produce e-commerce is still in a rising phase. Li Chengdong said the main difficulties in operating fresh produce e-commerce lie in the standardization of upstream supply chain products, the lack of cold chain logistics and the issue of user education. The purchase frequency of fresh products is very high, and the market prospects remain large.
According to the 2016 China Fresh Produce E-commerce Industry Research Report released by iResearch, last year China's fresh produce e-commerce market transaction scale reached 49.71 billion yuan, accounting for 3.4% of total agricultural product retail sales. Some statistical agencies predict that by 2018, China's fresh produce e-commerce market size could break through 100 billion yuan, reaching 128.3 billion yuan. Industry insiders said that compared with the mature fresh produce e-commerce models abroad, China is still in the initial stage of fresh produce e-commerce development, with pain points such as an imperfect supply chain, a single service model and technical barriers that are hard to break through, and a development system suited to the market has not yet taken shape, but fresh produce e-commerce companies still have broad market space and profit space. It is expected that in the next three years, fresh produce e-commerce will open up the situation and gradually enter an era of profitability. The key lies in improving the safety and quality of products, focusing on the construction of cold chain logistics, strengthening the guidance of consumer services, and shifting the layout focus from extracting upstream profits to obtain value to creating value based on products and services.