Caixin
Jan 13, 2017 04:20 PM
BUSINESS & TECH

Competition Bites Online Grocers in 2016

Photo: Shutterstock
Photo: Shutterstock

(Beijing) — Almost a third of China’s biggest e-commerce failures came from the fresh-food sector last year, as startups struggled under intensifying pressure from heavyweights that included Alibaba, JD.com and Wal-Mart Stores Inc.

Among the 13 largest e-commerce failures in 2016, four were from the fresh-grocery business, the most for any single category, according to a list compiled by retail information provider LinkShop.

The category may be less suitable for startups due to many complex requirements for perishable fresh foods, such as high-quality temperature-controlled logistics and fast delivery times, analysts said.

One of the four failures, fresh-fruit seller Guoshibang, said on its last day in August that the industry faced extremely stiff competition from well-funded competitors that were using subsidies and discounts as marketing strategies.

“We knew there would be a day when we would use up our bullets, but we didn’t imagine that day would come so fast,” the company said in its swan-song statement, as it closed up shop after only two years in business.

Another failed grocer was Shenqi, which scored new funding at the very beginning of 2016 only to quit the market nine months later due to lack of management experience. The startup’s CEO was 17-year-old Wang Kaixin.

Companies also failed after using up their budgets to hire expensive talent, said Li Chengdong, an independent e-commerce strategy.

Online grocers have faced challenges from traditional e-commerce giants that expanded into fresh food in search of new growth. JD.com Inc. and Alibaba Group Holding Ltd. got in a high-profile spending war over their respective fledgling grocery businesses over the summer as the two detailed promotions worth billions of yuan.

Other sectors that saw e-commerce startups die in 2016 included automobile selling and maintenance, travel, fashion, real estate and cross-border retail. Some secured as many as four rounds of fundraising, from renowned investors including Amazon.com Inc., Alibaba, JD.com, Baidu Inc. and Matrix Partners.

Some of the failures may have been the direct result of growing conservatism that made investors more cautious about lending to money-losing startups, Li said.

Contact reporter Coco Feng (renkefeng@caixin.com)

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