99% of investors don't understand the lead position

At the end of June, the two representatives of the pre-position model, Ding Dong Buy food and daily fresh, have been listed, but from the data disclosed in the prospectus, there is still a long way to go before full profit.

In the first quarter of 2021, Ding Dong Maicai had a net loss of 1.38 billion yuan and a loss of 610 million yuan, and the net loss rate of Ding Dong Maicai and Daily Maixian were both above 35%.

The pre-warehouse model is a new model born in 2015, and different from the O2O business model with the Internet, the pre-warehouse is more like a logistics solution to reduce losses and transportation costs at first, but it is targeted at the needs of instant delivery and distribution to the home, thus stimulating greater energy.

Early strength players have daily fresh and U shopkeeper, but the latter fell in the expansion of the way, Ding dong buy food is a rising star. The front-loading model has been optimized by several companies to become what it is today.

The new model tests the vision of investors, especially in the wave of fresh electricity business closures from 2015 to 2017, the market has debated more than fresh electricity business. For a long time, the capital's opinions on several companies diverged widely, with hesitant investors worrying about the future and committed investors betting themselves on the risk.

01

In the early stage of the birth of the pre-position model, Daily fresh and U manager are the most powerful two, Daily fresh in Beijing, U manager in Shanghai, with the strongest consumption power of the first-tier cities as the base, to explore the new business model.

At that time, the pre-position model was not mature, the founders were feeling the stones across the river stage, and investors were more difficult to have unique insights. They decided to invest, first of all, is optimistic about the fresh track, followed by the quality of entrepreneurs and entrepreneurial teams.

Xu Zheng, the founder of Daily Youxian, has spent ten years in Lenovo and has experience in retail and product operation management with excellent performance. In 2012, Xu Zheng became a senior executive of Jiawo Group responsible for the fruit division, and he came with his partner for many years, Zeng Bin, Zeng Bin was a member of the 300 employees of Ali Head.

Xu Zheng and Zeng Bin are familiar with all aspects of fruit, they soon realized that the post-80, post-90 crowd is becoming the new consumer main body, which will be an important opportunity for fresh electricity suppliers, so in the second half of 2014, 33-year-old Xu Zheng led 18 employees in Wangjing an apartment to set up daily fresh.

At the beginning of 2015, Peng Zhijian of Tencent investment met Xu Zheng, at that time, the daily fresh has not done the pre-warehouse, but only through SF Express logistics to do the next day. Fresh electricity suppliers were faced with high cold chain costs, high operating costs (30~50 yuan/single), large losses (average loss rate of about 10%), low customer unit price and low pain points, Tencent investment founder Peng Zhijian has been cautious to wait and see, no investment.

Daily fresh for a period of time, found that the cost of SF's cold chain logistics is too high, and the loss is large, encountered the platform to do activity orders surge, but also often burst the warehouse, the user has been delayed to receive the goods, went to the industrial and commercial Bureau to complain. As a last resort, they plan to set up their own logistics.

The Daily Fresh team discovered a shift in people's consumption habits at that time: going to the store became home, and planning became instant. They decided to adopt the cold chain logistics model of "sorting center + community micro warehouse" to be closer to the user and do timely delivery. But execution costs money.

At this time, Peng Zhijian has some understanding of the daily Youxian team, and in the process of getting along with Xu Zheng, he was gradually moved by the vision and ability of the young entrepreneur, so Tencent invested in the Daily Youxian 10 million US dollars A round of financing, which can be said to be a complete bet.

In May 2015, Daily Fresh built the industry's first warehouse in Wangjing, serving the surrounding radius of three kilometers, opening up a new fresh model. Tencent, an investor, uses big data to locate warehouses for the daily best fresh and to help with localized operations.

Three months later, another pre-position mode of fresh electricity supplier U shopkeeper also obtained financing, the investor is Xu Xin. The two founders of the company, Wang Haihui and Zhu Pengcheng, were executives of the No. 1 store, responsible for the back-end supply chain and front-end business of the No. 1 store respectively. Yihaodian was once one of the earliest "online supermarkets" in China, and was later acquired by Walmart and included in Jingdong's territory. After the No. 1 store business was taken over by Walmart, Wang Haihui and Zhu Pengcheng moved the idea of entrepreneurship.

