DingDong sells itself, the front warehouse model comes to an end

DingDong's acquisition by Meituan not only signifies that the instant retail war in 2026 will focus on "quality" as the core of competition among "many, fast, good, and economical"; it also marks, from another perspective, the end of the front warehouse business model.

The heavy assets of front warehouses and the supply chain behind them have dragged down the industry leader Missfresh. Although DingDong and Pupu Supermarket have managed to run regional business models by curbing expansion impulses and deeply exploring business value, encountering dimensionality reduction attacks in the all-scenario war of instant retail is inevitable.

DingDong has welcomed "the best outcome," so what should Pupu Supermarket do next?

Meituan Acquires DingDong

A piece of news last week revealed a different flavor for the instant retail war in 2026.

On the evening of February 5, Meituan-W announced that it plans to acquire DingDong's (DDL) China business for USD 717 million (approximately 5 billion yuan). After the acquisition is completed, DingDong China will be incorporated into Meituan's financial statements.

After the news was disclosed, Meituan's Xiaoxiang Supermarket issued a statement saying that the company and DingDong will continue to operate as independent market entities. DingDong's founder, Liang Changlin, stated in an open letter that the business and team will remain stable.

In 2017, entrepreneur Liang Changlin founded the fresh e-commerce platform DingDong in Shanghai. At that time, the fresh e-commerce market was fiercely competitive, and DingDong established itself with the front warehouse model and intelligent supply chain, standing out during the supply guarantee battle in special periods, and went public in the U.S. market in 2021.

By the end of the third quarter of 2025, DingDong operated over 1,000 front warehouses in China, with monthly shopping users exceeding 7 million. As of now, DingDong has maintained business profitability for 12 consecutive quarters.

Despite this, constrained by the high costs of front warehouses, DingDong remains a regional fresh e-commerce platform, primarily operating in the Yangtze River Delta.

After being incorporated into Meituan and receiving comprehensive support in terms of funding, traffic, and more, DingDong can confidently expand its influence to the national market.

Previously, Meituan has always been a long-standing competitor of DingDong across dimensions. In 2019, Meituan launched its self-operated instant retail business, Meituan Grocery, which was officially renamed Xiaoxiang Supermarket in 2023, achieving full-category expansion.

Acquiring DingDong can quickly enhance Meituan's influence in the East China market for instant retail business. Of course, more importantly, it is DingDong's supply chain capabilities accumulated over the years.

After going public, Liang Changlin decisively adjusted the strategy from "scale first, with efficiency" to "efficiency first, with scale," curbing expansion impulses and deeply exploring internal business value.

The extreme internal competition in the front warehouse market, especially the sudden collapse of the leader Missfresh, made DingDong realize that to survive, it must delve into others' weaknesses and engage in the dirty and tiring work that competitors are temporarily neglecting.

DingDong has launched multiple categories of its own brands, including the grain brand "Liangxin Craftsman" and the meat brand "Black Diamond Family," leveraging over a dozen self-built factories, self-operated farms, and thousands of direct-sourcing fresh suppliers Since 2025, the instant retail war has revolved around the core aspects of "more, faster, better, and cheaper" among major platforms.

Taobao Flash Sale, Meituan Flash Sale, and JD Instant Delivery have all ramped up their efforts, pushing "more, faster, and cheaper" to the extreme. In 2026, the instant retail war will continue, with "better" becoming the new competitive focus.

After Meituan acquired DingDong, leveraging its platform advantages and DingDong's experience in the supply chain field, it may be able to provide the market with more high-quality and low-priced products.

The Ups and Downs of Front Warehouses

More than 20 years ago, Taobao, Tmall, and JD were successively established, marking the gradual entry of China's retail industry into the e-commerce era.

As e-commerce penetration in sectors like clothing, beauty, and books continued to rise, fresh produce, with its larger potential consumer base and market size, also became a popular category, experiencing a surge in fresh e-commerce around 2013.

