GoPuff & Missfresh Share Similar Model to Tackle Different Markets

Two grocery delivery services, GoPuff and Missfresh, use a similar delivery model to tackle the different needs of their respective markets. Though the two use a similar base model, they diverge in how they've chosen to expand their businesses.
Oct. 21, 2021 20:06
GoPuff & Missfresh Share Similar Model to Tackle Different Markets

Missfresh (Nasdaq: MF) and GoPuff, two underdog grocery delivery services in their respective neighborhood retail markets, use a similar model to cater to very different circumstances.

Both companies use small warehouses to deliver grocery items to nearby residences in no time, but while Missfresh has a large selection of fresh grocery items, GoPuff focuses more of its inventory on convenience items. While GoPuff was started by two college students and tends to bring in a similar consumer base, Missfresh's selection of fresh groceries brings in more young families.

The Missfresh Experience

Missfresh offers a vast selection of fresh groceries as well as frozen and packaged foods along with other items. Their selection, user experience, and fast delivery make them an appealing option for young families with little time or availability to leave the house and make a trip to the store.

Ms. Bai, a young stay-at-home mom, said that with five family members living in the same house, she needs to buy a lot of groceries. She usually buys meat, organic vegetables, and flowers from Missfresh. Bai relies heavily on online shopping for everyday needs, and she said she uses Missfresh because of the quality of the products and fast delivery time.

Ms. Hua is also an avid user of Missfresh, and has been for years. She's a young mom who works full-time, and said she likes Missfresh for the quality of their products and delivery service. Hua usually orders fresh groceries for her family of four before work or later in the afternoon, and she especially likes that Missfresh has excellent customer service and can recommend products to you.

The GoPuff Experience

GoPuff's selection has long focused on instant needs such as convenience and frozen products, but recently they've expanded into more fresh grocery options and in August the company began offering ready made meals through their service. Though the company has recently expanded its offerings and target audience, many of GoPuff's longtime users are college students. 

Some students who use the service said they appreciate the convenience of GoPuff because of their busy schedules as well as the speed of delivery and its availability late at night. One student said that she likes GoPuff because it offers some snack products she has trouble finding anywhere else and sometimes provides samples of new products to try.

Business approaches 

Missfresh's locations are mainly in first- and second-tier cities to cater to the consumer base of young, urban professionals with more disposable income and a need for the convenience of delivery. GoPuff's early model was targeted towards universities to serve the needs of college students in need of small orders of basic products. 

Though the target market is different for the two companies, both are finding success by utilizing their small warehouses and taking full control of the customer delivery experience. Both companies also use data analysis to predict customer demand and adapt their inventories and strategy to these trends.

Missfresh pioneered the Distributed Mini Warehouse (DMW) model in China. This model, which uses smaller warehouses to deliver to nearby neighborhoods and cut out wholesalers in the buying process, makes delivering fresh groceries in short time frames much easier. 

GoPuff operates in over 650 U.S. cities through around 250 fulfillment centers. The company is valued at $15 billion, and reported $340 million in revenue last year. GoPuff is currently a private company and is valued at 44x price-sales ratio on account of its $15 billion valuation.

Missfresh operates 625 DMWs in 16 cities. Most recently, the company has reported net revenues of $233 million, and is trading at .43 EV/2021. The Bloomberg consensus revenue estimate in 2021 is 7.9 billion yuan ($1.2 billion) with a .59x EV/2021 Rev estimate, a significant discount to Dingdong at 2.18x, along with other competitors.

During the Covid-19 pandemic, grocery delivery shot up in popularity across markets. In this time, GoPuff expanded its business to also target families and elderly consumers and expanded its selection of grocery, household, and pet items. GoPuff also acquired the US alcohol retailer BevMo for $350 million in November 2020, expanding into brick-and-mortar retail with plans to use the stores to promote their delivery service.

While GoPuff is expanding to offline retail and focusing on expanding its base, Missfresh's focus is primarily on technological development and its partnerships with existing local retailers to provide digital services and assistance.

"Missfresh has strategically decided to take a more conservative approach with the DMW business, shifting focus on improving efficiencies and developing innovative business initiatives, including Intelligent Fresh Market and Retail Cloud," according to a company statement.

Both companies are small compared to their competitors, but their respective business models earn them praise as up-and-comers in the industry with sustainable strategies and huge potential for future growth with the success of online neighborhood retail markets.

CapitalWatch Disclaimer

All information contained herein as well as on the CapitalWatch website is obtained from sources believed to be reliable but not guaranteed to be accurate or all-inclusive. All material is for informational purposes only, is only the opinion of CapitalWatch and should not be construed as an offer or solicitation to buy or sell securities. The information includes certain forward-looking statements, which may be affected by unforeseen circumstances and/or certain risks. This report is not without bias. CapitalWatch received remuneration for this report. Please consult an investment professional before investing in anything viewed within.

retail, grocery delivery, technology, SaaS