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China’s online grocers downsize as losses extend

Written by Jiaxing Li Published on     2 mins read

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Dingdong Maicai and Meicai, two online grocery platforms, have reportedly trimmed headcounts due to underwhelming business performance.

Two of China’s online grocery delivery platforms, US-listed DingDong Maicai and Meicai, have both laid off staff in recent weeks, at a time when losses are mounting and regulations are becoming stricter, Chinese media reported.

Community group-buying platform Dingdong Maicai reportedly laid off over 20% of its staff in core departments, including purchasing, algorithm design, and engineering, according to Sina Tech. The company said on Thursday that news about the layoffs was “untrue,” and said some personnel changes are underway.

Aiming to provide fresh produce for the middle-class households, online grocery platforms were deemed to be a hundred-billion-RMB market with exponential growth potential. However, the major players remain deeply in the red. Dingdong Maicai hasn’t turned a profit since it began offering services in 2019, and has reported an accumulated loss of over RMB 5.3 billion (USD 830 million) in the first three quarters of 2021.

The narrow gross margins and high cost for expansion are among the main reasons fueling the losses, Dingdong’s latest financial release shows. To break even, chief strategy officer Yu Le said they would cut costs and serve higher-value users.

E-commerce platforms that supply F&B businesses have also seen their growth remain stagnant. Meicai, a B2B online vendor that connects farmers with small and medium-sized restaurants, also reportedly laid off around 40% of its staff in Beijing, Chinese media website Phoenix Technology reported.

Amid Didi’s debacle after a mega IPO, Maicai halted its US IPO plans in July 2021 amid mounting regulatory scrutiny of overseas-listed firms, Bloomberg reported. The company’s estimated valuation then plunged by over USD 5 billion and triggered an investor sell-off, according to 36Kr. In September 2021, the grocery vendor trimmed over 50% of its staff in the R&D, purchasing, sales, and finance departments, according to Jiemian.

The once skyrocketing growth of China’s major tech companies has been weighed down by sweeping regulatory campaigns, and some of firms have streamlined their businesses and downsized in recent months in the face of a rapidly changing market environment.

Last week, Ele.me and Koubei, two main business lines of Alibaba’s local consumer service division, reportedly planned layoffs due to sluggish business. Short video platform Kuaishou laid off 30% of its staff in December 2021, after falling more than USD 1 billion in the red in Q3 2021.

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