THE DOMINO EFFECT OF CHINA'S FOOD DELIVERY WAR

I’ve been watching the Chinese e-commerce space for 15 years, but what has happened this year I've never seen before.

As I previously wrote, the Chinese instant retail space (q-commerce, delivery from a store or warehouse 3-5 km from the consumer, within 60 minutes) is exploding. E-Commerce players realise that in the long term, it will cannibalise traditional retail.

JD has been losing ground to Meituan's various business formats in the instant retail market and realised it had to take action to secure its future business. It needed a higher order density to compete, which led it to enter the food delivery market in February.

It grew fast, up to 25 million daily orders in May, although many were heavily subsidised milk tea and coffee orders. These frequent drink purchases made it relatively easy to achieve a high order volume.

Still, it was enough to worry Alibaba, which could not allow JD to become the number 2 in food delivery, a position its Eleme business had secured after losing market share in a fierce battle with Meituan in the 2010s.

In August 2024, it had already connected its Taobao marketplace with its food delivery/instant retail business, Eleme, so that people could have Taobao orders delivered from an offline store within an hour by Eleme. At the end of April, Alibaba rebranded this ‘Taobao Hourly’ service to ‘Taobao Instashopping’ and gave it a position on Taobao’s app homepage.

Alibaba also moved Eleme from the local services business unit to the e-commerce business unit and allocated RMB 50 billion for consumer subsidies. It designated Saturdays, starting from July 5th, as promotional 'Super Saturdays'.

When Meituan saw a sudden explosion of orders on Taobao Instashopping on July 5th, it could not allow Alibaba to surpass its own regular daily order volume of 90 million. It joined the battle and also started subsidising orders. That day, Meituan had 120 million and Taobao 80 million orders.

The next Super Saturday, July 12th, the battle continued. 240 million Chinese opened the Meituan app that day, 70 million more than normal, and Meituan saw 150 million daily orders. 10 million were self-pickup (saving delivery fees), and 20 million utilised coupons for a free drink when at least one other drink was purchased for delivery. The average delivery time was 34 minutes.

Taobao again exceeded 80 million, a number Jack Ma has asked the company to stabilise at, asking first to improve capabilities (e.g. number of couriers) and consolidate the foundation before moving forward.

The total number of orders that day was 250 million. JD is said to have had 10 million orders.

This shows a domino effect caused by one player entering the food delivery market. Now, together the three players are spending an estimated RMB 500 million ($70 million!) per day on subsidies for consumers, merchants and couriers.

And JD? It might get marginalised in the battle it ignited.

-Ed