In June 2015, Xu Xin wanted to dig wish Pengcheng to do an executive in a invested enterprise of today's capital, but wish Pengcheng wanted to start a business, Xu Xin readily invested in him. Wish Pengcheng hope to take six to eight million dollars, Xu Xinyi waved to ten million dollars. This is similar to the situation when Xu Xin invested in Jingdong in 2006, Liu Qiangdong felt that $2 million was enough, Xu Xin felt that it was not enough, and gave $10 million.

Xu Xin has high hopes for fresh track. When the O2O fire in 2014, today's capital saw a lot of projects, nail art, hairdressing, home economics, fresh, takeout, etc. Xu Xin believes that this model should seize the high-frequency category, become the entrance of traffic, this category is either takeaway, or fresh. She asserts that the fresher wins the world, and the field will move out of the big companies.

02

It was around 2016 that investors really noticed the uniqueness of the front-position pattern.

Since the end of 2015, fresh electricity suppliers have closed down, and daily good fresh has been affected. Despite the endorsement of Tencent investment, Xu Zheng also judged that the pre-position mode was about to run through according to data such as re-purchase and retention, and daily fresh still could not finance money. Zhang Ziquan, a partner of Time Capital, has seen daily good fresh, but he does not know how far the pre-position mode can go and does not dare to invest.

And the numbers that many investors struggle with are not repurchase and retention rates, but GMV. The GMV data of Daily Youxian has no advantage with other platform projects, and continues to increase investment in membership and pre-positioning, and investors are not optimistic about it. Xu Zheng does not recognize the views of investors, also do not want to brush the amount, so mortgaging the real estate to solve the urgent needs. But before the loan even arrived, new investors were found.

In 2016, Yuanyi Investment led the B+ round of Daily Youxian, which was led by Wang Jun, who was also the CFO of Daily Youxian later.

Wang Jun believes that China's e-commerce circuit will definitely produce a super consumption platform, and the traditional advantages of the existing giants can not be directly reused in the field, and the infrastructure used is different from those of Jingdong and Ali. Daily fresh meets the needs of users for fresh online consumption "better and faster", the business model has obvious efficiency advantages, Wang Jun felt that it is worth betting, and joined Daily Fresh in March of the following year, in charge of corporate strategy and capital, but also manages Daily Fresh East China business, participate in the battle line.

Another key investor is Wu Haiyan, managing partner of Huachuang Capital. She used to be the assistant CEO of Dunhuang Network (an online foreign trade trading platform, the invested enterprise of Huachuang Capital), and has invested in many e-commerce projects, and has a good understanding of the e-commerce industry.

When the fresh electricity suppliers were fighting, Wu Haiyan did a lot of research and found that the retail logic of the fresh track was different from that of the standard and semi-standard products - the upstream was not manufacturing, the scale and standardization of domestic agriculture were relatively low, and the procurement management was difficult to do with the existing electricity supplier logic, and at the same time, the storage and distribution link could not be solved with mature express solutions. There are problems, there are gaps, this is the opportunity for startups.

She saw a lot of companies, but all feel that the model is not good, before the Spring Festival in 2016, Wu Haiyan met Xu Zheng, and threw out more than 20 questions about the company's operation, Xu Zheng answered with different figures. After talking for about an hour, the two went to Huachuang's office to meet with several other investors and business leaders, and within 10 days, Huachuang Capital completed due diligence and gave detailed feedback on Daily Youxian.

"The real value comes not from the short-term sales flow and orders, but from the unseen, the hard work of laying out the new infrastructure that Daily Yuxian did at the time, but also its real value, which is what Huachuang thought it was particularly different." Wu Haiyan said.

03

As investors track and observe, the front-position pattern is also evolving.

Due to the small scale and low degree of standardization, the pre-warehouse mode still had problems of high procurement cost, high fresh consumption rate and high performance cost. In 2015~2016, the pre-warehouse fresh retailers represented by Daily Excellent Fresh and U shopkeeper optimized various links.

First, reduce attrition rates through digital management. The system algorithm is used to predict according to the market situation, so as to flexibly deploy the goods in the pre-warehouse, and adopt different storage methods for different goods. Soon the loss rate of the leading position dropped from an average of about 10% to about 2%, and in the best case it could reach 1%.

Secondly, through direct sourcing to reduce procurement costs. In 2016, the company has achieved more than 60% direct sourcing from the place of origin, some of which are direct sourcing from the place of origin, which saves 30%-40% compared with the market procurement cost. At present, Ding Dong buy fresh food direct purchase amount accounts for 75% of the total purchase amount; The daily yield of fresh fresh is 93%.

