Private label opportunity: China’s online grocery firm Dingdong to develop more products as sales take off

By Guan Yu Lim

- Last updated on GMT

Damanguan brand sells 18 hot pot flavours ranging from butter-spice to tomato-ox bone.  ©DingDong
Damanguan brand sells 18 hot pot flavours ranging from butter-spice to tomato-ox bone. ©DingDong

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China’s on-demand grocery e-commerce firm Dingdong has unveiled plans to significantly increase the number of private label brands it offers across fresh groceries and food products.

As of Q3 2021, gross merchandise value (GMV) contribution from its private label products stands at 5.8%, with the firm hoping to increase this to 30% in the long-term.

Dingdong first launched its private label brands in 2020, such as Boxing Crayfish and more recently hot pot soup brand Damanguan.

Dingdong 1

Boxing Crayfish is a range of lychee, hawthorn and brandy flavoured crayfish. The brand generated a GMV of more than RMB80m (US$12.5m) in just over two months after its launch.

Damanguan brand sells 18 hot pot flavours ranging from butter-spice to tomato-ox bone.

Fresh groceries

Dingdong was established in 2017, with a mission to ‘make fresh groceries as available as running water’.

It was the first domestic e-commerce company to deliver live and fresh food. According to Hui Zhang, public relations director at Dingdong, live aquatic products, low-temperature dairy products, fresh fruits, and vegetables are its best-selling categories.

The firm sources foods directly from the place of origin. It can also provide a set of planting and breeding standards for the upstream supplier, helping farmers and suppliers to grow products that are more suitable for the market.

Fresh foods are then processed at the warehouse where Dingdong conducts rapid testing on all fresh foods, using the enzyme inhibitor method, which is commonly used in the fruit and vegetables industry to identify residual concentration of organophosphorus and carbamate pesticides.

Dingdong is also one of the few fresh food e-commerce companies in the industry that applies the colloidal gold method, that has higher sensitivity, accuracy, and cost​,” Hui told us.

For aquatic products, Dingdong has set up on-site testing laboratories in all warehouses across the country. Technical support is provided by Intertek, a consumer product testing and certification company.

At present, there are only a handful of fresh food e-commerce companies in China that can achieve 100% full quick inspection​,” Hui said.

The foods are then sent to its front fulfilment stations. These self-operated stations are built in the nearest place to the consumer, and each station can cover 3km in distance. Delivery can be done within 29 minutes once the user places an order on Dingdong app. 

To ensure freshness of aquatic products, Dingdong has even invented its own patented aquatic product delivery box. It has also invested in creating a smart supply chain and has an algorithm-based sales forecasting which has helped the firm reduce cost and improved efficiency.

Forecasting among grocery retailers is key in managing inventory to maximise sales and minimise waste.

Currently, Dingdong can accurately forecast sales above 90% and its grocery loss rate is 1%.

New potato breed

Dingdong 3

Recently, Dingdong was the first retailer in China selling a new light potato breed.

The light potato has a low amylopectin ratio and carbohydrate content, making it an ideal staple food for carb-conscious consumers.

The amylopectin content in typical potatoes is often 80% or more, but the light potato contains around 51% of amylopectin, which may have lesser impact in causing fluctuations in blood sugar after consumption.

Just one week after launching online, sales of light potato increased by 34 times. On the best performing day, sales volume reached 4,500 units, equivalent to two tons in weight.

Potatoes are a basic food, and most consumers' understanding of potatoes is also basic. Therefore, new products certainly need some time to achieve consumer recognition. Dingdong has provided information to help consumers better understand and choose these products based on their actual needs. As the number of users who are willing to try new products increases, we believe this potato will become more and more popular among customers​,” Hui said.

Currently, the first batch of light potatoes are sold in Shanghai.

Going forward, Dingdong will bring the potatoes to other cities in the Eastern part of China. In the future, with the production capacity improved, based on Dingdong's supply chain and warehouse capabilities, the light potatoes will be taken to cities across the country​.”

The research and breeding was conducted by a potato research institute in China. The potato is grown in Wuchuan, known as the potato capital in China.

Beyond food, Dingdong also has a fresh flower business which was launched in November 2020, and monthly sales volume has continued to increase by more than 30%.

Q3 2021 results

Dingdong reported 111% increase in total revenue in Q3 2021 to RMB6,189.5m (US$960.6m), compared to RMB2,933.5m in the same quarter of 2020

Its average monthly transacting users reached 10.5m in Q3 2021, a 120.3% increase from 4 the corresponding period last year.

The firm has opened 1,375 front fulfillment stations in 37 cities in China, and an increase from 711 front fulfillment stations in 2020.

Related topics Business Asian tastes China East Asia

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