WHO WILL WIN THE FOOD DELIVERY BATTLE?

So, some people seem to have written off Meituan based on the Q2 results. Together, Meituan, JD and Alibaba have spent more than RMB 30 billion (I have even seen estimates of the investments as high as RMB 45 billion) on the food delivery war in Q2. And that was before the fiercest battle broke out in July and August. The Q3 results should be truly scary.

People point at Alibaba's cash reserves compared to Meituan's as proof that Alibaba will win this battle. For me, that is a premature conclusion because it assumes that when the subsidies stop, consumers stick to Taobao/Eleme. That's not a given. If you look at the Questmobile data for JD, it seems like the customers it won in H1 are already partially lost. The same could happen with Alibaba.

I want to share a few bits from a recent article by Lao Dao on Linkshop's WeChat account ...

"I believe the food delivery war between the three companies won't last long, and Meituan is the one most in need of a halt. Meituan has a first-mover advantage in the food delivery sector, or what Wang Xing calls its "food delivery infrastructure," which is superior to that of Alibaba and JD. Meituan is currently playing it down, and some customers may be poached by Alibaba and JD. However, once the subsidy war between the three parties subsides, Meituan will further leverage its existing infrastructure advantages - including more merchants, a wider selection, faster delivery, and lower fulfilment costs - to maintain its leading position in the food delivery industry, and its accustomed users will continue to choose Meituan."

"Ever since Meituan merged with Dianping in 2015, it has dominated the food delivery market. Consumers have long been accustomed to using Meituan or Eleme for food delivery, and even after the investment boom ends, this mindset will likely persist- fait accompli consumer habits are difficult to change. Alibaba and JD are currently investing heavily in food delivery, hoping to forcefully change existing consumer habits by offering discounts. However, as mentioned above, changing consumer mindsets is extremely difficult."

-Ed

Picture by Linkshop