Tech Buzz China

WHAT DO THESE TWO COMPANIES HAVE IN COMMON? The two warehouses you see in this video are so-called front-end warehouses. These companies, Meituan Xiao Xiang and Dingdong Maicai, are two competitors using one of the three business models of instant retail you will find in China. They deliver food products (including fresh produce) from these warehouses within one hour to consumers in a radius of 3 km. I have written extensively about them for Tech Buzz China in 2023 and am planning an update in early 2025. I also spend one of the masterclasses during our ChinaTechTrip tour explaining their business models. We normally aren't allowed to enter the warehouses, where cameras monitor staff; the warehouse manager could get in trouble. But I normally make a quick stop at one of these places anyway. I find it amusing that these two competitors are often located right next door to each other and that there are always two armies of couriers waiting in front of them. 'The Meituan business seems to be better', one of the participants of our recent ChinaTechTrip with K5 - Future Retail told me. 'Why?' I asked. 'Because it has more couriers waiting'. 'Well, maybe that proves that their business is actually worse than Dingdong's', I said. 😉 Besides being in the same market segment and located right next to each other, what else do these two have in common? They both have recently started business abroad. Meituan is launching Xiao Xiang in Saudi Arabia after first launching its food delivery business under the name Keeta there. Dingdong has also started operating in Saudi Arabia, selling pre-prepared meals, fresh food, refrigerated food, and general merchandise. Yes, folks, what happens in China does not stay in China ... Footage taken by guligo jia during the recent K5 - Future Retail study tour. For information on our 2025 tours, check out ChinaTechTrip.

WHATEVER HAPPENED TO JD’S HEMA (FRESHIPPO)-CLONE 7FRESH? On our ChinaTechTrip study tours, we used to visit both Alibaba’s Hema (Freshippo) and JD’s 7Fresh stores. When new concepts emerged, we dropped the 7Fresh visit since our travellers said it was too similar to Hema, and my research for Tech Buzz China showed it was not as successful. Lianshang just did an interesting analysis of the different paths of the two store + warehouse model supermarket chains. Here’s a summary. Some strategies of 7Fresh: ▶️ Positioning: high-quality fresh products, integrated online and offline operation model (delivery within 3 km in ~30 min). ▶️ Data-driven: use JD.com's big data analysis to build a portrait of the target users, accurately locate user consumption, and select the most suitable product pool from the massive SKUs of JD.com. ▶️"Black technology" in stores, such as magic mirror traceability, face payment, self-service checkout, etc. When 7Fresh launched in 2018, JD claimed it would open 50 stores that year and 1,000 in 3-5 years. It reached 10 in 2018 and has about 70 now. Hema has over 400. Possible reasons for the relative lack of success: ▶️ 7Fresh launched 2 years later than Hema.          ▶️ JD faced challenges with a lack of overall profitability; high investments offline were too risky ▶️ Lack of differentiation from competitors (precisely what our tour participants also mentioned). After 2019, 7Fresh tried various new concepts, including small community supermarkets (7Fresh Life) and stores targeted at office workers. The chain also implemented various optimizations, global sourcing and cooperation in the retail market. However, during the rapid changes during the pandemic, 7Fresh failed to seize new opportunities and other instant retail models, like Dingdong’s front-end warehouses, grabbed the market. 7Fresh decided to focus on the Beijing-Tianjin-Hebei region and the Greater Bay Area (Guangdong, Hong Kong, Macao). It improved order-picking efficiency and, thereby, delivery speed and flattened the organisation structure. By the end of 2021, GMV had increased to RMB 3 billion, several times higher than the (very low base!) in 2020. However, the chain was still lacking differentiation... Meanwhile, since 2018, 7Fresh changed CEOs three times, and none seemed to have a clear long-term development plan, while some good ideas fell by the wayside and never got fully implemented … 7Fresh opened its first store in Shanghai this year. Like Sam's Club, it also launched front-end warehouses (‘satellites’). So, after copying Hema, Sam’s Club, which runs over 500 front-end warehouses, is now 7Fresh's example. 7Fresh continues to lack uniqueness…

