Chinese online grocery app Dingdong has decided to reduce the size of its planned IPO in New York on the eve of listing.
This comes after shares of its competitor MissFresh, the first China stock to represent the country's fast-growing online grocer market listed on NASDAQ, slumped by over 30 percent since listing last Friday.
Dingdong had originally planned to sell 14 million shares at priced at $23.50 to $25.50 each but is now drastically cutting the amount it was selling to mere 3.7 million shares – a reduction of 74 percent.
That has put a big question mark on China's online grocery market and is making investors nervous.
The year 2012 is regarding as one when the online grocery app made its appearance in China. After nine years of mixed results, online grocers really came into their own during the COVID-19 pandemic, as people preferred to stay at home to do most of their shopping.
Big-time grocers like MissFresh and Dingdong are in the midst of stiff competition in a crowded market that has been joined by e-commerce giants Meituan and JD.com and others which have launched fresh produce delivery services last summer.
Many people have two to three apps on their smartphones so they can compare prices and services.
That results in low customer loyalty, according to Wang Dan, chief economist of Hang Seng Bank China. Whoever can offer the lowest prices will get the entire market and new players in this business too, Wang said.
To really create long-term value in this space, online grocers need to be super competitive in price, quality, customer service and speed backed by superior tech capabilities and exceptional logistics operations, said Chen Jiahe, chief investment officer of Novem Arcae Technologies.
But the truth is that all players doing the same thing now, and the market remains tight with no clear winners, Chen added.
Both Chen and Wang thought in metropolises like Beijing and Shanghai people are working hard in offices and don't have enough time to go out and buy their daily supplies. They prefer to use their smartphones to shop.
But in many other smaller cities, buying groceries online is still at an early stage. Almost everywhere, the infrastructure to support the efficient delivery of fresh produce is missing.