Market skepticism appears to be emerging towards China’s online grocery sector after a leading player scaled back a targeted fundraising due to weaker-than-expected demand.
Shanghai, China-based fresh food platform Dingdong Maicai raised USD 95.7 million (EUR 80.4 million), a quarter of its original target for its initial public offering. The firm scaled back its expected fundraising sum a day before its IPO.
Another Chinese fresh food delivery service, Guangzhou-based MissFresh, has had a disappointing debut on the Nasdaq Stock Exchange. Its share price fell to USD 8.65 (EUR 7.26) on Wednesday, 30 percent down on its USD 13.00 (EUR 10.90) offering price for its IPO, which took place on Friday, 25 June. The stock listings were aimed at raising cash for the companies’ building logistics networks into China's regional cities.
The huge investment required to build out the distribution network in a low-margin business appears to have spooked investors looking at Dingdong and Maicai. Price wars between the two, as well as rising logistics costs – in part related to a shortage of delivery staff – has pressured margins, while larger online players have also sought to enter the online perishable goods sector.
In its IPO prospectus, Dingdong described itself as the “fastest-growing on-demand e-commerce company in China providing users with fresh produce, meat, and seafood” and pointed to its “extensive self-operated frontline fulfilment grid.”
Dingdong also said it is “working to modernize China's traditional agricultural supply chain through standardization and digitalization, empowering upstream farms and suppliers to make their production more efficient and tailored to actual demand.”
Last month, DingDong announced a collaboration with Shanghai Ocean University to develop Ding Dong Seafood G.A.P. standards, drawn up to guarantee traceability for its seafood customers.