The secret of instant retail can be found deep within the bowels of Beijing. The real innovation in Chinese retail isn't in robots, gimmicks and gadgets but in smart business models. During one of the days of the ChinaTechTrip study tour we zoom in on different forms of instant retail in China. After a morning masterclass explaining various business models, we head into the city to explore them in real life. One of the most successful concepts concerns lightning warehouse. We visited a Xiongben warehouse, deep below the ground in a residential area in Beijing. On first sight it might look like a strange underground supermarket or a dark store of a flash delivery company like Gorillas/Zapp/Getir/Flink. But lightning warehouses are different. They are often run by convenience store entrepreneurs who have moved their businesses to places with cheaper rentals and expanded the number of SKUs they can sell. Unlike many of the failed flash delivery companies in Europe, lightning warehouses do not run their own sites/apps and do not deliver. They cooperate with the likes of Meituan and Eleme that offer digitization and couriers for them and have hundreds of millions of users in their multi-functional platforms. As I explained in a Tech Buzz China report last year, lightning warehouses make the difference between loss-making and profitable instant retail for these entrepreneurs. Xiongben has already expanded to 50 lightning warehouses in Beijing. Meituan plans to expand the 30.000 lightning warehouses it currently works with to 100.000 in 2027, generating more than $25 billion in GMV. You'll be able to learn more about this and many other innovative retail concepts during the ChinaTechTrip tours in 2025. Visit the LinkedIn page for more information.

I'm just going to leave this image out here ... Taken from Marketplace Pulse Year in Review 2024. Most people I meet at seminars where I present a ChinaTalk keynote have not yet woken up to this new reality. We are stuck in a complacency of ignorance and sometimes arrogance. Be smart in 2025 and get more informed. We can help in two ways: our Tech Buzz China reports on cross-border e-commerce and hardware products coming at us from China (e.g., EVs) and our ChinaTechTrip study tours which help you gain competitive intelligence. You might think you don't have time for this and can't free up a week in your agenda in half a year because business is so busy. But if you keep procrastinating, you might not even have a business in a few years. Read the rest of Marketplace Pulse's slides for more eye-openers if you need more reasons. https://lnkd.in/eQE3gSMC

A quick reminder. This month, we have opened the ChinaTechTrip timeslot of 13/4 - 19/4/2025, during which we have prepared a study tour about retail innovation, on a first-come, first-served basis. Our complete program includes visiting Beijing, Hangzhou, and Shanghai and delving into topics like e-commerce, ecosystems, instant retail, live commerce, C2M, and cross-border e-commerce (Temu, Shein, etc.). We have morning masterclasses, afternoon excursions, Chinese cuisine, and entertainment in the evening. Previous participants have rated the program with a 9.5. The tour will inform you about the latest trends and innovations in Chinese online and offline retail and provide competitive intelligence on new Chinese e-commerce players entering your market. A group of Dutch participants is slowly filling up. If you speak Dutch and want to join, don't wait and register here: https://lnkd.in/eAjbZCsU If you are an organisation that wants to book this timeslot for your own (private) tour with customers, staff or members, please contact me. We've been talking to many interested individuals and organisations, but a lack of urgency leads to procrastination. 'Maybe next time.' Meanwhile, new Chinese competitors go full steam ahead while you think it's not important enough to free up one week in your agenda. We can't wait, and neither should you. Therefore, whatever comes first, a Dutch group of at least 10 participants or a client for a dedicated tour, will be served. PS: this is the only remaining chance to join us for a tour in 2025. We are fully booked in the autumn of next year.

This evening (December 9th), Lianne Baaij and I will answer the following questions at a Vereniging Nederland China VNC China Café event: ▶️ How has Temu expanded its market share so quickly in the Netherlands and Europe? And how about Shein? ▶️ What technological and logistical innovations do these companies use to differentiate themselves from traditional players? ▶️ What makes these webshops so appealing to consumers? ▶️ How can these webshops offer so many products at such a low price level? ▶️ Are consumers aware of the environmental impact of these platforms, and how does this influence their purchasing behaviour? ▶️ How do Temu and Shein address criticism regarding sustainability and labour conditions? ▶️ What about product safety and quality? ▶️ Are there privacy, data security, or national security concerns regarding using apps like Shein or Temu? ▶️ What new developments or strategies can we expect from platforms like Temu and Shein? ▶️ How do you see the future of Chinese e-commerce platforms over the next five years? Join us for a drink and get more informed about your new Chinese competitors (or partners). Date: December 9th. 2024 Time: 17:00 – 19:00 Location: Stadsbrasserie De Utrechter, Vredenburg 40, 3511 BD Utrecht, The Netherlands Tickets for this event are €12.50. Registration link in the comments.