However, the lack of standards for fresh products and insufficient delivery capabilities at that time hindered the effective enhancement of traditional fresh e-commerce models.

Subsequently, innovative community group buying and front warehouse models emerged in the fresh e-commerce market almost simultaneously. The difference between the two lies in whether the platform delivers to consumers through offline group leaders or directly to consumers via front warehouses.

Community group buying is similar to the franchise model in chain operations, allowing for rapid scaling and gaining widespread market attention. That year, major internet giants rushed to join, nearly leading to a community group buying war.

Front warehouses, akin to the direct operation model in chain businesses, have higher costs across the entire chain and did not receive enough attention during the comprehensive expansion of the internet industry.

However, the shortcomings of community group buying in terms of timeliness, service, and fulfillment capabilities have led to an overall retreat in recent years. Almost all major internet platforms, except for Pinduoduo, have exited the community group buying market.

Of course, Pinduoduo's persistence in this market is not only due to its layout in the fresh supply chain but also relates to its minimal presence in emerging markets like instant retail.

On the other hand, although the veteran front warehouse giant Daily Fresh faced a funding chain break, DingDong and Pupu Supermarket, by curbing expansion and deeply exploring supply chain strategies, not only streamlined their business models but also achieved profitability.

Thus, in recent years, front warehouses have become a popular model in the new retail market. Hema is firmly expanding its warehouse-store integration, followed closely by JD's Seven Fresh; membership stores like Sam's Club are also leveraging online cloud warehouses to address issues of remote locations and insufficient coverage.

Just as DingDong and Pupu Supermarket felt they had weathered the storm, the instant retail war broke out, once again changing the tide of the industry.

Saying Goodbye to the Front Warehouse Concept

The instant retail war has become a key variable across multiple industries, including the internet, retail, and express logistics, in 2025. Its ultimate goal is to enable consumers to develop the perception of purchasing everything within 30 minutes. This trend has already begun to profoundly influence the evolution of industry patterns in e-commerce, express delivery, and offline retail markets.

In the early stages, front warehouses may not have felt the pressure. After all, once user consumption habits are established, some demand spilling over to platforms like DingDong and Pupu Supermarket will lead to very clear growth expectations However, as the penetration rate of instant retail continues to rise in various consumer scenarios, the sense of crisis for front warehouses is becoming increasingly evident.

Instant retail may serve as a supplement to e-commerce and takeaway businesses, as user profiles and scenario demands differ; but for front warehouses, it will lead to a competition for existing users and purchasing power, which is a clear dimensionality reduction attack.

Therefore, for front warehouse brands, 2025 presents a very critical choice—whether to join instant retail platforms. Joining means "handing over one's soul"; not joining not only misses opportunities for traffic and subsidies but will eventually be cornered. Thus, some instant retail platforms have seen the emergence of the "XX purchasing" business model.

The front warehouse model places points of sale close to consumers, essentially serving as the middle ground and intersection between offline retail and fresh e-commerce, combining online transactions with offline fulfillment.

The two major assets of front warehouses and supply chain construction restrict the development of the front warehouse model. The downfall of Meituan's Daily Fresh is a result of failing to balance investment and cash flow. DingDong and Pupu Supermarket, relying on regional layouts and point distribution, have barely maintained their current situation by suppressing scale expansion and deeply exploring business value.

In the trend of instant retail, platform models will become the market mainstream, and the necessity for front warehouses to exist as independent models is greatly reduced, with almost no power to share the cake. DingDong selling to Meituan is almost the best outcome.

However, from this moment on, the independent concept of front warehouses will likely cease to exist.

As the penetration rate of instant retail continues to advance, all offline outlets can serve as the foundation for instant retail fulfillment, whether they are physical stores or virtual front warehouses.

Meituan acquiring DingDong is akin to Taobao Flash Sale partnering with Hema. JD's expansion of Qixian follows the same logic. Last year, Pupu opening offline stores can be seen as a counter-trend struggle, right?

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