Prospectus Summary
PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to invest in our ADSs. This prospectus contains information from an industry report prepared by China Insights Consultancy, or CIC, an independent research firm.Our Mission
Our mission is to make fresh groceries as available as running water to every household.
Overview
We are a leading and the fastest growing on-demand e-commerce company in China, according to China Insights Consultancy, or CIC. We directly provide users and households with fresh produce, meat and seafood and other daily necessities through a convenient and excellent shopping experience supported by an extensive self-operated frontline fulfillment grid. With fresh groceries as our core product categories, we have successfully expanded to providing other daily necessities to grow into a leading one-stop online shopping destination in China for consumers to make purchases for their daily lives. At the same time, we are working to modernize China’s traditional agricultural supply chain through standardization and digitalization, empowering upstream farms and suppliers to make their production more efficient and tailored to actual demand.
Our total revenues has grown from RMB3,880.1 million in 2019 to RMB11,335.8 million (US$1,730.2 million) in 2020, driven by the robust growth in our GMV. Our market share in the on-demand e-commerce industry as measured by GMV was 10.1% in 2020, according to CIC, and our total GMV has grown from RMB741.7 million in 2018 to RMB13,032.2 million (US$1,989.1 million) in 2020, representing a CAGR of 319.2%. This growth rate ranked first among the top five on-demand e-commerce platforms in China and significantly outpaced the overall market size growth rate of 114.6% during the same period. In addition, in 2020, we ranked first by GMV among our competitors in the Yangtze River Delta megalopolis, which contributed approximately 24% of China’s total GDP in 2020, while also successfully penetrating into other regions across China.
With the increasing trend of consumption upgrading in China, being able to conveniently purchase quality products online has become increasingly important to consumers across China’s geographic and wealth spectrum. We believe that consumers naturally seek product quality, speedy delivery and product variety at attractive prices. However, China’s traditional agricultural industry is characterized by highly fragmented upstream farm sources and redundant supply chain intermediaries, resulting in higher prices and lower assurance in supply and quality. In addition, the perishable nature of fresh groceries makes the ability of fulfillment channels to reliably and expediently deliver products particularly important. Furthermore, Chinese cuisine tends to require a plethora of ingredients to be cooked to satisfaction, which requires a broad selection of complementary SKUs from any seller.
As a result of these factors, it has been difficult for consumers to find the ideal purchasing channel for fresh groceries. For example, in-person shopping in supermarkets and traditional Chinese wet markets is often time-consuming, and has less product variety. On the other hand, although traditional e-commerce platforms do offer grocery shopping options, their fulfillment capabilities are not optimized for fresh groceries, leading to slower and uncertain delivery times and less assurance over product freshness. As such, e-commerce companies with a reliable supply of quality products and the ability to provide the core components of the ideal shopping experience are well-positioned to capture this growth.
In response to both consumer needs and inadequacies in the traditional supply chain model in the industry, we launched Dingdong Fresh, our mobile app and mini-programs to reshape the Chinese consumer’s online shopping experience for groceries. We entered the industry with fresh produce, meats and seafood as our initial focal point, a segment known for high-frequency orders and relatively difficult procurement and fulfillment operations, and successfully expanded into other product offerings. We have embraced a user-centric philosophy since our inception, and have in the past four years been committed to providing consumers with a wide variety of quality products with fast delivery times at attractive prices:
As a result of these capabilities, we have been able to achieve significant scale in our industry, with a strong and active user base and increasing engagement and stickiness. In the first quarter of 2021, our revenues reached RMB3,802.1 million (US$580.3 million) and our GMV was RMB4,303.5 million, with 69.7 million total orders and an average of 6.9 million monthly transacting users. In particular, during the same period, 22.0% of monthly transacting users were members of our Dingdong membership program, contributing 47.0% of our GMV and with an average of 6.7 orders per month.
