WHAT IS JD'S FOOD DELIVERY ALL ABOUT?There's a lot of talk (and JD PR) about the 'new' food delivery business of JD in China, but many people are misinterpreting this new strategic move. Recently, we wrote a two-part report on the topic. Here's some of the key takeaways (no pun intended).

▶️ With a large base of active users and a substantial fleet of couriers through Dada, JD aims to overcome the initial hurdles faced by previous entrants like Douyin.

▶️ JD faces significant behavioural, organisational, logistical, technical, and financial challenges despite its advantages. Major obstacles include changing established consumer habits, adapting its corporate culture to the high-pressure food delivery industry, building sufficient delivery network density, refining its technical systems, and managing potentially large financial losses.

▶️ JD employs an intensive resource investment strategy to gain market share quickly, including subsidies for consumers and merchants. This approach is intended to rapidly increase order volume and market penetration.

▶️ Profitability for JD's food delivery business is unlikely in the short term, with projections suggesting it could take at least five years to break even. The food delivery business currently operates at a loss per order, relying on retail profits for subsidies, and management's tolerance for these losses is limited.

▶️ Meituan, the dominant player in the food delivery market, appeared less concerned about JD's entry compared to Douyin's, citing JD's lack of operating experience and the established nature of merchant relationships. Meituan had no plans to reduce fees in response.

▶️Eleme is responding to the increased competition by launching initiatives to support and attract high-quality caterers, the same group JD is targeting. This includes financial incentives, traffic support, and digital operation services for merchants.

▶️ JD primary strategic goal for its food delivery business appears defensive and aimed at enhancing its e-commerce ecosystem by increasing user engagement and improving logistics efficiency rather than immediate profitability. The venture's success will be evaluated based on its ability to drive traffic and sales to the main JD app.

▶️ Analysts and investors have shown some concern regarding JD's food delivery plans, likely due to the anticipated significant financial losses. JD's U.S.-listed shares fell after the reports of its entry into the market.

▶️ JD has a two-year evaluation strategy for its food delivery project, with an initial focus on model application and infrastructure building, followed by a crucial second year assessing order volume and transaction scale requiring significant investment. Failure to achieve expected results may lead to resource reallocation or project termination.

The full reports can be found here: