Fresh food e-commerce cruelty: Who can laugh to the end of Alibaba and JD?

　　Fresh food e-commerce is a big business. A report released by the China E-Commerce Research Center (hereinafter referred to as: E-Commerce Report) shows that the fresh food e-commerce market size reached 85.14 billion yuan in the first half of 2017, almost equivalent to the market size for the whole year last year. The penetration rate of fresh food e-commerce was only 3% in 2016. Compared with the penetration rate of more than 20% in the entire e-commerce industry, the market space is huge.

　　This is still a market with huge opportunities. The rules of platform e-commerce do not apply to fresh food e-commerce : all logistics, warehousing, distribution, and fulfillment models need to be rebuilt. In the development of fresh food e-commerce, we must first burn infrastructure rather than traffic. This is a typical development model of JD and Amazon. Therefore, this industry may be brewing the next JD and Amazon. It is precisely because fresh food e-commerce needs to invest in infrastructure first that a large number of startups have difficulty in survival. According to the e-commerce report, in 2016, 88% of the more than 4,000 fresh food e-commerce companies across the country suffered losses.

　　Fresh food e-commerce completed the knockout round in 2016. Fresh food e-commerce companies that invest a lot in infrastructure and improve the operational efficiency of the entire link have temporarily won the fresh food e-commerce industry. The more lively it was in 2014, the calm it was in 2016.

　　Around 2014, fresh food e-commerce startups exploded in a concentrated manner. According to IT Orange data statistics, in 2014, about 35 startups flocked to the fresh food e-commerce market. The number is twice that of the previous year and seven times that of the previous three years. Capital also broke the threshold. Amazon invested $20 million in Delicious Qiqi, JD.com led the investment in Tiantian Orchard, Alibaba invested in Yiguo, and SF Express launched the fresh food e-commerce SF Express. That year, the fresh semi-finished e-commerce Youth Caijun was established. The project received two consecutive rounds of financing of tens of millions in the second half of 2014, with a valuation of RMB 200 million.

　　In 2014, investors were generally optimistic about fresh food e-commerce and actively encouraged them to accelerate their investment. In less than two years, capital's attitude changed drastically. Just as Qingnian Caijun built a home delivery logistics system to achieve 2-hour delivery in Beijing, in August 2016, the capital suddenly dropped the tickets and the project had no choice but to liquidate. Not only Young Caijun, but most of the once popular fresh food e-commerce star projects lost their life-sustaining capital in 2016. News of bankruptcy, layoffs, business cuts, and acquisitions are common: Delicious Qiqi went bankrupt, Tuotuo Workshop gave up its expansion and deepened its cultivation in the organic market, Yimixian was acquired, Duodian Dmall core executives were all withdrawn, and more than half of their layoffs... All this did not come suddenly.

　　Most fresh food e-commerce companies develop on the basis of high subsidies, high investment and high losses. E-commerce report shows that in 2016, only 1% of the more than 4,000 fresh food e-commerce companies including small vertical brands achieved profitability, 4% remained unchanged, and 88% suffered losses, while the remaining 7% were huge losses. Capital is becoming more cautious. "The investment is too large and the gross profit is too low, and investors are unwilling to start. Therefore, many e-commerce companies switch to 2B business, at least they lose less." said a large e-commerce executive involved in fresh food. Many fresh food e-commerce companies have difficulty in financing, and the company itself lacks the ability to make self-produce

　　Compared with e-commerce platforms such as Tmall, fresh food e-commerce focuses on one category, which is vertical business. But it is also a platform business, because all the backends of platform e-commerce (purchase, logistics, warehousing, distribution, fulfillment, etc.) are almost not suitable for fresh food e-commerce and need to be rebuilt. In essence, fresh food e-commerce is the "B2C+self-built logistics" model of JD.com and Amazon, and it is more difficult. First of all, unlike the books that started with Amazon and the 3C products that started with JD.com, fresh food is a non-standard product.

　　China's agricultural products are produced in different sizes and varying quality. Therefore, the purchase price of fresh food is not fixed, and different batches are of different quality.

　　The storage entry standards are implemented non-standard, and the procurement data management system must be rebuilt. At the same time, the fresh food storage and logistics system also needs to be rebuilt. Fresh food has a short sales cycle and high losses. Aquatic products only have a shelf life of 0.5 days to 1 day, while fruits are 1 day to 2 days. The transportation conditions and ratios of each city are different. This means huge upfront investment that startups are difficult to bear. For example, fresh food e-commerce Yidian.com once used cross-thermal stratigraphic technology in cold chain logistics, which was expensive and eventually indirectly led to its bankruptcy.

　　Overall, e-commerce giants have become the industry leader. Both Tmall and JD.com have built trenches in the fresh food category, and their traffic advantages and investment strength are not comparable to startups. Liu Qiangdong announced a full-scale war with Alibaba in 2015, especially focusing on fresh food. In January 2016, JD.com's Fresh Division was established. Fresh food is regarded by JD.com as an ammunition depot that achieves a trillion-yuan net income and a trillion-yuan market value, and JD.com has sent strong generals to take the helm. Wang Xiaosong, vice president of JD Group and president of JD Mall Fresh Division, is a meritorious general of JD.com. He once led the 3C business unit and made JD.com 3C category the first in the country.

　　At the same time, from 2016 to 2017, Tmall Supermarket dramatically experienced first downgrade and then upgrade - Jiang Pan, the general manager of Tmall Supermarket, was dismissed, and Mao Chao was demoted; and after Jing Jie, the head of Tmall Fast-Fast Consumer Goods, took over, Mao Chao had to upgrade again. "At present, all fast-moving consumer goods business lines are responsible for Tmall Supermarket KPI." But at present, the entrance weight and business division level of Tmall Supermarket are not as high as JD.com. In 2017, both parties spared no effort to transfusion blood for the fresh food business.

　　Alibaba has currently laid out all models to form a formation mainly of "Tmall Supermarket + Yiguo + Hema Fresh". JD.com is centered on self-operated fresh food and is expanding in more directions. Both parties inherit the unique advantages of their respective platforms. The differences in fresh food styles between Alibaba and JD can be summarized by "making no difficult business in the world" and "more, fast, better, and less" respectively - the former focuses on the layout of the platform-based full industrial chain in addition to consumer experience; the latter hopes to achieve the ultimate in consumer experience.

Thank you for your attention and support to Laogao E-commerce Club . Please indicate the source of the reprinting website www.shxuanming.net

 Click to register to apply to join the well-known e-commerce network - Laogao E-commerce Club. Any merchants from all over the country, Tmall merchants, Taobao Crown Store, Jinguan Store, and other e-commerce platform merchants can apply to join!