Dingdong Maicai plans to suspend operations in several lower-tier cities in China, joining a slew of grocery delivery platforms downsizing amid a cooling market.
Why it matters: Dingdong is pivoting from expanding by all means to prioritizing profitability, a trend that has been visible among many of the top players like Meituan and Alibaba.
- Dingdong’s cutback in lower-tier cities comes when China’s top-tier cities, Shanghai and Beijing, see surging demands for groceries, driven mainly by panic buying during lockdowns and uncertain times as the Covid-19 outbreak surged again in the country.
Details: Dingdong will stop providing delivery services in two cities in the eastern province of Anhui — Xuancheng and Chuzhou — from 6 p.m. Tuesday, according to a May 29 report from Ahwang (in Chinese), a regional media outlet. The firm will also halt operations in the northern city of Tangshan in Hebei province and the southern city of Zhuhai in Guangdong province around the same time.
- Dingdong users’ group chats in these cities will be dissolved, and the company will refund any outstanding balance in users’ prepaid accounts, according to a statement from the company.
- Suspension of services in these cities is part of the “company’s normal business adjustment and optimization,” a Dingdong representative told TechNode on Tuesday.
- The Ahwang report added that the company’s business in Guangdong province’s Zhongshan and Zhuhai is also undergoing adjustments. Meanwhile, services within the Yangtze River Delta area, where the firm expects to achieve profitability soon, remain unaffected.
- TechNode found that Dingdong users in Shanghai still can’t order freely as of Tuesday morning. Instead, they have to compete for limited amounts of order slots, a measure that was introduced amid soaring demand and staffing shortage during the city’s Covid-related lockdown that began in late March.
Context: Online grocery and food delivery teams at various Chinese tech giants were among the worst-hit units in the country’s ongoing mass tech layoff. Dingdong reportedly launched a series of job cuts in January this year.
- Along with around 150 US-listed Chinese companies, Dingdong has been added to US’s Securities and Exchange Commission’s provisional delisting list targeting foreign companies that have failed to comply with the country’s financial audit rules.
- In its fourth-quarter earnings of last year, the grocery delivery company said that it achieved profitability in Shanghai for the quarter.