Join us for a ‘fireside chat’ on Chinese webshops like Temu and Shein Next Monday, I will sit down on a bar stool with a beer to discuss Temu and other Chinese webshops with Lianne Baaij of Vereniging Nederland China VNC. A lot has been written and said about Chinese webshops, some facts, some fiction. In our discussion, I will share insights from the 2+ years I spent researching them for Tech Buzz China. We will discuss the factors behind their success, whether we should be worried about these webshops, and what we can expect in the future. Besides answering Lianne’s questions, I'm also looking forward to the interaction of a Q&A with the audience, and there will be ample opportunity for sharing drinks and networking afterwards. Everybody is welcome to join, but especially if you work in retail or e-commerce, I would urge you to come and listen to well-researched information about these webshops and why they won’t be the last ones to arrive in our markets … Date: December 9th. 2024 Time: 17:00 – 19:00 Location: Stadsbrasserie De Utrechter, Vredenburg 40, 3511 BD Utrecht Tickets for this event are €12.50 Registration link in the comments.

The choice is yours … You can believe the echo chambers of some media that continue to write absurd claims about Temu, like the Gazet van Antwerpen did this weekend: “The Chinese companies are controlled and financed by the regime in China, they do not have to take into account working conditions or environmental legislation and they have a free promotional channel: Tiktok, also owned by the Chinese government.” … or, especially if you are a brand or retailer, you can go for factual, well-researched information about Temu, its successes and challenges, and what we can expect of it in the future. At Tech Buzz China, I have been writing about Temu since its launch in September 2022. We are very well informed about its parent company, Pinduoduo, and therefore can put Temu in the right perspective and context. We’ve published nine reports about Temu and have even started a recurring Temu Watch series. Our research is based on Chinese tech media, which are much better informed about their domestic companies than we are, and tens of expert interviews with people close to Temu and Pinduoduo from the Six Degrees Intelligence network. In the past year, I've been interviewed about our Temu reports by everything from provincial newspapers in my country to The Wall Street Journal and appeared on various international podcasts to discuss our finding. Even if you don’t take a paid Tech Buzz China subscription, the free preview sections of our reports, which normally give you 1/3rd to half of the report for free, contain loads of valuable information. I also publish free excerpts frequently on ChinaTalk. If you are a retailer, e-commerce platform or brand, staying informed about Temu and other webshops and understanding their strategies is essential. It offers severe threats (which I continuously see underestimated in the market) and maybe also some opportunities. It won’t go away and based on what it’s parent company, which is run like a military operation, has achieved in the home market (becoming a top 3 e-commerce company and number one in community group buying) I seriously expect it to be able to reach its goal of becoming #2 in the US and #1 in Europe. So, the choice is yours. Believe the parroting of nonsense or get informed about your new competitors.  

Just in time for Black Friday: Temu Watch #5: Logistics, marketing, AI and the question 'When will Temu break even?' In the second part of our quarterly Temu update at Tech Buzz China, we examine the latest developments in Temu’s logistics, marketing & advertising strategies, competition with Amazon and the current profitability and expectations for the future. We also share some insights about the ways Temu applies AI. Here's the table of contents: - Logistics Warehouses Sold on Temu, fulfilled by Amazon - Marketing Meta and the four little dragons Applovin Promoting Semi-Managed Planning around Amazon Year-end promotion Customer acquisition and retention Advertising in Europe vs the US Subsidizing by Temu - Amazon versus Temu - AI and Big Data - Profitability - Looking ahead Further differentiation of operating models ‘Self-operated semi-management model’ Third-party platform How long can this continue? P.S. Control yourself during the next few days. Don't buy things you don't need.

Temu's GMV is expected to almost quadruple in 2024 That's one of the conclusions in our latest Temu Watch report on Tech Buzz China, compiled from a series of expert interviews in China. The Q3 GMV was comparable to the whole of last year, and with the shopping season of Black Friday, Christmas, and several other regional holidays approaching, Temu might exceed its own GMV target of $60 billion this year. Temu is facing many challenges, like the threat of abolishing import-free thresholds in both the US and EU and a damaged reputation due to dodgy product quality. In Temu Watch #4, we discuss how it is dealing with these issues. Also, keep an eye out for Temu Watch #5 this Friday. We will discuss Temu's developments in logistics, marketing, and profitability and provide an outlook on what to expect.