MissFresh acquires Zailouxia, in a move to expand its unattended grocery store business model.
The deal’s value hasn’t been made public yet. MissFresh claims that the acquisition will allow it to add 10,000 self-service fresh food retail vending machines in nine Chinese cities.
Zailouxia, a Beijing-based startup founded in 2017, runs an unmanned convenience store that sells snacks, fresh fruits and vegetables, and other essentials like groceries.
What does MissFresh acquires Zailouxia bring to the table
MissFresh Limited’s efforts to drive the digitalisation and modernisation of the neighbourhood retail industry are reflected in this move. The agreement follows the company’s partnership with more than 5000 businesses in Beijing last August to install MissFresh Convenience Go Smart Vending Machines on their premises.
The Distributed Mini Warehouse model was launched by MissFresh Limited to run an integrated online and offline on-demand retail business that specialises in fast-moving consumer goods and fresh produce. Using the company’s mobile app and Mini Program, customers can order groceries and have them delivered to their door in an average of 36 minutes.
Zhang Ying, who also founded the grocery app Bee Quick in 2014, founded Zailouxia, which means “on your doorstep,” in 2017. Despite receiving four rounds of funding in its first year, Zailouxia’s operations began to deteriorate due to the high costs of maintenance.
Due to the pandemic, vending machines are once again becoming popular among consumers who prefer contactless retail. In 2020, Zailouxia plans to open 200 new locations, with each location’s revenue expected to increase by 100%. With 600 unmanned stores and 1,800 vending machines, the company has expanded significantly.
Unmanned retail is a risky business. Within a few days, meat, vegetables, and fruits can go bad. It is becoming more popular for people to shop at markets, where they can have more options and interact with other people, as the pandemic fades.
Over the past two years, MissFresh has suffered a 7.6 billion yuan loss in revenue. Only time will tell if acquiring Zailouxia is a blessing or a burden.
Zailouxia Business Model in a Nutshell
Zailouxia uses self-service kiosks to sell snacks, fresh food, and other necessities in residential areas. Customers can shop online via WeChat mini and pick up their purchases from the vending machine, thanks to the startup’s O2O model.
There are currently hundreds of Zailouxia selling machines in Beijing, and the company plans to expand both within the city as well as across China.
To support the company’s rapid expansion, the startup has upgraded its selling machines several times, allowing for mass production.
However, during the past few months, the startup has increased its SKU to about 2000. Customers can now get fresh food, such as salads, from it. In addition, Zailouxia claims to have partnered with well-known companies like Coca-Cola and Haidilao.
How MissFresh is different from Zailuoxia
Unlike vending machines, MissFresh focuses on providing fresh products through door-to-door delivery, and Mr Fresh’s line of in-office shelf services sells food, snacks, and beverages on shelves rather than in vending machines.
Over the next few years, MissFresh intends to expand to more than 100 cities in China by building over 10,000 front-end warehouses to support this expansion.
Unlike China’s traditional fresh product industry, MissFresh’s supply chain is much simpler and more efficient. Due to its lack of traditional components, MissFresh is the only link between the source and the dining table.
With only 3,000 varieties to choose from, MissFresh has a better position in the bargain – fewer varieties, but more quantity in the bargain. If customers can be satisfied with fewer options, then a larger quantity can lower costs. This is why wholesalers’ unit prices are lower than those of fine grocery stores.
Front-end warehouses are small transition points with storage functions close to communities and neighbourhoods. With the lack of front-end warehouses and refrigerated vans not being frequently used due to budget considerations, traditional fresh product providers suffer losses during the transit from regional transition centres to their final destinations.
Due to the simplified purchase process from origin to door, Miss Fresh is able to keep the rotting rate at around 5 per cent.
MissFresh’s efficiency and costs have been improved through the use of specific SKUs and front-end warehouses. MissFresh’s app generates content that has the potential to pique consumer interest and, as a result, drive sales. To keep its customers up to date on the latest products, MissFresh focuses on promoting freshness.
As a result of the marketing and advertising efforts, more people bought the product, which increased sales. At a break-even point in Tier-1 cities, MissFresh claimed to have generated CNY 280 million (USD 41.4 million) in August of 2017 and to have reached profitability.
There was a threefold increase in revenue in 2017 to over CNY 3 billion (US$ 443.1 million) and total revenue in 2018 of over CNY 10 billion (US$ 1.5 billion). Even though most competitors aren’t even close to breaking even, MissFresh is the market leader.
Source Links:
Missfresh Limited aquires unmanned retail vending machine company Zailouxia! — VADO (vadosrl.com)
