previous post – China’s Fresh Produce E-commerce (1)
Second Round
The two words that characterize the second (current) model is “front warehouse” (前置仓).
By managing more distributed front warehouses (mostly in cities), the fresh produces e-commerce companies can usually deliver within 2 hours after an order is placed.
The model could be exemplified by the current focus of Hema (盒马鲜生) and MissFresh (每日优鲜). The difference – Hema’s warehouses are also consumer-facing stores; MissFresh’s warehouses are expanding much faster and many have no “experience store” functions.
Hema is financed within Alibaba (consolidated in earnings reports) and MissFresh has raised several hundred millions from Tencent.
Hema
Hou Yi (侯毅), the CEO and founder of Hema, worked for JD.com and in charge of JD logistics, prior to joining Alibaba. He has rotated to the O2O (online to offline department) and was the founder of the predecessor of JD Daojia (京东到家), JD’s delivery team. It has been rumored that firstly HOU proposed to Richard Liu, the CEO and founder of JD.com, about the idea of Hema; unfortunately, LIU did not approve that idea at that time. Later HOU approached ZHANG You (张勇), the CEO of Alibaba Group, and get offered to join Alibaba and try out his idea. [equalocean]
Since its beginning in 2016, Hema has now expanded into 130 stores in 19 cities as of March 2019.
Tmall’s fresh stores have also been consolidated into Hema’s operations, announced in December 2018. (meanwhile, JD’s fresh produces team was combined with 7-fresh in the same month)
Its operation summary compared with competitors provided by EqualOcean.
MissFresh
Jan 2017, Series C, $100 million led by Lenovo Capital
Sep 2017, Series C+, $230 million led by Tiger Global and Genesis Capital
Dec 2017, Series D, said to be $500 million; another report said $200 million to spin off 便利购 (the unmanned shelves)
Sep 2018, Series E, $450 million led by 高盛（GSIP）、腾讯、时代资本、Davis Selected Advisers
Tencent has invested four times so far.
Its core competitiveness lies in its front warehouse network, inventory management system and local community operation. MissFresh has an average duration of inventory of 2.5 days.
MissFresh is targeting gross margin at ~20% in the long-term while maintaining an operating margin at 10-15%.
So we can see that attempts are made to locate “warehouses” closer to consumers and to shorten the waiting time to ~30min.
Alongside the 1st and the 2nd rounds, there is another attempt – not necessarily new but will take some time to stabilize, if possible) – to combine 1) mainline logistics, 2) city delivery networks, 3) front-warehouses + community stores, all facilitated by digitalized and AI-driven systems.