Staying Fresh in China’s Online Grocery Business: Cecilia Sun of Miss Fresh

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Online grocery retailer Miss Fresh has two key features: one, instant delivery, requiring up to 30-minutes for home delivery, and secondly, a full grocery offering of fruit, vegetable to packaged food.

As partner and COO at Miss Fresh, Cecilia Sun joined the firm in 2015. Fresh (pun intended) out of Baring Asia and Deutsche Bank, the private equity investor holds dual bachelor’s degree in economics and statistics, master’s degree in finance from Peking University.

A member of Forbes 30 under 30, Cecilia Sun shares her expertise in keeping the business novel, interesting and attractive.

Differentiate Your Business

Grocery stores bringing their business online is nothing new. Brands like Instacart and JD Daojia (京东到家) digitised the offline shopping experience - however, the experience isn’t without trouble. In tier-one to tier-three cities in China, rent is sky high, and so is labour. This results in very low margins for stores ranging from 0 to 3 per cent net margins. With home delivery, the burden of delivery cost ranges from 5 to 10 per cent. This results in a less than ideal financial situation of causing customers to bear the delivery cost, to the brand’s detriment.

Miss Fresh, on the other hand, chose the route of building warehouses instead of physical stores to increase efficiency and to reduce cost. For physical stores, the delivery radius ranges 500 metres to 1 kilometre, whereas a warehouse covers 1 to 3 kilometres. On top of that, the rent is a third of a physical store, with increased capacity for storage - making a warehouse 10 times more efficient and advantageous.

Maximise Resources: Do More By Doing Less

Depending on its size, a warehouse can deliver around three to four orders per square meter. Each delivery personnel can deliver 60 to 70 orders a day; by comparison, leading food delivery service Meituan (美团) delivers 30 to 40 orders daily.

When you consider the high population density areas in China, it becomes feasible to deliver at a highly efficient rate due to them living in high-rise clusters. However, in lower-tier cities, this becomes more of a challenge. Despite this limitation, a strategic approach is implemented, where resources are focused in highly populated cities. The reason being, different lifestyles in lower and higher tier cities; the latter leads a busier lifestyle, thus needing more efficiency in grocery shopping to maximize their time.

At the end of the day, the business model is to help people save time, not kill time. Naturally, with it comes limitations like the aforementioned. The important thing is to employ the right strategy for the right audience, and use resources efficiently.

Find a Sweet Spot and Grow Your Business

The moment you enter the eCommerce industry, you’re faced with competition from the big boys: Alibaba, JD, and Meituan. Survival depends on how your business is different, and what you have to offer. In short, you need to find a sweet spot.

For instance, Alibaba and JD conduct inter-city business, essentially non-local business where they bring national goods from elsewhere and sell across the country. Meituan, on the other hand, excels in local service. They connect restaurants, movies and other services.

Miss Fresh began as local retail, where there was an initial struggle of low margins. For local services like theirs, the gross margin for a restaurant is over 70%, with 10% going to Meituan for profit. For retail, however, the gross margin is less than 50%, making a 10% platform commission close to impossible.

Thereby came the need for developing our own supply chain. Having found a sweet spot of owning Miss Fresh’s own offline facility, the efficiency of the entire supply chain can be increased and resources better allocated to serve customers.

This is also why upon entering the mobile application, the default delivery chosen is instant delivery. Reason being, the realm of second-day delivery is owned by companies like JD and Alibaba. The opportunity for Miss Fresh lies in delivery efficiency - convenience is a must for the customer. At the end of the day, the customer experience has to be as seamless as offline store shopping.

Constantly Innovate Through Changing Tides

Change is the only constant. More than just a saying, it is important for brands to recognize that and constantly adapt and innovate. During the outbreak of COVID-19, Miss Fresh encountered the challenge of not being able to enter communities in lockdown. Instead, orders had to be chosen at the gate, and customers had to pick it up. This, however, allowed efficiency to increase by about 10 per cent. Eventually, when lockdown measures eased, door-to-door delivery began and thus returned the additional 10 to 15 minutes per delivery.

More than that, COVID-19 has long-term impacts on the consumer’s shopping behaviour. Out of necessity, the online penetration quickened, and the older generation is adopting technology ahead of schedule. This brings in new customers for Miss Fresh, with a similar retention rate as the year before. This means that new customers are entering the platform, and staying on beyond COVID-19.

To cater to this growth, Miss Fresh increased the number of vegetables, meat and seafood stocked, and slightly decreased snacks and other goods. Despite this, it is important to realize that adapting goes beyond aggregating demand or promotions. More importantly, you need to figure out a way to maximize the efficiency of logistical delivery distribution.

Miss Fresh’s business model allows for increased efficiency in supply chain and distribution. It is a model that takes the path less travelled; one that takes time, effort and innovation. Establish yourself in the B2B realm, and eventually conquer the B2C space with an established capability and efficiency. At the end of the day, you need to find what best works for your business, and find where you belong in the industry,

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