U.S.-Listed Chinese E-Grocers Bleed Red Ink Despite Rising Orders

Missfresh Ltd. and Dingdong Ltd., both U.S.-listed Chinese online grocery platforms since the summer, suffered widening losses in the third quarter even as revenues grew.

In the three months through September, Nasdaq-listed Missfresh’s net loss attributable to ordinary shareholders swelled to 973.7 million yuan ($151.1 million) from 616.2 million yuan a year ago, while its revenue rose 47.2% year-on-year to 2.1 billion yuan, according to its earnings report released last week.

The revenue increase was primarily driven by an increase in online orders from more users and a boost in next-day delivery sales, the company said.

Meanwhile, New York-listed Dingdong reported a net loss of 2 billion yuan in the third quarter, compared with a 828.6 million yuan loss in the same period of last year, even as its revenue more than doubled to 6.2 billion yuan, according to its financial report published on Monday.

The widening losses came as operating expenses at Missfresh and Dingdong increased 70% and 117% year-on-year respectively to 1.2 billion yuan and 8.2 billion yuan, their reports showed.

The two companies, which sell both their own brands and those owned by third parties, said they will increase the share of the former on their platforms and improve their supply chains in order to grow their gross margins, a key indicator of profit-earning ability.

Dingdong’s own brands, launched last July, now make up 5% of sales volume on the platform. The firm’s founder and chief executive, Liang Changlin, said he hoped they would make up 30% in the long term during an earnings call on Monday.

The way Liang sees it, Dingdong’s road to profitability has three phases: First, its hometown operation in Shanghai will break even in the coming quarter and drive growth in the Yangtze Delta region; second, its operating cash flow will break even; and lastly, it will deliver a positive net income to shareholders.

Liang said during the IPO process, the firm predicted it would turn profitable in the fourth quarter of 2024. “We are now even more optimistic about our timeline to achieve profitability based on the current status of efficiency improvement,” Liang said.

As for Beijing-based Missfresh, founder and chief executive Xu Zheng said the company will continue to focus on courting affluent customers in big cities.

In an earnings call on Nov. 11, Xu also said the firm, which is known for its “distributed mini-warehouses” that store goods to shorten delivery times, will seek to improve its upstream supply chains and logistics.

Xu said the company’s intelligent fresh market business, which sells technology and services to existing groceries with a focus on smaller cities, began operating at 52 stores in September.

Authors: Yuan Ruiyang, Ding Yi, Kelsey Cheng, Caixin Global