Dingdong Maicai, which has been seeking to build its presence in the home delivery seafood business across urban China, reported bigger losses in the second quarter of 2021.
The company, which trades publicly on the New York Stock Exchange following its June IPO, reported net revenues of CNY 4.64 billion (USD 719.6 million, EUR 727 million), up 77.9 percent from the same period of 2020. But at CNY 6.58 billion (USD 1.01 billion, EUR 848 million), its total operating costs and expenses were up 93.3 percent year-on-year. The company said its jump in costs was due to “increased spending on product development expenses to lay a solid ground for further growth.” It also said its spending on marketing was up 260 percent year-over-year.
Its net operational loss in the quarter was CNY 1.93 billion (USD 300.1 million, EUR 253 million), more than twice the loss it recorded in Q2 2020. Registered as a holding company in the Cayman Islands, Dingdong claims to be the “leading and fastest-growing on-demand e-commerce company in China” through a self-operated fulfillment service.
Numerous players are battling over China’s still-growing online grocery market, but huge investments are required to build out distribution networks. The low-margin business has started to test the patience of investors seeking a payback, and price wars between the main players as well as rising logistics costs – in part related to a shortage of delivery staff – have pressured margins. Government moves against tech firms on the grounds of data and monopolistic behavior have also frightened investors.
Dingdong and its competitors have sought to ally themselves with Chinese governmental priorities such as eliminating rural poverty. In its promotional material, Dingdong stresses 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.”
Another firm focusing on delivery of seafood and other fresh foods, Missfresh Limited, also completed its IPO on the Nasdaq Stock Exchange in June. It recently reported a 389 percent increase in its sales on JD.com and its affiliated JD-Daojia (JDDJ) since it started cooperation with the firms earlier this year.
Several analysts covering the sector have predicted consolidation in China’s e-commerce market.
