The cash-burning model of fresh food e-commerce is being put to the test
Tian Tian Guo Yuan (Fruit Day) recently announced in Shanghai that it had secured 100 million yuan in D+ round financing from a fund management company in which Zhangjiang Hi-Tech holds a stake. Wang Wei, founder of Fruit Day, said this round of financing will mainly be used for regional expansion, category introduction and supply chain development. Prior to this round, Fruit Day had just obtained 100 million US dollars in D round financing led by JD.com in early 2016.
The successful financing this time also shows that Fruit Day is beginning to emerge from the shadow cast by its earlier "closure" of offline stores. However, industry insiders believe that the fresh food e-commerce industry, represented by players such as "Fruit Day", still faces a severe test of survival. For example, since the beginning of this year, fresh food e-commerce has suffered one setback after another: Meili Qiqi, Qingnian Caijun and Guoshi Bang have successively announced suspension of operations; Ai Xianfeng has "persuaded" employees to leave on a large scale, and after the integration of JD Daojia and Dada there was also a wave of disguised layoffs; Benlai Bianli was renamed "Jisuda" and integrated into the Benlai Life platform. The entire industry faces layer upon layer of challenges. Where exactly should the fresh food industry go?
Experts say the most obvious difference between fresh products and other products lies in timeliness. Unlike traditional products, which have a shelf life of several months, fresh products, especially fruits, often have a shelf life measured in days, and transport times are even measured in hours. The tendency to spoil also gives consumers many concerns when shopping online for fresh products. Fresh food e-commerce may use various methods such as subsidies to attract consumers, but as long as they receive one unsatisfactory product, consumers' confidence will waver, and the company may lose the customer as a result. Therefore, cold chain logistics capable of preserving freshness throughout the entire process is especially important.
Wang Wei said that building cold chain logistics is not difficult, but managing warehouses is a bigger challenge. Fruit Day currently has more than 50,000 sq m of warehouses. The warehouses are divided into different floors, with temperatures of minus 36°C, minus 10°C and minus 18°C, and fruits cannot be mixed together. It can be seen that Fruit Day has already accumulated some of its own experience in warehouse management, but Wang Wei also said that they still have a long way to go and may still need to pay a lot of "tuition".
Regarding Fruit Day's earlier move to close all offline stores, Wang Wei said this was not about closing stores, but about converting all stores into warehouses, in order to improve operational efficiency and enhance the user experience, and that the overall O2O strategy will continue to be implemented in the future. In its city expansion strategy, Fruit Day will also take a more refined path, no longer pursuing scale and quantity, but starting with first-tier cities and then expanding to second-, third- and fourth-tier cities.
When talking about the future development trend of the fresh food e-commerce industry, Wang Wei believes that starting in 2015, a large number of fresh food e-commerce companies, driven by capital, took many irrational actions, and almost every kind of foreign fresh food model was rehearsed in China. Moving from explosive growth back to rationality is a process that emerging industries are bound to go through. The end of the cash-burning model will eliminate a large number of companies that have no supply chain foundation. Many companies claim they ultimately went bankrupt because they invested too much in supply chain layout and cold chain logistics, but in fact the problems arose in other areas such as marketing, capital chains and the repurchase rate of subsidies.
"Since last year, everyone in the fresh food industry has been saying they want to become an asset-light company, to build a light supply chain without warehousing or procurement, but facts have proved that many asset-light companies have died." Wang Wei said the new round of financing will still be heavily used for supply chain and logistics layout.
Wang Wei said the additional financing is not because the previous financing has already been spent, as there is still 1 billion yuan in cash on the books. The additional financing now is mainly for a "sense of security": "Raising more money makes the company safer. For a company, cash flow is very important." At the same time, in order to increase its "sense of security", Fruit Day also reached a strategic cooperation with Lactalis, the world's largest dairy group, based in France. The two sides will conduct in-depth cooperation in many areas, including sales of the Lactel brand, especially the fresh dairy series, on Fruit Day's online platform, brand building and supply chain optimization. Lactalis will use "Fruit Day" as the launch platform in mainland China for some products of its Lactel brand.
In addition, Ge Peijian, general manager of Zhangjiang Hi-Tech, also expressed optimism about the development of fresh food e-commerce. He said that Fruit Day, as a "unicorn" enterprise that grew up in Zhangjiang Park, growing together with it is an important measure for Zhangjiang Hi-Tech to practice the concept of "time partner". In the future, Zhangjiang Hi-Tech will rely on its strong resource integration capabilities to help park enterprises connect with various resources, actively build an innovation service platform, strengthen post-investment management services for industrial investment, and strive to cultivate and build more "unicorn" enterprises.