Source: Tech Planet
Since October last year, community group buying business$MEITUAN-W (03690.HK)$After choosing to change its name to “Next-Day Delivery Supermarket,” Meituan Grocery, a fresh e-commerce business that focuses on 30-minute delivery, also officially changed its name to “Little Elephant Supermarket” on December 1. This means that in the five years since its launch, Meituan Grocery Shopping has officially transitioned from a fresh e-commerce to a full-category retail platform.
According to Meituan's introduction to Tech Planet, the name change hopes to be closer to the essence of the business and establish a “supermarket” mentality in the minds of consumers. The products in Xiaoxiang supermarket have reached the level of large offline supermarkets. In the future, it will further expand categories such as casual snacks, daily cleaning, personal care and beauty, alcohol and beverages.
Now on the homepage of the Meituan App, “Little Elephant Supermarkets,” “Convenience Supermarkets,” and “Quality Department Stores” in the top navigation bar after takeout are all helping Meituan evolve from “delivering takeout” to “delivering everything.”
Online supermarkets are nothing new. Apart from Tmall and Jingdong supermarkets, which have already developed, Douyin supermarkets also officially launched at the beginning of this year. In the past, businesses such as Meituan Flash Sale and Meituan Preferred also built online supermarkets through different contract timelines. How much room for imagination will the self-operated Xiaoxiang supermarket bring to Meituan in the future?
Meituan buys groceries and rolls them to supermarkets
As can be seen from the latest Xiaoxiang supermarket app, in addition to the original 13 categories, “Meituan Exclusive” and “Selected” channels have been added. The former mainly includes Meituan's own brands such as Chef, Like Budget, and Like Choice. The latter is a product developed by Meituan in collaboration with quality vendors to provide users with differentiated choices.
Currently, the Xiaoxiang supermarket is divided into 15 sections, and the fresh food category is still placed in a more prominent position in the first row. Looking at a horizontal comparison, the JD supermarket currently has 18 sections and the Tmall supermarket has 20 sections. For example, the JD supermarket has also set up subcategories such as pet life and trendy toys. The Tmall supermarket, on the other hand, ranked the alcohol category with high gross margin first. Meanwhile, the Douyin supermarket, which was launched at the beginning of this year, currently has 8 sections, and does not include fresh food.
According to information disclosed by Little Elephant Supermarket to the outside world, it has covered 10,000 SKUs in the past five years. A relevant person in charge of the Little Elephant supermarket in the Shenzhen area revealed to Tech Planet that after the name change, they have continued to increase segmented category tests. For example, imported products have recently been added, covering various categories such as skincare products and cat food.
Before the name change, the Little Elephant supermarket had been in preparation for a long time. Unlike Meituan to buy groceries, Xiaoxiang supermarkets have more SKUs and require larger warehouses. According to an industry insider revealed to Tech Planet, since February of last year, the newly expanded warehouse area of the Little Elephant supermarket has been over 800 square meters. In the Hangzhou Market, which opened a new terminal in early December this year, the warehouse area of the Little Elephant supermarket has reached a maximum of 1,000 square meters.$Missfresh Limited (MFLTY.US)$,$Dingdong (DDL.US)$The front warehouse area is generally 300 to 500 square meters.
Li Ming, a fresh e-commerce practitioner, told Tech Planet that in the fresh e-commerce sector, Pak Pu supermarket is a front-end fresh e-commerce with large warehouses. The main warehouse area is 800 to 1,000 square meters, and the operating SKU is 6,000 to 8,000, mainly fresh, while taking into account all categories.
In his view, Xiaoxiang supermarket has a similar development path to the Pu Pu supermarket. It starts with fresh products and then uses the large warehouse model to expand SKUs. The product structure is gradually getting closer to traditional supermarkets. In the future, it will drive profit growth through richer categories and higher customer unit prices.
But that also means high costs. Li Ming further stated that excluding costs such as rent, etc., the cost of investing in a front-end warehouse with a thousand square area is usually in the millions level. Generally speaking, for warehouses of 300 square meters to 500 square meters, the average daily order volume is 1000 to 1500, only then can profit and loss balance be achieved in a single day.
On the one hand, the challenge for Xiaoxiang supermarkets is to further develop the mentality of users. Wang Qian, a supplier at Xiaoxiang supermarket, told Tech Planet that when it first began to expand the non-food category, Xiaoxiang supermarket would invite suppliers directly from the KA channel to ensure more stable quality control. The platform is still in its infancy, and the overall order volume is not high. Wang Qian said that judging from the winter clothing products she runs, the average daily sales volume is currently around 10 orders.
