Instant Retail

Instant Retail

The industry tailwind behind Dingdong was real, and large. China's on-demand fresh-grocery market grew from ¥3.5 billion in 2016 to ¥128.8 billion in 2020, and the frontline-fulfillment-grid model Dingdong pioneered was the fastest-growing corner of it. Yet Dingdong's revenue has sat flat near ¥24 billion since 2022, its city count has shrunk, and its margin has stayed at breakeven. The tailwind arrived; it was captured by companies far larger than Dingdong. That gap — a booming market and a stalled participant — is what this chapter examines.

A market that was supposed to compound

At the 2021 IPO, the case for Dingdong rested on penetration. Fresh groceries — vegetables, fruit, meat, seafood — were still bought overwhelmingly in wet markets and supermarkets; online penetration of the category was only 8.1% in 2020, up from 2.8% in 2016, and the market researcher CIC projected it would reach 17.8% by 2025 [1]. The whole fresh-groceries and daily-necessities retail market was put at ¥11.1 trillion in 2020, forecast to grow to ¥15.2 trillion by 2025 [2].

Source: IPO Prospectus (Form 424B4), Industry — CIC estimates, 2016–2020 actual and 2021–2025 forecast [3].

The sharper number was the delivery layer on top of that penetration. On-demand e-commerce — the businesses that deliver fresh groceries within hours of an order — grew at a 146.7% compound rate from ¥3.5 billion in 2016 to ¥128.8 billion in 2020, and CIC forecast a further 31.8% compound rate to ¥511.8 billion by 2025 [4]. Within that, Dingdong's specific niche — the self-operated "frontline fulfillment grid" model, in which a company owns its supply chain and neighbourhood stations rather than acting as a marketplace — was projected to be the fastest-growing of all, compounding 49.2% a year from ¥30.8 billion in 2020 toward ¥227.7 billion by 2025 [5].

And Dingdong led it. By GMV it held a 10.1% share of on-demand fresh-grocery e-commerce in 2020, ranked first for growth among the top five platforms, first by GMV in the Yangtze River Delta, and second nationally [6]. Its own GMV had gone from ¥741.7 million in 2018 to ¥13,032.2 million (US$1,989.1 million) in 2020 [7]. A leader, in the fastest-growing slice of a market forecast to nearly quadruple. The market grew broadly as forecast; the leadership Dingdong held in 2020 did not.

What actually happened to the growth

Dingdong's revenue climbed with the market through 2022, then stopped. It reached ¥24,221.2 million in 2022, fell 17.5% to ¥19,971.2 million in 2023 as the company pulled out of unprofitable cities, recovered to ¥23,066.3 million in 2024, and grew 5.6% to ¥24,359.9 million in 2025 — leaving it 0.6% above where it stood three years earlier [8] [9].

Source: FY2021 Annual Report [10]; FY2022 Annual Report, Consolidated Statements of Operations [11]; FY2025 Annual Report, Consolidated Statements of Operations [12].

The physical footprint tells the same story in reverse. At the end of 2021, Dingdong ran roughly 1,300 frontline fulfillment stations across more than 35 cities, serving about 8.8 million average monthly transacting users [13]. By the end of 2025 it operated more than 1,100 stations across 28 cities [14]. Fewer cities, fewer stations, flat revenue — through the exact window in which CIC had projected the company's niche to more than double. The turn to profit that earlier chapters documented (The Financial Record) was bought with this retreat: Dingdong stopped chasing the market and defended a smaller one.

The three-front war

The market kept growing; what changed was who was fighting for it. Dingdong's own filing names three sets of competitors: other fresh-grocery e-commerce players, the general merchandise platforms, and traditional retailers moving online — and concedes plainly that some of them "may have longer operating histories, greater brand recognition, better supplier relationships, larger customer bases or greater financial, technical or marketing resources" [15]. In practice that is a war on three fronts, all fought by companies with balance sheets many times Dingdong's:

The first front is community group-buying — next-day pickup of heavily subsidised staples — run at national scale by Pinduoduo's Duoduo Grocery and Meituan. The second is platform, or marketplace, delivery, where an intermediary carries orders from existing shops without owning inventory; CIC classed this as a distinct model from Dingdong's self-operated one [16]. The third, and most direct, is the frontline-station model itself: on the Q2 2024 call an analyst noted that "Meituan is extending the station to more cities" and asked Dingdong how it viewed the threat [17]. A competitor that copies the model and carries effectively unlimited capital tests the moat directly.

