MissFresh's overall earning turned positive in 2019.
Fruit Market. Image Credit: Tom Grunbauer/Unsplash
MissFresh’s CFO, Wang Jun recently indicated that MissFresh has turned its overall earning positive since 2019, beating expectations. This performance proves the success of the front end warehousing model and could justify millions of investments the company has attracted despite harsh macro conditions.
Front End Warehousing Model
Currently, in the industry, one model is the front end warehousing model led by MissFresh, and another is fresh food + restaurant and storage model led by Hema.
The front end warehousing model received many doubts from industry insiders, among them was Hema’s CEO Hou Yin. He decided to close the front end warehouses Hema Stations since March this year, switching to community stores called “Hema Mini”. Recently Hema Mini’s earnings have also turned positive in June.
Despite concerns, MissFresh always maintains the belief that although establishing front end warehouses has a low entry barrier, the time and investment dedicated to perfect the system, service, and supply chain has created an economic mote in MissFresh’s operation.
The price war in Shanghai
According to Wang Jun, an algorithm-driven operating model makes the business easy to scale, but the failure in Shanghai was still a valuable lesson for the company.
Going into Shanghai, Beijing based MissFresh invested more than 1 billion CNY in eastern China aiming to take first place in market share, but it ended up taking only 1/10 of market share compared to Dingdong Maicai(叮咚买菜), which was based in Shanghai. According to Wang Jun, MissFresh’s failure can be attributed to both overemphasizing on inefficient price war and failing to localize its business.
Wang Jun also expressed that reaching 10 billion CNY sales could be a critical mass in this competition, and that’s likely why Dingdong also entered Beijing.