Grocery delivery platform, Missfresh (NASDAQ: MF), has filed for an initial public offering (IPO). The Chinese company is backed byTencent, and did not disclose any pricing details nor a listing schedule for its IPO. Instead, the company used a placeholder value of $100 million when calculating its filing fees. The company had previously raised $495 million in a funding round led by the China International Capital Corporation.
Key Operating Numbers
Missfresh was founded in 2014 and offers over 4,000 different kinds of fresh produce, including fruit, meat, personal care products, seafood, snacks, and vegetables on its platform.
The Beijing-based company says that, on average, it is able to deliver its products to its customers within 39 minutes. Considering the size of China, this is a very impressive feat. Missfresh has been able to achieve this by increasing its logistical node density and building a massive network of mini-warehouses close to customers across China’s 16 cities.
The company has won over 31 million customers as of March 2021. In 2020, it earned a gross merchandise value (GMV) of $1.16 billion, an increase of just 0.2% from the previous year.
Missfresh has been a unicorn since 2017, but as research shows, the number of profitable unicorns is very small. As is typical with many IPOs, Missfresh combines rising revenue with an inability to earn any profits. Not only is Missfresh unprofitable, but it has also been so for the last three years. The platform’s net loss for 2020 was a massive $252 million. This is in spite of revenue growing by 2.2% in 2020, to reach $936 million.
Missfresh Has a Scale Advantage
Missfresh has an incredible advantage when it comes to e-groceries. This is because, as we alluded in discussing its average delivery time, being able to deliver quickly requires building a massive network of warehouses close to consumers, warehouses not unlike Go Mini’s storage pods. That kind of expenditure is well beyond what rivals can offer and it’s a cost that is rising given the way global supply chain disruptions have increased real estate prices, as well as the cost of various inputs necessary to developing this infrastructure. Consequently, many of Missfresh’s rivals, as well as Missfresh itself, collaborate with or are backed by an internet giant. These kinds of joint ventures ensure that Missfresh and it’s few rivals have access to the cash necessary to succeed as well as the technology they need to offer their products to their customers.
Missfresh’s partnership with Tencent is an example of how e-grocery platforms work with internet giants. Missfresh is deeply embedded into Tencent’s WeChat messenger. Alibaba, on the other hand, offers its own Freshippo platform, which is part of a supermarket chain it owns. Meituan, the restaurant delivery platform, has added e-groceries to its offering. Dingdong Maicai bucks the trend of partnerships with internet giants, and has instead sought funding from venture capital firms Gaorong Capital and Qiming Venture Partners.
The shift to digital will likely survive the return to normalcy in the post-pandemic world, and this will ensure that Missfresh will be an interesting company to look at when its IPO details are unveiled.