The lockdown of COVID-19 across the world first introduced online grocery shopping to many shoppers, spurring an industry that had long attracted skepticism. In China in particular, older generations often worry about buying perishable goods without examining them in person.
Still, venture capitalists are optimistic about the future of online grocery shopping. One of the recipients is China’s Missfresh, who announced on Thursday (in Chinese) a new round of funding of $ 495 million led by a fund from the state-backed China International Capital Corporation. Other investors include ICBC International Securities, Tencent, Abu Dhabi Capital Group, Tiger Global and a fund managed by the government of Changshu County, the headquarters of Missfresh’s headquarters in east China.
By placing the mini-warehouses closer to customers, the six-year-old startup is able to deliver 30-minute delivery to households in 16 Chinese cities.
Few players are able to compete in the e-grocery arena, as the business requires early investment in large-scale cold chains and expensive user acquisition to make home deliveries profitable. Unsurprisingly, almost all of the forerunners of online grocery shopping in China are backed by or collaborating with an internet giant.
Missfresh is deeply integrated into Tencent’s WeChat Messenger. Alibaba has its own Freshhippo supermarket chain that offers a delivery service. The Meituan restaurant delivery platform added groceries to its offering last year. Dingdong Maicai is a rare case without the backing of a large tech firm, seeking funds from venture capital institutions like Qiming Venture Partners and Gaorong Capital.
Some wonder how many new adapters will stick with the on-demand grocery store for life after lockdown. Research suggests they can. China saw 11.6 million additional daily active online grocery users in May compared to the same period a year earlier, according to research firm QuestMobile. Consumers may be addicted to convenience, but those who see their corner stores shut down due to loss of business during the lockdown have no choice but to go digital.