PUPUMALL Raises USD 100 Million in the Competitive Fresh Grocery Market
The Fujian-based PUPUMALL has received its second round of financing in 2019 and will further expand to Shenzhen and Guangdong. Will the flimsy profit model they’ve adopted work for ‘top’ players like Freshippo, Miss Fresh and PUPUMALL?
The front warehouse fresh grocery brand PUPUMALL secured a new round of funding on December 26, 2019. According to 360kuai.com, the funding amount was USD 100 million. The company has already received USD 30 million. The new funds will help in supply chain construction in southeast China.
Early last March, the company announced its series B1 funding round of USD 55 million. The new round is the second investment injected in PUPUMALL this year.
Founded in 2016, PUPUMALL is an Internet-based shopping platform. While fresh groceries are its primary products, it also provides daily necessities, counting over 3,600 SKUs. The company guarantees a 30 minute-delivery for customers within a 1.5 kilometers range of its front warehouses.
At present, the major business battlefield of PUPUMALL covers Fujian, with employees reaching 10,000. The Shenzhen market expansion was launched in 2019; a person familiar with the matter said that the company plans to enter Guangzhou in March 2020 and will expand in the eastern, central and western regions. However, the northern China market will not be considered for the time being.
"The founder of the company, Chen Xingwen (陈兴文), has positioned PUPU as a tech company. The move to enter Shenzhen also shows how much he values its strong technology atmosphere and talent supply," one of PUPU’s suppliers said.
Fujian’s PUPUMALL, Beijing’s Miss Fresh, and Shanghai’s Dingdong Maicai have gone through a rapid roll-out in the past two years. Their common label is the ‘front warehouse’ model, along with the common promise of ‘delivery within 30 minutes.’ Due to its rent and delivery costs, this model is generally regarded as a heavy capital investment. Therefore, the competition now under the influence of a capital spree has largely been played out between startups operating on a fast-scaling speed and backed by deep-pocket investors such as Sequoia China, Capital Today, and Tiger Fund and Meituan.
Houyi (侯毅), founder and CEO of another giant player in the fresh grocery market – Freshippo, under Alibaba – also expressed concerns over the front warehouse model in a public speech recently. He stated that the customer unit price, high loss rate and the razor-thin gross profit are the problems to overcome. He even admitted that Hema Xiaozhan, the front warehouse trial under Freshippo, is still facing these unsolved issues.
However, this does not mean that Freshippo will abandon the front warehouse business. Hou said that the company would continue to test the front position and see if there is any possibility for optimization. At present, Freshippo has invested 80 front warehouses in five cities across the country.
Wang Jun (王珺), CFO of Miss Fresh, also made statements about the difficulties in lowering customers acquiring cost, rent and labor cost to make a profit. As the leading player, Miss Fresh can deliver 80 online orders per day, four times than that of traditional logistics delivery efficiency. The algorithm-based operation and order volume has helped the company approach profit. Currently, 10% of Miss Fresh’s front warehouses have realized profit and the company expects to pass the break-even point next year.
Other players are still striving and try to approach this seemingly bright future, but will it be the case for them may still need to wait and see.