July 01, 2021: -Two Chinese grocery delivery start-ups, Missfresh and Dingdong, have had uninspiring starts after their initial public offerings in the U.S.

Investors are concerned about the cut-throat competition in the Chinese market in grocery deliveries and whether these companies will ever become profitable.

Missfresh, backed by Chinese technology giant Tencent, went public on Friday on the Nasdaq, which priced its American depositary shares ADS at $13 each and producing around $273 million. On Tuesday, since then, shares have fallen by a third and closed at $8.65.

Meanwhile, rival Dingdong, which started trading on Tuesday’s New York Stock Exchange, closed roughly flat on its debut after pricing shares at $23.50 per ADS.

After Missfresh’s tough start, Dingdong reduced its IPO size from $357 million to $110 million, assuming the underwriters completely exercise their option to purchase additional shares.

Both these e-commerce players are trying to take advantage of growing trends in China, the shift to online shopping, demand for high-quality products, and the digitization of supply chains, among others.

However, Missfresh and Dingdong are coming up against China’s biggest giants, including Alibaba and JD.com, and food delivery company Meituan. These firms have solid logistics and supply chains.

And competition is expensive.

“Both MF and DDL are still far away from break-even points,” Kevin Xiang, an analyst at 86Research, told CNBC. “We think that their business models cannot generate positive unit economics nationwide.”

Missfresh reported a yearly loss of 610.3 million yuan in the first quarter of 2021, much larger than the 194.7-million-yuan net loss posted in the same period in 2020. The company has also never been cash flow positive.

The net loss of Dingding of 1.38 billion yuan in the three months ended on March 31, 2021. That was wider than the 244.5-million-yuan net loss in the same period of 2020.

The losses and ongoing operating costs have concerned analysts.

“Despite IPO financing, MF and DDL may be out of cash by the year-end,” Xiang said. “The pace of cash burning is faster than unit economics improvement.”

On Tuesday, in an interview with CNBC’s Eunice Yoon, Dingdong founder Liang Changlin said the company raised $1.3 billion by this year, so the money raised from the IPO “isn’t that essential.”

“We have adequate cash flow, and that is our situation,” Liang said.