Wang Qian explained that at present, the annual sales volume of products on the KA channel can reach 10 million, and the annual sales volume in Xiaoxiang supermarkets is at the level of one million. Also, in the Xiaoxiang supermarket, two months after a new product is launched, it will be eliminated if sales are poor. In her opinion, in the non-food category, products such as tissue paper towels, which are consumed more frequently and have a brand effect, sell better in Xiaoxiang supermarkets and have an advantage.
Another Xiaoxiang supermarket supplier said that at present, the expansion of all categories on the platform is still mainly household and daily chemical products, because the cost of the Xiaoxiang supermarket's self-operated model is high, so it is necessary to ensure that the products have a certain premium room. However, the high-priced unit price products he supplied are still at a loss.
Since Meituan Grocery Shopping changed its name, Xiaoxiang Supermarket's own brand development has also received a lot of attention. Fresh e-commerce has already bid farewell to burning money in exchange for growth and has begun to overcome the profit problem. Currently, Dingdong's grocery shopping is still mainly in the fresh food category, increasing gross profit through its own pre-made food brands. Currently, the “Delicious Kirin List”, which currently ranks first in the app, actually includes many of Dingdong's own grocery shopping brands such as “Dingdong Daimangwan,” “Cai Changqing,” and “Paul's Workshop.” Previously, Dingdong Grocery Shopping and Hema Xiansheng all disclosed that their goal was to increase the share of their own brands to more than 50%.
As far as Little Elephant supermarkets are concerned, they have also been adding more “elephant chefs.” In Hema Sam's “Shifting Prices” this year, Meituan also launched the “Tug of War” theme. The products all come from “Like Chef.” As can be seen from the Xiaoxiang supermarket app, Meituan's self-operated brand products focus on categories such as fast food noodles, dairy baking, and prepared dishes, and also cover categories such as alcohol, beverages, snacks, and department stores, but the latter currently has fewer SKUs.
Open a new site in seven days
On the fresh e-commerce circuit, Dingdong grocery shopping further withdrew from Sichuan and Chongqing this year, suspending all business in the southwest region. Meituan Grocery Shopping, on the other hand, is restarting its expansion. In February of this year, Meituan Grocery Shopping restarted the Suzhou Kaicheng Plan, which had been put on hold at the beginning of last year.
According to the official disclosure of Xiaoxiang Supermarket, it has now covered cities such as Shanghai, Beijing, Shenzhen, Guangzhou, Langfang, Foshan, Wuhan, and Suzhou. The latest development is that on December 2, the Xiaoxiang supermarket Xintuocheng entered Hangzhou, which is also the home base for shopping groceries in Dingdong. This means that Xiaoxiang Supermarket has achieved business coverage in the three regions of North China, East China, and South China.
A relevant person in charge of the Little Elephant supermarket in the Hangzhou area told Tech Planet that currently Hangzhou is dominated by Dacang (800 to 1,000 square meters), and progress is basically expanding at the rate of one site per week. It is expected that 50 to 60 stations will be opened in Hangzhou. Due to early newcomer allowances and other benefits, Xiaoxiang supermarket had an average daily order volume of 4,000 to 6,000 orders in a single warehouse in Hangzhou. It is expected that after stabilizing later, the average daily order volume will be around 2,000 to 3,000 orders.
At the same time, the person in charge mentioned above said that Okura has high investment costs. Currently, it is concentrated in first-tier cities and new first-tier cities in developing cities, and other cities will carefully consider it.
Prior to the expansion, Meituan also made a series of adjustments in grocery shopping. According to the “Late” report, Meituan Grocery Shopping Center shut down warehouses with poor efficiency. In 2022, the average daily order volume of Meituan Grocery Store (300-400 square meters) was stable at around 1200 orders, and Kokura has reached a break-even point. Furthermore, while developing the city, Meituan Grocery Shopping Management has also made adjustments. In April of this year, during the organizational restructuring of Meituan Preferred, the Customer Experience Department was abolished, and the former person in charge was transferred to Meituan to buy groceries. On September 12 of this year, Meituan released an internal letter announcing that the head of the grocery shopping business changed from Zhang Jing to Wang Ruochong, who was originally responsible for the quick donkey business. Zhang Jing, head of the grocery shopping division, was promoted to Group Vice President.
