Grocery startup Dailuobo may have burned $92 million in 5 months

On Dec 2, 2019

Dailuobo, the Chinese online-to-offline grocery startup is in a cash crunch after burning through hundreds of millions of yuan to fuel expansion, Chinese media reported.

Why it matters: Dailuobo, once an up-and-coming player in China’s fresh produce e-commerce sector, may join a long list of casualties that have bowed out of the highly competitive market.

The liquidity crisis follows a RMB 634 million ($92 million) Series A which closed in June.
China’s fresh produce e-commerce market saw multiple players including Amazon-backed Yummy77 and Xianpinhui exit by 2017 following a boom in the industry from 2014 to 2015.

Details: Multiple signs of a cash crunch have emerged in recent weeks. In an apology dated Nov. 23, the company confirmed it was struggling to pay off debts to its suppliers and employee salaries due to a cash shortage. However, it said it was still trying to fix the problem.

Dailuobo said on Nov. 24 that it had support from its suppliers and planned to revive its operations on Nov. 25.
A TechNode reporter observed many inventories managed by the platform remained unavailable on Monday.
On Nov. 28, Dailuobo partner Liu Feng said on his Moments newsfeed on messaging platform WeChat that the Hefei-based firm had closed its Hangzhou research center, home to more than 300 employees in product development.
Liu said that the company had “settled up” with the laid-off employees, indicating it had paid salaries and compensation. However, dissatisfied employees told Chinese media that the company owes a combined RMB 30 million to employees on the Hangzhou and Hefei teams.
Meanwhile, users complained about difficulties withdrawing funds they had pre-paid to the platform.
The company founder and CEO acknowledged to local media that the team had “underestimated” the speed with which it spent cash competing in the fresh grocery e-commerce segment. However, he said that the company was not considering bankruptcy.
The company operated more than 1,000 offline stores as of the beginning of the year, expanding by more than 10-fold in five months after reaching the 100 benchmark in August 2018. It had set a goal of 10,000 storefronts.

Context: Using its own warehousing and logistics network, Dailuobo offers next-day grocery delivery to Chinese residential communities.

The app led the market as of June with an 89% app open rate and 48% user retention rate, followed by competitors like Tencent-backed Missfresh and Alibaba-baced Freshippo, according to data from research firm MobResearch.
The company received $10 million in an angel round in August 2018.