Founded in 2014, Miss Fresh (每日优鲜) is a Chinese e-commerce new grocery company. It completed its 230 million Series B+ financing round in 2016. According to iYiou, the company is committed to restructuring the supply chain. Fresh Hippo (盒马鲜生) is Alibaba’s new grocery chain and is part of their e-commerce arm.

Miss Fresh’s domestic advantages lie in its asset-light business model, third party and cold chain logistics, and scale effect. Fresh Hippo also uses an asset-light business model, but it’s facing an economic slowdown due to its shaky upward supply chain while rapidly expanding. While each platform has its advantages, how would they generally fare in the United States assuming their benefits are transferred?

We compared the United States’ fresh grocery market with China’s and took a look at how Miss Fresh could potentially stay fresh abroad.

The United States’ Online Fresh Grocery Market

Kantar’s Worldpanel report shows that e-commerce grocery sales grew 30% and leading countries include China (+52%), South Korea (+41%), UK (+8%), France (+7%), Japan (+5%), and the United States (+5%). According to Nielsen U.S.A., online grocery in the States is forecasted to be a USD 100 billion business by 2022, representing over 12% of the country’s projected total for the retail food and grocery business that year. Furthermore, FMI Research expects 70% of U.S. consumers will regularly purchase packaged goods online in 5-7 years as 2017 was a disruptive year for the industry.

Amazon Fresh / Amazon Pantry is the pioneer in the online grocery industry. However, to use this service, consumers must have an Amazon Prime membership, a move to entice more customers to buy a membership. Amazon Fresh also differs from its competitors by using a more efficient supply chain. They acquired Whole Foods to establish “mini distribution centers arguably,” and Whole Foods can take advantage of Amazon Fresh’s massive supply chain. Furthermore, Amazon Fresh also uses replenishment centers just outside the urban area to maintain efficient orders and line item fill rates.

In the traditional grocery market, Wal-Mart, Costco, and Safeway shifted to an O2O model to enhance their competitive edge. Wal-Mart provides grocery pickup and delivery to its customers; Costco only provides service to its members but offers free online grocery delivery at select locations; Safeway offers discounts and deals for online grocery such as free delivery and USD 20 off for your first purchase.

These traditional grocers have substantial physical assets and aren’t as attractive to those using an asset-light business model like Amazon Fresh. However, Walmart still reports firm earnings announcements despite it being asset-heavy which show that they found a way to be profitable “without embracing the store closing panacea,” according to Steve Dennis, a Forbes contributor.

He also argues that Walmart reported strong earnings to show that “retail companies can have enormous physical assets and will remain highly relevant.”

China’s Online Fresh Grocery Market

According to Euromonitor, China occupies the most significant percentage of the e-commerce market and is driven mainly by a combination of technology, infrastructure, and economic factors.

China occupied the largest online fresh grocery market share at 32.3% in 2016. According to Euromonitor, from 2012 to 2016, the country reported a 52.9% CAGR, beating the United Kingdom, the United States, France, Japan, South Korea, Australia, and others. China is also forecasted to keep its dominance in the market from 2017 to 2021 despite having a lower CAGR within the same period than Australia, Italy, and Germany with 16.6%, 16.0%, and 14.1%.

According to the E-grocery Market in China report published by the Canadian government, the rise of disposable income and spending in China led to the country’s “golden age for e-commerce.” Its value sales jumped due to emerging players and retailers trying to lure consumers to their websites.

In the online fresh grocery market, top players include Alibaba’s Fresh Hippo, Miss Fresh, Yiguo, Mecai, Fresh Legend, and more. However, traditional supermarkets such as Yonghui Supermarket have adopted an O2O business model to compete, a similar tactic to its United States counterpart. While new grocery retail is becoming a new norm, traditional supermarkets still occupy a large share of the market.

However, unlike Amazon Fresh which acquired Whole Foods to boost area coverage arguably, Miss Fresh and Fresh Hippo haven’t used a similar tactic: Fresh Hippo takes advantage of Alibaba’s technology, and Miss Fresh is a pioneer in its “urban sorting center + front warehouse” cold chain logistics system. According to iYiou, users can enjoy a great instant shopping experience within an hour with Miss Fresh due to its small focus on targeting a “high-end market” and first warehouse delivery. Miss Fresh’s daily repurchase rate reached 80%.

Can Miss Fresh & Fresh Hippo Survive the Fight Abroad?

Assuming Miss Fresh and Fresh Hippo’s advantages are carried over to the States, they still may face trouble due to lack of differentiation. Consumers are favouring more organic products; the industry is forecasted “to grow at an annualized 16.1% over the next five years through 2023-24, to reach USD 4.5 billion.” Additionally, the States has a stricter food standard. Depending on where Miss Fresh and Fresh Hippo import their goods from, they may lose their scale effect in the United States versus in China.

It might benefit Miss Fresh and Fresh Hippo if they merged or partnered with stores like Target in addition to their e-commerce platform. As such, it may help them integrate smoother than opening a stand-alone store where their brand isn’t as widely recognized as it is in China. However, what may give Miss Fresh and Fresh Hippo a competitive advantage is how efficient they use their technology in controlling their overall supply chain and keep up with demand. In terms of the downward supply chain, Fresh Hippo may have already surpassed Amazon in terms of technology. By implementing facial recognition payment and 30-minute deliveries, Business Insider has argued that it's likely where Amazon is going to take Whole Foods. 

How well Miss Fresh and Fresh Hippo understand the United States consumer is also significant to lower their variable costs as much as possible as brick-and-mortar stores have lower variable costs than pure players. 

XU Zheng (徐正), Miss Fresh’s CEO, believed that supply, demand, and poor circulation were problems facing the new grocery industry, according to iYiou. China’s middle class gets richer which simultaneously improves the quality and desire for fresh products have significantly improved. However, supply wasn’t able to keep up with the need for traditional grocers. As the online new grocery industry and market grows, it may boil down to who is more efficient at balancing these two realms.