Finally, the SKU is long, the retail unit is small, and the re-purchase rate is increased. Fresh gross margins are too low and other SKUs are needed to increase profits. According to the daily fresh Wang Jun, if you only do a single category, you will never make a profit. The pre-warehouse must be a supermarket, neither a fruit store nor a vegetable market. At the same time, the platform also takes products that once needed to be bought by the box and sells them separately, so that users can buy more categories of goods at once. In this way, both of them achieved a re-purchase rate of about 80% in 2016.

In addition to the above basic indicators, at the end of 2016, Daily Youxian also relied on exquisite operation and cost control to reduce the average performance cost to only ten yuan, so that the customer unit price can be easily profitable at about 100 yuan. U The shopkeeper compressed the operating cost of each order to 10 yuan, and the average delivery cost was 6.1 yuan.

After the transformation, the data of the pre-position mode has been greatly improved, and in 2016, Daily Fresh was the first to announce regional profits, and the U manager also announced the break-even of operating costs at the end of the year.

04

In 2016, Daily Youxian mainly expanded its scale in North China, in addition to Beijing, it also entered Shandong, Henan and other places. The U shopkeeper is in South China, in Jiangsu, Zhejiang, Shanghai and other places.

At the end of 2016, Xu Zheng publicly said that the number of front-loading warehouses on the platform had exceeded 200, and planned to expand to 500 to 1,000 in 2017, covering 30 to 50 cities.

U The scale of the shopkeeper is not equal to the daily good fresh, and there are only dozens of pre-positions within the outer ring of Shanghai. However, I wish Pengcheng at the end of the internal staff meeting is still full of ambition, announced that in 2017 to the pre-position model quickly copied to more areas, "if 2016 is from 0 to 1 process, then in 2017 we will write a lot of 0 behind 1."

This requires sufficient financial support, the daily fresh financing is smooth, and the U shopkeeper gradually loses his advantage because of the financing is not smooth.

In 2017, the investors behind the two rounds of Daily fresh financing are mostly old friends of Xu Zheng. Huachuang Capital continued to invest, when Wu Haiyan believes that no model can conquer the world, but the daily fresh in the continuous exploration of new business models, and the scale of expansion has enough rational restraint, she believes the daily fresh team. The previous far wing investment and Tencent investment also continue to chase investment in this round.

It is worth mentioning that the new entry of Lenovo Venture Capital, Lenovo is Xu Zheng's old club, naturally understand his ability. On New Year's Day in 2017, He Zhiqiang, president of Lenovo Venture Capital, personally went to Beijing's pre-position warehouse to investigate, and the Lenovo Venture Capital team and Daily Youhua spent several months to make a detailed growth model for the pre-position to judge the feasibility, and soon invested.

Lenovo's backing has also attracted other investors to join in. Since then, Daily Youfresh has accelerated its expansion and established hundreds of pre-positions in Beijing.

Soon after, Daily Fresh completed a C+ round of financing, led by Tiger Global China and Yuansheng Capital. Wang Pengfei, director of Tiger Global China, explained, "The circuit is gradually becoming clear after several rounds of reshuffling. Relying on strong supply chain advantages and unique pre-warehouse layout, Daily Youxian can provide consumers with high-quality goods and extremely fast services, and is very hopeful to stand out on this circuit."

Yuan Sheng Capital, one of the leading investors, is actually at the helm of Xu Zheng's old friend Peng Zhijian. In 2017, Peng Zhijian established Yuansheng Capital and recognized the evolution ability of the team after seeing the market performance of Daily Youxian, so he invested $60 million. At the time of the listing, Yuansheng Capital was one of the top five shareholders, holding 7.2 per cent.

This round of financing was mainly hit by daily Youxian on the expansion of 1-3 tier cities, and gradually into the hinterland of Shanghai. Unlike the scenery of Daily Fresh in the capital market, the U shopkeeper has been unattended for a long time.

Since getting more than $30 million in Series B financing in early 2016, the company has not received new financing in the following year and a half, during which it did not disclose the progress of expansion.

Until October 2017, the U manager received 100 million yuan of C round financing led by Haier Capital, but this is ammunition belonging to unmanned retail. Zhu Pengcheng announced that it will combine Haier's unmanned retail equipment and smart home appliances to expand its unmanned retail business.

This is the last round of financing for U. Since then, the daily fresh strong expansion, Ding dong buy food to seize the market, U shopkeeper gradually lost the original market share. In October 2018, the U shopkeeper quietly ceased operation, and it did not grow into another Jingdong under Xu Xin.