WAKE UP! THE BATTLE FOR HOME DELIVERY HAS REALLY BEGUN!

I recently shared how JD and Alibaba’s Taobao Shangou/Instashopping (a cooperation with Eleme) have been increasing their numbers by offering heavily discounted coffee deliveries. I also illustrated it during my keynote at K5 - Future Retail.

On July 5th, Alibaba set itself a goal to surpass the daily orders of market leader Meituan. The results are in …

In my keynote, I shared how Taobao Shangou had reached 40 million daily orders. On July 5th, it surpassed 80 million. But ... only 13 million of these were non-catering orders.

Meituan wasn’t just going to let this happen and promoted its meal delivery and instant retail business through high-value discount coupons, pushing it up from the normal 90 million daily orders to 120 million. Together, they have set a new record for the number of meal deliveries per day. It even caused the app to crash in some regions.

Alibaba is investing 50 billion RMB (7 billion USD) into Taobao Shangou to …

1. Revitalise Eleme, which Alibaba acquired in 2018 but has never generated a profit, as it has been unable to surpass market leader Meituan, which holds a 70% market share. Alibaba was rumoured to consider selling Eleme a year or two ago, but now needs it to retain a position in the ‘O2O business’ (local services and instant retail).

2. Push traffic for e-commerce. Instead of promoting Eleme itself, Alibaba is promoting the integration of Taobao and Eleme, driving traffic to the Taobao app through high-frequency user scenarios, such as meal delivery. Alibaba has lost a significant amount of market share to Pinduoduo, Douyin (the Chinese version of TikTok), and Kuaishou over the last 10 years, which it is now trying to reclaim. Meal delivery users have a high overlap with big spenders on e-commerce. The investment is thought to have a better ROI than buying traffic on Douyin and WeChat.

3. Improve meal delivery to increase the share of instant retail. Meituan’s cooperation with retailers' ‘lightning warehouses’ is capturing market share in daily necessities. After losing market share to the aforementioned players, Alibaba does not want to lose more market share to Meituan.

The battle with Meituan will be centred on on-time performance rates (customer satisfaction) and order fulfilment efficiency (average delivery fee per order). Order volume, and thereby the density of orders, determines the latter. However, the question remains whether Taobao Shangou can maintain the record order volume once the discounts cease...

Sources: Lao Zhang, Yicai

- Ed