Along with changes in the stages of economic development, high-quality development has gradually become a new theme of the times. In this historical process, more and more enterprises are breaking away from the path of only pursuing scale growth, and are paying more and more attention to improving profitability and resilience to risks.

Facing the rapidly changing consumer market environment in recent years, Dingdong Grocery Shopping (DDL.US), which has been deeply involved in the instant retail circuit for many years, has shown strong growth resilience. The Zhitong Finance App noticed that recently, Dingdong Grocery Shopping released its financial report for the fourth quarter of 2023. This latest “report card” released a series of noteworthy signals: up to this quarter, Dingdong Grocery Shopping had achieved profits under Non-Gaap standards for five consecutive quarters, and 2023 was also its first annual profit under Non-Gaap standards; during the reporting period, the company's operating cash flow had a net inflow of 120 million yuan...

In the past year, due to many factors such as fluctuations in the consumer market and the existential crisis faced by the same racetrack company, the market controversy surrounding Dingdong grocery shopping has never stopped. However, this latest financial report not only confirms that Dingdong Grocery Shopping has withstood the “headwinds” of the industry, but the strengthening of the company's own “hematopoietic” function also seems to indicate that its strategy of “prioritizing efficiency and taking into account scale” has achieved phased results. This is probably the strongest response from the outside world to questions about its viability.

Firmly implement “efficiency first”

In the fourth quarter, Dingdong Grocery Shopping achieved revenue of 4.99 billion yuan, and GMV of 5.53 billion yuan. Looking at the whole year, in 2023, Dingdong Grocery Shopping's revenue was 19.07 billion yuan, and GMV was 21.97 billion yuan.

Looking closely, there was no shortage of structural highlights in Dingdong Grocery Shopping during the reporting period. In terms of regions, the company's basic market performance in East China is still strong, especially in the Jiangsu and Zhejiang regions. Even in 2022, where the comparison base is high, the company achieved positive growth of more than 8% in GMV and order volume in this region last year. Over a long period of time, the compound annual growth rate of Dingdong Grocery Shopping's GMV in the East China market has reached 10% in the past few years.

Recently, however, Dingdong Grocery Shopping was reported to have adjusted some of its sites in Guangzhou and Shenzhen, which raised concerns in the market about its withdrawal from the South China region. In response, Dingdong Grocery Shopping said that there are currently no plans to remove the city from South China. The site adjustments involved various situations, but all of them are normal operation of opening and closing the station. Currently, the vast majority of services in South China have not been affected.

The Zhitong Finance App believes that an overreaction from the outside world may stem from a reflection on conditions after the fall of Daily Fresh last year. It is undeniable that the current industry environment is difficult to compare with when Dingdong Grocery Shopping started in the early days, but it is clearly unbiased to assert that Dingdong Grocery Shopping will follow in the footsteps of its peers. In the context of “headwinds” in the industry, instead of “spreading flatbread” to get everything covered, it is better to be targeted. Focusing on and amplifying the advantages of the East China Market as a core area is more in line with the long-term interests of Dingdong Grocery Shopping.

Judging from financial reports, the more “focused” Dingdong Grocery Shopping is indeed closer than ever to achieving the goal of “prioritizing efficiency.”

According to the data, the fulfillment fee rate for Dingdong Grocery Shopping in 23Q4 was 23.6%, an optimization of 0.5 percentage points compared to last year; in the same period, Dingdong Grocery Shopping's service was also enhanced. The Q4 instant order fulfillment time was 36 minutes, 2 minutes faster than the previous quarter.

After more “focus” and more emphasis on efficiency, Dingdong Grocery Shopping's self-“ hematopoietic” ability has also improved markedly. On the one hand, under Non-Gaap standards, Dingdong Grocery Shopping has been drastically optimized from a loss of 30.4% in 2021 to a profit of 0.2% in 2023. On the other hand, following 23Q3, Dingdong Grocery Shopping once again achieved a net inflow of operating cash flow. Q4's net operating cash inflow was 120 million yuan; by the end of the period, after deducting the balance of short-term loans, the company's actual own capital balance was 2.01 billion yuan, a net increase for the second consecutive quarter.

Looking for a new way out in the midst of “headwinds”

In addition to withstanding the “headwinds” of the industry, Dingdong Grocery Shopping is also exploring new business opportunities.

In 2023, Dingdong Grocery Shopping's own brand began to realize its potential. According to financial reports, the GMV of its representative brand “Cai Changqing” increased 43% year-on-year to 840 million yuan; during the same period, the GMV of its own brand “Liangxin Craftsman”, which focuses on rice and noodle products, was about 500 million yuan, an increase of 19% over the previous year. In terms of scale, at present, its own brands in categories such as prepared dishes, rice and noodles, soy products, meat and poultry already have some potential. The scale of consumption of these categories will also be enough to create more room for growth for the platform in the future.

With a high “price-quality ratio”, Dingdong Grocery Shopping's own brand products have initially taken over consumers' minds. By the fourth quarter, the user penetration rate of Dingdong Grocery Shopping's own brand products had reached 73.6%. At the same time, the repurchase performance also reached a new height. In 23Q4, the average monthly repurchase rate of “Cai Changqing” reached 37%, and the average monthly repurchase rate of “Good Master” was close to 40%.

From a commercial perspective, Dingdong Grocery Shopping has already accumulated supply chain advantages in the early stages. Now, following the trend of developing its own brand will not only help further increase the company's overall gross profit margin, but also enhance users' stickiness and loyalty to the platform in the long run, thereby creating a differentiated advantage in the market.

Summarize

Affected by the uncertainty of economic growth, pessimism has continued to dominate the trend of China Securities over the past year. Meanwhile, Dingdong Grocery Shopping's stock price performance has also been clearly dragged down. Admittedly, fluctuations in market sentiment will certainly affect short- and medium-term trends, but the factors that have a decisive influence on stock price trends in the long run are still the fundamentals and growth of the company itself.

Under the “headwind” environment, Dingdong Grocery Shopping has made positive adjustments. As shown in the latest financial report, Dingdong Grocery Shopping's own “hematopoietic” ability has improved markedly, and the strong growth of its own brands has also “spoiled” the company's future development direction. Next, as the company gradually comes out of the adjustment period, it is unknown that Dingdong Grocery Shopping, which has passed the inflection point of profit, may be able to enter a high-quality growth channel in the next stage.