By 2025 the fight had a name inside Dingdong's own remarks. Founder Changlin Liang told investors that "recent competition within instant retail has garnered widespread attention" and that "the battle for users and traffic is fierce" [18]. Grocery delivery in China in 2025 was not a quiet compounding market. It was a subsidy contest among Meituan, Alibaba and JD, and a self-funded ¥24 billion operator could not set the price.

Dingdong's answer: narrow and deep

Dingdong's response was not to match the subsidies but to leave the mass market to them. Liang has been explicit that the low-price playbook does not fit fresh food: the traditional retail principle of "achieving scale by offering low prices and then leveraging that scale to drive down procurement costs… is not applicable to the fresh grocery industry," he argued, casting Dingdong instead as "primarily a fresh grocery supply chain business" rather than a retailer competing on traffic [19]. The strategy has a label — "narrow and deep," under a "Love of Quality" repositioning — and it aims squarely at higher-spending households rather than the marginal, subsidy-chasing shopper [20].

The metrics management chose to disclose describe that narrower base. In June 2025, the roughly 30% of users it classes as "good users" — quality-led, price-insensitive — generated 68.5% of GMV and reordered at least eight times a month, against a 4.4-times average [21]. The clearest evidence of a real, hard-to-copy advantage is private label: launched only in July 2020, Dingdong's own brands reached around 20% of total GMV by 2025 across more than 23 labels and roughly 5,000 SKUs [22]. Private label is where the self-operated supply chain earns its keep — it is margin a marketplace cannot easily replicate, because it requires owning procurement and product development rather than renting shelf space.

Source: FY2025 Annual Report, Private Label Products [23]; Q2 FY2025 Earnings Call [24].

That is a coherent niche strategy, and it is the reason the business reached profitability at all. But it is a defensive one. It concedes the volume the 2021 thesis was built on, and it rests on execution — supply-chain skill, product development, regional density — rather than on switching costs that lock a customer in. A "good user" who reorders eight times a month does so out of preference, not obligation; nothing stops that household opening Meituan or Freshippo the following week.

The Moat, Measured

Held to the standard that an advantage must appear in the numbers, Dingdong's is narrow. Its supply chain and private label are genuine and specific to the company; they show up as a plateauing 20% of GMV and as a business that survived a shakeout that killed weaker frontline-grid operators. But the same numbers bound the moat: revenue flat for three years, share ceded as the market grew, and a core grocery margin that runs at breakeven once government subsidies and interest income are stripped out (The Financial Record). A moat that lets you survive a price war but not grow through it is real, and narrow.

The most authoritative read on that moat is not Dingdong's or this report's — it is Meituan's. The company with the deepest instant-retail pockets and its own expanding station network chose, in February 2026, to buy Dingdong's China business outright for up to roughly US$997 million rather than continue competing with it (The Meituan Sale) [25]. That transaction cuts both ways, and both should be held at once. It confirms the assets are worth more to a strategic owner than the market credited — the density, the supply chain and the ~10-million-user base have real value inside a larger network. It also confirms the standalone case had a ceiling: the founder, offered the choice between fighting the giants for another decade or selling to one of them, chose to sell, and to sign a five-year non-compete on Greater China fresh grocery in the process (The Meituan Sale) [26].

For an investor weighing the value-versus-trap question, the competitive read points one way on the operating business and complicates the whole. As a standalone compounder, Dingdong is a narrow-moat participant in a market whose growth flows to better-capitalised rivals — the durability the bull case needs is not there in the numbers. What makes the situation interesting is precisely that the operating business is being converted to cash by a buyer who values the assets more than the market did; the investment question turns less on whether Dingdong can win the instant-retail war and more on whether that cash reaches shareholders. The evidence that would change the competitive read is straightforward to watch: private label breaking meaningfully above 20% of GMV, or revenue and city count turning up again — neither of which has happened, and both of which the pending sale would render moot.