We understand that being close to users is a key to our success as an on-demand e-commerce company. We were one of the pioneers in using a frontline fulfillment grid model to efficiently achieve last-mile delivery for fresh groceries while still scaling rapidly. At the same time, we believe that focusing on a high-frequency purchase product category such as fresh groceries allow us to build a loyal, engaged user base as a gateway for expansion. In addition, we have digitalized all of our core operations, building a full suite supply chain solutions to assure end-to-end quality control, which allows us to continuously optimize operating efficiency while providing users with the best products for value. We have streamlined the farm-to-home supply chain by cutting out intermediaries and guaranteeing strict end-to-end quality control through our 7+1 Quality Control Procedure, across the entire procurement and fulfillment process. The core capabilities that we have accumulated have since our inception lay the foundation for our exploring other supply chain collaboration opportunities and user service models in the future. Our capabilities include:
March 31, 2021, we had built from the ground up a frontline fulfillment grid of more than 950 frontline fulfillment stations in 29 cities in China, serving 6.9 million average monthly transacting users in the first quarter of 2021. In particular, the size of our frontline fulfillment grid in the Yangtze River Delta has tripled in size since the end of 2018. In addition, our frontline fulfillment grid is supported by 40 regional processing centers to sort, package, label and store raw products prior to fulfillment.
Our massive economies of scale and network effects have enabled us to simultaneously achieve rapid growth and increasing operating efficiency, demonstrating the effectiveness of our highly scalable and replicable business model. Our excellent user experience has also enabled us to continuously attract new users and promote increased purchasing frequency by existing users, doubly driving the growth in our GMV through growth in both total orders and average order value. At the same time, high consumer demand helps to attract more high-quality suppliers to cooperate with us, enhance our upstream bargaining power and further ensure product quality and diversification. In addition, the increasing density of regional orders can generate data to support our continued analysis and new user insights. As our continued expansion connects more consumers with fragmented upstream suppliers, we have formed a powerful self-reinforcing and dual flywheel effect, promoting rapid business growth while continuously improving operating efficiency, as set forth below:
As a result of the foregoing, since our initial entry into Shanghai in May 2017, we have successfully expanded our business to 29 cities across China, of which five cities have achieved and maintained monthly GMV over RMB100 million. Demonstrating our ability to leverage our core capabilities and replicate our success in new markets, the speed at which we are able to reach a benchmark of RMB100 million in GMV for new markets has continuously accelerated. At the same time, our fulfillment expenses as percentage of total revenues decreased from 49.9% in 2019 to 35.7% in 2020, indicating significantly improved operational efficiency.
Our total revenues grew from RMB3,880.1 million in 2019 to RMB11,335.8 million (US$1,730.2 million) in 2020, and our GMV grew from RMB4,709.7 million to RMB13,032.2 million (US$1,989.1 million) during the same period. Our total revenues grew from RMB2,603.8 million for the three months ended March 31, 2020, to RMB3,802.1 million (US$580.3 million) for the three months ended March 31, 2021, and our GMV grew from RMB2,915.3 million to RMB4,303.5 million (US$656.8 million) during the same period. We had net loss of RMB1,873.4 million in 2019 and RMB3,176.9 million (US$484.9 million) in 2020, and our net loss margin decreased from 48.3% in 2019 to 28.0% in 2020. We had net loss of RMB244.5 million for the three months of 2020 and RMB1,384.7 million (US$211.4 million) for the three months ended March 31, 2021, while our net loss margin increased from 9.4% for the three months ended March 31, 2020 to 36.4% for the three months ended March 31, 2021.
Our Market Opportunity
China is the world’s second largest economy. In the context of consumption upgrade and transformational development of e-commerce sector in recent years, China has witnessed an increasing demand for high quality products with convenience and value-for-money among Chinese consumers. On-demand e-commerce has gradually become a major purchase channel for household fresh groceries and daily necessities. According to CIC, China’s on-demand e-commerce market size expanded quickly at a CAGR of 146.7% from 2016 to 2020 and is expected to grow at a CAGR of 31.8% to reach RMB511.8 billion by 2025. According to CIC, the size of China’s fresh groceries and daily necessities retail industry has grown at a CAGR of 7.2% from RMB8.4 trillion in 2016 to RMB11.1 trillion in 2020, and is forecasted to further grow at a CAGR of 6.5% to RMB15.2 trillion by 2025.
