On Monday, Shanghai-based online grocery company Dingdong Maicai reported its first quarterly GAAP profit, posting a figure of RMB 49.9 million ($7.3 million) for the fourth-quarter. The company’s revenue for this period was up 13.1% from last year, reaching RMB 6.2 billion.

Why it matters: The latest financial result shows that online grocers like Dingdong Maicai – which use front-end warehouses as their main operation model, something the industry has long viewed as costly and unprofitable – can still achieve profitability.

  • In the October-December period of 2021, the company recorded a net loss of RMB 1.1 billion.

Details: Dingdong Maicai’s profit is largely thanks to increased revenue from its own-branded meal kits, as well as cost reductions. A company executive emphasized on the earnings call that the profitability is sustainable.

  • The company’s total operating costs and expenses decreased by 5.6% year-on-year to RMB 6.16 billion during the fourth quarter, the financial report shows, with fulfillment expenses down 16.4% to RMB 1.5 billion, while sales and marketing expenses saw a significant decrease of 74.5% to RMB 91.1 million.
  • Dingdong recorded a yearly revenue of RMB 24.22 billion in 2022, up 20.4% compared to the prior year, while its cash and cash equivalents and short-term investments also increased by 24.1% to RMB 6.49 billion.
  • Dingdong Maicai achieved profitability in every month of the fourth quarter, according to the NYSE-listed firm’s chief scientific officer, Yu Le, who disclosed a GAAP net profit of RMB 10 million for November.

Context: Founded in 2017, Dingdong Maicai reported its first non-GAAP net profit of RMB 20.6 million in the second quarter of 2022.

  • The company has created new revenue streams by developing its own branded ready-to-cook meal kits. It set up a meal kit unit last February, upgrading it to a primary-level department of the company.
  • Shanghai has strategic importance to Dingdong Maicai. The city contributed 45.8% of Dingdong’s GMV in 2022, exceeding RMB 12 billion. Meanwhile, the executive team expects to generate revenue of over RMB 20 billion from the city alone in the long term. By comparison, the grocery platform undertook a mass withdrawal from smaller Chinese cities last year aimed at relieving profit pressure.
  • In 2022, Alibaba’s supermarket chain Freshippo achieved profitability with its main grocery brand Hema Xiansheng for the first time, after seven years of investment.

Cheyenne Dong is a tech reporter now based in Shanghai. She covers e-commerce and retail, AI, and blockchain. Connect with her via e-mail: cheyenne.dong[a]technode.com.