It is worth noting that in Meituan's new businesses (Quick Donkey, Meituan Preferred, Meituan Grocery Shopping, etc.), Kuai Donkey took the lead in achieving national gross profit correction in 2022. As the management of Quick Donkey is transferred to Meituan to buy groceries, outsiders generally believe that it may help Meituan Grocery Shopping increase its profitability.
Then, in December of this year, Meituan Grocery Shopping announced that it would change its name to Little Elephant Supermarket. Regaining the “Little Elephant” IP has also attracted industry attention. As early as 2017, Meituan launched “Octopus Fresh”, an offline fresh food supermarket similar to Yonghui Super Species and Hema Xiansheng, and later changed its name to “Little Elephant Fresh”. The integrated storehouse model later received a mediocre response, and the service moved to the Meituan Grocery Shopping App launched in January 2019.
The name change is still being adapted for the user terminal and Meituan grocery shopping staff. Having been delivering Meituan groceries for three years, Miao Tian recently changed to a green kit with the Little Elephant supermarket logo. “I'm still not used to it,” he told Tech Planet. “In the past, the Meituan grocery shopping category has also been expanding. Judging from the college area he is responsible for, the name change has not had much impact on the daily order volume.”
Tear off fresh labels and aim for instant retail
Removing fresh food labels, another role of Xiaoxiang supermarkets is to help Meituan further expand its real-time retail market. Compared to the Red Sea market for far-field e-commerce, known as instant retail for near-field e-commerce, it has become a must-compete place for major Internet companies in the past few years.
Meituan explained to Tech Planet that under the focus of Meituan's “retail+technology” strategy, Xiaoxiang Supermarket carries the task of “deepening instant retail and improving the consumer experience” and is one of the core business formats of the company's online retail exploration.
Currently, there are two main models for Internet giants to develop online supermarkets. One is a self-operated model with front-end warehouses to provide same-day or next-day delivery services through express logistics, such as JD's own, Tmall supermarkets, etc.; the other is the platform model. The platform does not directly own products, but cooperates with local merchants. Users place orders through the platform, and finally the riders deliver goods, such as JD to their homes and Meituan flash sales.
However, almost all major Internet companies are involved in both models. This year, Douyin also launched the Douyin Superstore and Douyin Hour Delivery business segments.
Judging from Meituan, Meituan flash sales have shown the growth potential of instant retail. Up to now, Meituan Flash Sale has cooperated with 4,600 major retail chains, 370,000 small local businesses, 5,000 convenience stores, and 350 brand manufacturers.
Meituan Preferred, on the other hand, has increased the speed of implementation of the agreement this year. Beginning in September of this year, Meituan Preferred launched the “Morning Delivery” delivery service, which accelerates self-pick-up from 4 p.m. to 11 a.m. Since changing its name to “Tomorrow's Super Market” last year, Meituan Preferred plans to expand the number of SKUs from 1,500 to 3,000, which is close to the level of a membership-based supermarket.
Meituan Preference is closer to sinking market demand, while users of Xiaoxiang supermarkets are mostly concentrated in Tier 1 and 2 cities. Moreover, compared to Meituan Preferred, Xiaoxiang Supermarket has a faster execution speed. Unlike the platform model, which generally earns revenue through technology and service fees, the self-operated model of Xiaoxiang supermarkets mainly profits through product sales price differences. It is an asset-heavy investment, but it allows the entire platform chain to control the quality of products and services.
The timing for the name change to “Little Elephant Supermarket” also coincided with Meituan's disclosure of its third quarter earnings report. At the performance exchange meeting, Meituan management no longer emphasized “firm investment” in the new business, but instead changed to “in the long run, if the new business has very limited opportunities to earn independent and substantial profits, we will adjust resource allocation accordingly.”
Li Ming, a fresh e-commerce practitioner, believes that by changing the name of Xiaoxiang Supermarket, Meituan is still trying to highlight its self-operated model. What will be tested in the future will be the ability of Xiaoxiang supermarkets to combine products. Traditional supermarkets generally channel the flow through fresh products and rely on other high-margin products for profit. Developing the mentality of Xiaoxiang supermarket users is the key, such as whether users will buy Maotai within the platform,$Wuliangye Yibin (000858.SZ)$Such as low frequency, high customer unit price products.
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