Our Strengths
We believe that the following strengths contribute to our success and differentiate us from our competitors:
Our Strategies
We believe that the following strategies will help ensure that we can flexibly expand our business boundaries and meet the diverse needs of China’s huge consumption markets:
Summary of Risk Factors
Investing in our ADSs involves a high degree of risk. You should carefully consider the risks and uncertainties summarized below, the risks described under the “Risk Factors” section beginning on page 14 of, including the risks described under the subsections headed “Risks Relating to Our Business and Industry”, “Risks Relating to Doing Business in China” and “Risks Relating to the ADSs and This Offering”, and the other information contained in, this prospectus before you decide whether to purchase our ADSs.
We face risks and uncertainties in realizing our business objectives and executing our strategies, including:
We are a China-based company and we may face risks and uncertainties in doing business in China, including:
Corporate History and Structure
Our founder, Mr. Changlin Liang, started our business in May 2017 through Shanghai 100me Internet Technology Co., Ltd., or Shanghai 100me. Over the years, we undertook several rounds of equity financings and expanded our business primarily through Shanghai 100me and its subsidiaries.
In October 2018, we incorporated Dingdong (Cayman) Limited under the laws of the Cayman Islands as our offshore holding company, and Dingdong Fresh Holding Limited, or Dingdong Fresh BVI, as a wholly-owned subsidiary of Dingdong (Cayman) Limited. In January 2019, we established Dingdong Fresh (Hong Kong) Limited, or Dingdong HK, a wholly-owned subsidiary of Dingdong Fresh BVI, under the laws of Hong Kong as our intermediary holding company. Later in August 2019, we purchased 100% ownership of Shanghai 100me through Dingdong HK, making Shanghai 100me our wholly-owned subsidiary.
We are a holding company that has no material operation of our own and we do not directly own all of our operations in China. We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have. However, the ability of our PRC subsidiaries to make such distribution to us is subject to various PRC laws and regulations, including the statutory requirement to set aside at least 10% of their respective after-tax profits each year to fund certain statutory reserve funds prior to making dividend payments, as well as potential restriction on currency exchange and capital controls imposed by the PRC government. For more details, see “Risk Factors—Risks Related to Doing Business in China—We principally rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have. Any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business or financial condition” and “Regulation—Regulations Relating to Foreign Exchange and Dividend Distribution.”
The following diagram illustrates our corporate structure, including our principal subsidiaries, as of the date of this prospectus:
Implication of Being a Foreign Private Issuer
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers. Moreover, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. In addition, as an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the New York Stock Exchange corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance listing standards. Currently, we do not plan to rely on home country practices with respect to our corporate governance after we complete this offering.
Corporate Information
Our principal executive offices are located at Building 6, 500 Shengxia Road, Shanghai, 200125, People’s Republic of China. Our telephone number at this address is +86 21-6858-5011. Our registered office in the Cayman Islands is located at Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.
Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.100.me. The information contained on our website is not a part of this prospectus.
Conventions That Apply to This Prospectus
Unless we indicate otherwise, all information in this prospectus assumes no exercise by the underwriters of their option to purchase up to additional ADSs representing Class A ordinary shares from us.
Except where the context otherwise requires, and for purposes of this prospectus only:
Our reporting currency is Renminbi. This prospectus contains translations from Renminbi to U.S. dollars solely for the convenience of the reader. Unless otherwise stated, all translations from Renminbi to U.S. dollars were made at a rate of RMB6.5518 to US$1.00, the noon buying rate in effect as of March 31, 2021, as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. On May 14, 2021, the noon buying rate for Renminbi was RMB6.4367 to US$1.00.
Unless the content indicates otherwise, all information in this prospectus assumes no exercise of underwriters’ over-allotment option and is after giving effect to a share subdivision effected on June 8, 2021, with each of our issued and unissued ordinary shares and preferred shares sub-divided into 50 ordinary shares or preferred shares, where applicable, such that our authorized share capital shall be US$50,000 divided into 25,000,000,000 shares par value US$0.000002 per share.