(Yicai Global) Jan. 18 -- The spring of fresh food e-commerce has arrived as new business models shape the way companies can quickly deliver produce to consumers' front doors, according to the founder of Capital Today, an investment firm engaged in the sector.
Convenience stores and group buying within residential communities and forefront warehouses will open up new channels for fresh food to be delivered, Xu Xin, also Capital Today's president, told Yicai Global. Forefront warehouses are sited within a few kilometers of communities to allow for quick delivery.
The biggest challenge in the sector has always been the cost of cold chain logistics and long delivery times, which make it unappealing to many customers looking to get their fresh food as soon as possible and left retailers targeting high-end markets, he added.
"Vegetables, fruits and other fresh goods are, after all, fast-moving consumer goods -- and shoppers are still quite price sensitive," Xu said. "Fresh food delivery should be almost instant, so it needs to be completed soon after a user places an order."
The sector had a breakthrough when startups like FruitDay and Dingdong Grocery started offering sub-30 minute delivery times two years ago, and group marketing on social media apps like WeChat is lowering the costs of obtaining new customers.
"We began taking just hundreds of orders a day in May 2017," Dingdong Chief Executive Liang Changlin told Yicai Global. "Our daily orders reached 150,000 by December last year, and increase of over 100 times in just a year and a half."
Fresh food e-commerce has developed rather slowly and suffered low profitability in recent years. But demand for food is rigid, and there is still room for further growth, said Cui Lili, executive director of the E-Commerce Research Institute at Shanghai University of Finance and Economics.
Another factor working in the sector's favor is young consumer groups, particularly those born in the 1980s and 1990s. These people are lazier and have shorter attention spans than their ancestors, results from a Capital Today consumer survey show, meaning they would rather have their food delivered than have to go to the local supermarket or grocery store.
Editor: James Boynton