After gaining growth advantages in the Jiangsu Zhejiang Shanghai region, Dingdong Maicai plans to increase investment in pre positioned warehouses.
On the evening of November 6th, Dingdong Maicai (NYSE: DDL) released its Q3 2024 financial report, with both scale and net profit reaching new highs, and revenue reaching 6.54 billion yuan, a year-on-year increase of 27.2%; GMV (Gross Merchandise Volume) reached 7.27 billion yuan, a year-on-year increase of 28.3%.
Compared to revenue, Dingdong Maicai's net profit growth is more prominent. After achieving a remarkable increase of nearly 13 times in net profit (non GAAP) compared to the previous quarter, the platform achieved a net profit of 160 million yuan in the third quarter, a year-on-year increase of more than 9 times, with a net profit margin of 2.5%. At the same time, under the US Generally Accepted Accounting Principles, the net profit reached 133 million yuan, a year-on-year increase of over 62 times.
Thus, Dingdong Maicai has achieved eight consecutive quarters of non GAAP profits and three consecutive quarters of positive revenue growth.
Dingdong Maicai executives pointed out during the earnings conference call that the rapid growth in performance is mainly due to the rapid increase in user scale, average revenue per user (ARPU), and penetration rate in existing regions. The financial report shows that in the third quarter, Dingdong Maicai achieved a year-on-year increase in the average monthly number of users who placed orders and the average monthly ARPU value of users.
The Jiangsu, Zhejiang, and Shanghai regions have increasingly become the focus of the platform's development and the engine of its growth. In the third quarter, the company achieved a year-on-year growth of over 50% in GMV in 13 cities in the Jiangsu Zhejiang Shanghai region.
Among them, the year-on-year growth of GMV in Shanghai and Jiangsu Zhejiang regions was 24.5% and 40% respectively, mainly due to the newly opened front-end warehouses and the increase in user penetration rate. As of the end of the third quarter, Dingdong Maicai has completed the opening of 80 new pre warehouses, of which more than 40 new pre warehouses were opened in the third quarter, with an average daily order volume of 866 new warehouses.
The stable development in Jiangsu, Zhejiang, and Shanghai has prompted Dingdong Maicai to restart its expansion strategy. In the second quarter, Dingdong Maicai announced that it expects to open about 80 new pre positioned warehouses within this year; In the third quarter, the goal became to open approximately 110 new pre positioned warehouses for the whole year.
For Dingdong Maicai, although the pre warehouse model has become relatively stable, there are still two major challenges.
On the one hand, Dingdong Maicai's strategic focus is on validated regional markets, which may have limitations in market size to some extent. For example, in Beijing and the Guangzhou Shenzhen region, the year-on-year growth rate of Dingdong Maicai GMV in this quarter was 14.6% and 2.9%, respectively, which was significantly lower than that in the Jiangsu Zhejiang Shanghai region. In the second quarter of this year, the year-on-year growth of GMV in the Beijing region was only 8.5%.
On the other hand, a major factor affecting the profitability of fresh food e-commerce is performance fees, but there is limited room for improvement in this indicator at present. In the third quarter, the performance fee rate of Dingdong Maicai was 21.4%, an improvement of 1.8% compared to last year.
On the premise of adhering to the pre warehouse model, Dingdong Maicai's major direction of effort in recent years is the differentiation of product development. During the earnings conference call, company executives revealed that the 45 opportunity categories they focused on this year, such as fresh seafood, drinking water, sandwiches, beverages, ice cream, etc., effectively drove the frequency and quantity of user purchases in the third quarter, contributing to more than half of the overall GMV growth year-on-year. Ding Dong Mai Cai founder and CEO Liang Changlin once again emphasized that product power has always been the company's primary driving force.
It is worth mentioning that this year, the fresh e-commerce market has entered a new phase: old players are seeking stable development, and some players are restarting the battle.
According to LatePost, Hema has made adjustments to slow down the "discount reform" that was launched in October 2023. JD.com and Meituan continue to lay out their front warehouse track, and recently JD Seven Fresh has launched a huge discount campaign. In November, the platform disclosed data stating that three days after the launch of the event, both the number of online orders and the number of transactional users achieved double-digit year-on-year growth.
These actions will more or less affect the development rhythm of Dingdong Maicai, but overall, market competition has not yet entered its final stage.
Chinese food industry analyst Zhu Danpeng told Interface News that fresh food e-commerce is currently in a stage of increasing demand, and although some platforms are losing money, capital can still see the prospect of sustainable development. This is also why platforms are optimizing and adjusting to continue investing in products with high demand and strong stickiness. But he still believes that without strong capital support, it is difficult for fresh e-commerce to achieve final profitability, and its future development still needs further observation.