Ding Dong buy vegetables for the first time to achieve stage profit, pre-position mode and "commodity power" strategy has been verified

We have a firm belief in the pre-position model. There are many, many analyses of the pre-position on the market. But people often forget that the most important key point to judge the merits of a model is what: is it really meeting the needs of users? Is it in line with the changing trend of user consumption behavior? Only the user's choice determines the success or failure of the business model. -- Liang Changlin, Founder and CEO of Ding Dong Maicai

On the evening of August 11, Ding Dong Maicai released its performance report for the second quarter ending June 30, 2022. Data show that Ding Dong Maicai achieved revenue of 6.63 billion yuan in the quarter, an increase of 42.8% year on year; Non-GAAP net profit of more than 20 million, the first time to achieve phased profit.

In addition, the Yangtze River Delta, as a market where Ding Dong bought food services earlier, has a more prominent performance. In the first half of this year, revenue in the Yangtze River Delta region grew 47.9 per cent year-on-year and achieved a positive operating margin of 3.7 per cent. In addition, as of the end of the quarter, Ding Dong Mai was fully funded, including cash and cash equivalents, short-term investments, including a balance of more than 6 billion yuan.

At the same time of high-quality growth, the company's UE is also rapidly optimized, which once again validates Ding Dong's pre-warehouse mode, stable development and rapid organizational response ability in the process of market changes.

"In Q2, among the products sold by Dingdong Maicai, there were 217 SKUs with unique features. In addition, the sales of Dingdong's own brand products accounted for 17.5%, most of which were products developed and processed by Dingdong 3F factory." When communicating with investors, the management of Ding Dong Maicai said that Ding Dong Maicai is not only a leading fresh e-commerce enterprise, but also a food enterprise with research and development and innovation capabilities.

The company's management believes that the outlook for Q3 may be a slight loss. But "comparing our post-pandemic and pre-pandemic data, in addition to revenue growth, loss rates have continued to improve." Therefore, we are very confident that Ding Dong Maicai can achieve full profitability by the end of this year."

01 Profit margin continuous optimization, the first time to achieve phased profit

As of this quarter, Ding Dong Maicai profit margin has been significantly optimized for several consecutive quarters, the gross profit margin of this quarter was 31.6%, an increase of 17.0 percentage points over the same period last year, an increase of 2.9 percentage points in the first quarter. Non-GAAP net profit margin improved by 37.5 percentage points compared to the same period last year.

This is mainly due to the substantial and continuous improvement of Ding Dong's supply chain capacity and operational efficiency. Specifically, on the one hand, it is because Ding Dong has continuously expanded the starting point of the supply link, and boosted the gross profit space through the resource integration and efficiency improvement at the production end. For example, improve the efficiency of commodity supply by improving the capacity of self-research and production and processing; Through order agriculture, data and market demand are used to empower agricultural production, reducing inefficient links and resource waste in traditional production and trading.

On the other hand, the performance efficiency and operational efficiency of the platform are also continuously optimized. According to the financial report, due to the improvement of customer unit price and reasonable optimization of front-line personnel efficiency, the rate of single performance expense in the quarter was optimized by 13.2 percentage points over the same period last year; At the same time, the marketing expense rate was optimized by 6.6 percentage points compared with last year, which shows that the supply chain foundation and commodity power accumulated by Ding Dong Shopping has become a new attraction.

On this basis, more costs are invested in food research and development, agricultural science and technology and technical algorithms, and these aspects will continue to strengthen the competitive advantage of Ding Dong buy food, to users continue to bring high-quality goods and services.

Tianfeng Securities believes that Dingdong buy food provides a variety of commodities through upstream direct mining, and the total number of SKUs exceeds 10,000. The products provided by the company are mainly divided into fresh and general merchandise. The number of SKUs increased from 5,700 + in the first quarter of 2020 to 12,500 + in the first quarter of 2021, of which there were SKU5700+ in the fresh category and SKU6700+ in the daily necessities category. In terms of procurement sources, fresh is mainly direct procurement from the source, and the proportion of direct procurement exceeds 75% as of the first quarter of 2021; Commodities are mainly purchased from manufacturers and distributors, and as of the first quarter of 2021, the two procurement methods are 50/50. The product structure of Ding Dong buying vegetables has been continuously optimized, and the proportion of its own brands, its own production and processing products and prefabricated vegetables has increased. After the launch of the company's private label products in July 2020, the proportion of GMV increased rapidly, from 3.3% in the first quarter of 2021 to 10.2% in the fourth quarter of 2021. According to the financial report, in the fourth quarter of 2021, self-produced and processed products accounted for 6.5% of GMV, and prepared dishes accounted for 14.9% of GMV.