The Red Ocean of Fresh Express Market, Legend Fresh’s To-Be or Not-To-Be Dilemma
COVID-19 and China

In early October, Fresh Legend(生鲜传奇, Shengxianchuanqi) has secured its series B funding in amount of CNY 300 million (USD 43.48 million) led by IDG group and followed by Sequoia China and Black Ants Capital(黑蚁资本). As a fresh product retailer, Fresh Legend is the black horse in the market. Born in Anhui province, Fresh Legend founded by Letus supermarket(乐城超市) has opened 100 retail stores till now and expected to open 1300 more stores in future five years. Being ambitious and bold, Fresh Legend has accelerated its expansion pace with strong financial support from VCs.

Fresh Legend is a chain fresh product express store brand that focuses on xiaoqu (small community). Xiaoqu is a Chinese concept of community and neighborhood, whose geographical range is smaller than a general community but bigger than a neighborhood. In siting selection, Fresh Legend shares a similar standard in siting with Trader Joe’s. According to a 2015’s analysis, Trader Joe’s siting tended to select zip code areas with more than 30,000 people and the average household income over USD 70,000 per annum. A xiaoqu’s size may vary from tens to hundreds of households, and Fresh Legend’s target is to cover every xiaoqu within 1 km (0.62 mile) radius that has more than 1,000 households. Considering Chinese population density, 3 - 4 km^2 may mean a customer base of 50,000 residents.

Though, what Fresh Legend sells is different from Trader Joe’s. Fresh Legend resembles farmer’s market at some degree due to the products it sells - fresh vegetables, meat, seafood, fresh-made products and seasonings-and where its products come from – directly from origin. Fresh Legend offers Land-to-Table products, and hence its product pricing is in advantage comparing to local supermarkets.

In 2017, the fresh express market sized reached CNY 13.91 million. Founded in 2015, Fresh Legend’s success in the fresh retail market has attracted competitors, and lots of them have strong backgrounds. Freshhema(盒马生鲜) comes from Alibaba Group, Ella Supermarket(Xiaoxiangshengxian, 小象生鲜) is delivered by Meituan Dianping and founded its fresh express department. All these competitors are standing on giants’ shoulders, while Fresh Legend has little resources comparing to them. Fresh retail is the strength of Fresh Legend. Even backed up by IoT management applied in inventory, order management, supply chain and so on, Fresh Legend is weaker than giant-supported fresh retailers in the logistics network. Alibaba, Meituan Dianping and are top e-commerce leaders in China and all have constructed their own logistics networks over years. In 2017, China’s express delivery’s quantity of packages was 40.06 billion and revenue reached CNY 495.7 billion. Behind a high speed in both revenue and quantity, giants push the hardest.

Data from Ministry of Transport of China’s Republic of China

Fresh express retail’s keyword is FRESH. A better logistics network could provide fresher products and control the potential risks that might be brought due to products’ expiration and possible PR crisis. Comparing with the expansion speed, Fresh Legend’s progress in setting the logistics network could be ignored. Logistics could restrain the variety of products and customer experience if door-to-door service is included in Fresh Legend’s blueprint.

For now, without a strong logistics network, Fresh Legend’s performance could satiate its investors’ requirement. According to IDG’s previous research, Fresh Legend’s price was averagely 27% lower than local supermarkets, and even if the price were to be raised up 15%, Fresh Legend would still be in advantage. Besides price, quality is another reason that puts Fresh Legend in favorable status. Recently, Freshhema was exposed two food expiration scandals, which indirectly strengthened Fresh Legend’s position. Fresh Legend purchases directly from farmers or organizations who produce products and delivers to its retail stores. The simplified ordering process minimizes potential risks and is easy to control products’ quality.

The fresh express market was supposed to be a blue ocean for all participants, but now aggressive extensions make the blue turn to red. According to Fresh Legend’s CEO, WANG Wei(王卫), Fresh Legend opens stores in new and low-occupancy xiaoqus in order to be in advance than other competitors, and build bondings from the very beginning with xiaoqu residents. He also mentioned that opening stores in low-occupancy xiaoqus equals to daily losses – may as low as CNY 8,000 cash flow per day while CNY 22,000 is the financial-sound line. Bearing losses is for the better good, believed by Wang Wei, first come first serve. However, this expansion model seems elastic to the real estate market. Real estate market is a battleground for investors, not for consumption but for investment. Occupancy might be the concern for Fresh Legend only.

As mentioned above, siting is a strategy that both Trader Joe’s and Fresh Legend shared. Ironically, siting criteria are no longer criteria when the competition gets intense for Fresh Legend. Blind siting for market share and ignoring hidden risks, with even 10 times of series B funding amount, could not stop Fresh Legend fall into a strange loop with financial risks: whether market performance is beyond expectation or below, Fresh Legend will keep expanding and opening new stores. On the other side, if Fresh Legend were not the one who splurges money in expansion, there would be others to play the role. In fact, others are following the step of Fresh Legend. Opening stores blindly or not is not up to Fresh Legend -- this is the To-Be or Not-To-Be dilemma for Fresh Legend and other players in the market.

--Author: FU YingWei; write to YingWei at

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