No Hope for IPO? FruitDay is Facing Business Contraction
Since FruitDay accomplished its D+ round of financing in August 2016, more than two years have passed without the hope of IPO nor the next round of financing that the company waited for. Recently, a report published on a whole page of the Beijing Business Daily revealed that the FruitDay was in a plight and facing a strategic contraction. As is well known, the ultimate goal of venture capital is to obtain huge returns, which can be achieved by two means:acquisition or IPO, and the IPO is always the priority. While two years passed and FruitDay has neither been listed on IPO nor capitalized. It is no doubt that the FruitDay can no more count on the support of venture capital, which means that its strategic contraction would be inevitable.
It is reported that the FruitDay maintains Beijing and Shanghai, the two major cities, as the center of its business layout; yet the performance in the south east is better than that in the northern. Furthermore, the FruitDay is cutting down its product categories in North China; The cut-off time for next day delivery at Beijing is also modified from 20:00 to 16:00, indicating that its distribution becomes further less efficient.
The product categories shrink in North China, delivery becomes less efficient
Recently, the Beijing Business Daily reporter found that the available product categories of FruitDay in the North China are shrinking. The main products provided at its platforms are the gift boxed fruits and the card or voucher of different nominal values; while not many kinds of fruits are available. This August, FruitDay issued a notice on its App's front page, stating that due to its business adjustments, it would reduce its product categories in the region of North China since August 30, 2018.
However, the FruitDay Company denied the news about its reducing product categories in North China. Some responsible person of the company, in response to the question of the Beijing business Daily reporter, said that there is no reduction in the product categories on the mobile App platform; and that in addition to fruits, the FruitDay plans to increase its sales of fresh products and other categories in North China. The reporter also learned from a purchasing manager who is working for Fruitday in the North China region that the reduction of the categories in North China is mainly due to the company's focus on off-line City Shop sales.
In fact, the FruitDay has started its business in Shanghai and then entered the Beijing market, but the sales in the northern has never been well as that in the southern region. Taking its product categories for example, the reporter compared the FruitDay business in several cities such as Shanghai, Hangzhou,Tianjin, and Beijing, and found that the FruitDay offers these cities fairly different product categories. Compared to Beijing, FruitDay Shanghai has expanded its product categories with seafood, meat and poultry, egg and dairy, fast food, seasonal fresh vegetable, grain and cooking oil, nuts, etc. In regard to the above differences, FruitDay said that due to differences in supply chain, consumption habits, fresh-products distribution efficiency, etc., the differences remain in sales categories between North China and East China.
Meanwhile, the delivery of FruitDay in Beijing region is becoming less efficient: it redefined several times the cut-off time for orders promised to be delivered the next day, each time earlier than before. According to the announcement of the FruitDay, the cut-off time for the next day deliver is modified to 16:00, and the order after 16:00 would be delivered on the third day. FruitDay said that these changes are due to the requirements changing of its third-party logistic company in Beijing. As early as May of this year, the FruitDay had already modified its cut-off time of the next day deliver order to 20:00 ― earlier than before promised time.
Weak off-line advantage, poor channel integration
While the online business of FruitDay still needs intensive development, its off-line business is at the initial stage of “cold start”. As early as 2017, the FruitDay had begun to cooperate with the City Shop. However, the Beijing Business Daily reporter visited the City Shop and found that although all the fruits sold there are from the FruitDay, the cooperation between the two is yet rather superficial.
In the Beijing Qiaofu-Fangcaodi store of the City Shop, the Beijing Business Daily reporter saw the LOGO and packaging of the FruitDay in the fruit section. The small QR code of FruitDay can be found on the price tag of the supermarket; nonetheless, the code being scanned, only a small amount of items are available for the online order, and a delivery to surrounding quarters is unavailable.The store clerk said that the fruit ordered through the FruitDay App would not be delivered from the store. It is recommended to buy the store merchandise through a take-out APP such as Ele.me (literally “Hungry now”): evidently, the online and off-line sales systems are still separated.
The Beijing Business Daily reporter learned from the purchasing manager of the company that this May, FruitDay issued a prepay card “Fresh SmartCard” that can be used both in City Shop stores and in FruitDay App. While the cashier of the Qiaofu-Fangcaodi store of the City Shop market said that so far, the card has not been sold at the store, and no consumers have used it yet.
The reporter noticed that although a wide variety of fruits provided by the FruitDay supply chain are available at the City Shop ― seven to eight varieties of apples, of domestic or abroad production, including Luochuan apple, Jingning Fuji apple, New Zealand Envy apple, etc., the price is higher than that of Miss Fresh, another new emerging fresh food e-commerce retailer. The price of Thai longan in the City Shop is 19.9 RMB per 500g, while its price at Miss Fresh is only 9.9 RMB per 500g; the cherry tomato, in the City Shop, is sold at 14.9 RMB per 500g, in the MissFresh, 6.9 RMB per 500g.
Meanwhile, the reporter learned from the FruitDay that it has established its own warehouse in Beijing, but no self-built distribution system to end consumer, Fruitday has to rely on logistic system of JD.com since 2015. A source close to the FruitDay told the reporter that the delivery of FruitDay in the Beijing region always relies on third-party logistics, and its control over the cut-off time and delivery time for orders remains weak.
With the rise of MissFresh and FreshHema (another fresh products e-commerce company launched by Alibaba Group, literally “box and instant fresh”) and their business model characterized by a combination of online sales and widespread warehouses close to living communities; facing the intense competition from off-line fruit chain stores such as Pagoda and Xianfeng (literally “fresh harvest”), it would be hard for the FruitDay to maintain a position in the marketplace. How would FruitDay survive in the fierce competition of fresh products market in China? We will wait and see.
This report is from Beijing Business Daily, and translated only for reference.
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