Chinese grocery platform Dingdong posts first quarterly profit, but easing pandemic controls could slow industry growth
- Dingdong Maicai posted a US$900 million profit in the fourth quarter, but analysts see trouble ahead for the industry that boomed prior to eased Covid controls
- The platform could see increased competition from larger players like on-demand delivery giant Meituan and supermarket chains Yonghui and Wumart
Chinese grocery delivery firm Dingdong Maicai has posted its first-ever profit for the fourth quarter, an accomplishment that analysts say came at the expense of expansion, as the industry faces mounting challenges following the country’s easing of stringent pandemic controls.
Dingdong’s revenue last quarter climbed 13.1 per cent year on year to 6.2 billion yuan (US$908.3 million), while non-GAAP net income reached 116 million yuan, according to its earning results announced on Monday. This was a reversal from the 1.03 billion yuan loss it posed a year earlier.
The company also saw its gross merchandise value (GMV) increase 12.7 per cent year on year to 6.8 billion.
“[Dingdong’s] profit comes at the price of growth and expansion,” Li said.
Zhang Yi, founder of Guangdong-based internet consultancy iiMedia, also noted the company’s tempered spending, ascribing Dingdong’s quarterly earnings to reduced marketing expenses and improvements in operational efficiency. Optimising and shortening its supply chain also helped, he said.
“[Dingdong] truncated unnecessary links on the supply chain to connect with farm produce suppliers directly [to save on procurement costs] to get rid of the middlemen,” Zhang said.