Alibaba enters the market, the three giants "fight" in instant retail

Author | Wang Xiaojun

Editor | Zhou Zhiyu

This year's instant retail market is already booming, and with Alibaba entering the fray, this sector has clearly shown a "bloodbath" among the three giants.

On May 5th, before the poster could even be made, Ele.me released a report on its involvement in the food delivery battle. On that day, the daily orders from Taobao Flash Purchase had already exceeded 10 million, with Ele.me's delivery orders in 39 cities surpassing the historical daily peak. This was just 6 days after the official launch of the Taobao Flash Purchase business.

It is evident that this round of competition is not just focused on the food delivery business, which has a low profit margin. After all, Meituan's food delivery business has a net profit margin of 2.8%, and Ele.me has yet to turn a profit. In this chaotic battle, each company hopes to leverage the high-frequency, essential nature of food delivery to boost their overall instant retail business.

This business is also seen as a new growth direction for the e-commerce market in the coming years, and it is a direction that Alibaba and JD.com must invest in. After all, as one side gains, the other may lose, and traditional e-commerce orders could be snatched away by instant retail.

Alibaba's entry into this market is a war that seems aggressive but is actually defensive. In the face of new battles in the e-commerce market, the giants cannot afford to lose.

Alibaba Enters the Market

As Meituan and JD.com are fiercely competing in the instant retail market, Alibaba is no longer a bystander and has stepped in.

On April 30th, Ele.me officially launched the "Ele.me Supplement Over 10 Billion" promotion; on the same day, the instant retail business "Hour Delivery" under Taotian Group was officially upgraded to "Taobao Flash Purchase," gaining a first-level traffic entry on Alibaba's app Taobao, which has 400 million monthly active users, and launched in many cities nationwide.

After a few days of fighting, Alibaba released a report showing that as of May 5th at 20:28, the daily order volume had exceeded 10 million. In recent days, many users who took advantage of the promotions have shared on social media about the nearly free milk tea and coffee they managed to grab.

The collaboration between Ele.me and Taobao Flash Purchase reflects Alibaba's intention to leverage its e-commerce traffic and brand advantages to continue consolidating the integrated online and offline consumption scenario.

On Taobao Flash Purchase, in addition to the existing food delivery, supermarket convenience, and medicine purchasing services from Ele.me, there are now more prominent entries for clothing, daily necessities, and mobile digital products. Among the mobile digital product entries, nearby electronic product merchants such as Apple, Huawei, and Samsung have all set up shop, and delivery can be achieved within an hour.

In fact, before this round of joint efforts, Alibaba had already been laying the groundwork for instant retail for several years. Since Alibaba founder Jack Ma proposed the concept of "New Retail" in 2016, Alibaba has been exploring the integrated e-commerce model of online and offline.

Whether it is Hema delivery or Taobao "Hour Delivery," these have all emerged from that phase. Since acquiring Ele.me in 2018 and upgrading the Tmall Supermarket business group to the local retail business group in 2020, instant retail, which focuses on local life, has always been placed in a relatively important position by Alibaba.

Since last year, Alibaba has further intensified its efforts in instant retail On one hand, Ele.me has partnered with tens of thousands of leading convenience stores and retail brands across the country to jointly launch the "24 Hours · Order Anytime" marketing IP. At that time, major convenience stores such as FamilyMart, Lawson, 7-ELEVEN, Meiyijia, Bianlifeng, Shizhu, Meihao, and Youtong Convenience joined this instant retail frenzy. On the other hand, "Hourly Delivery" has gained a primary traffic entry on the Taobao homepage.

After the increase in investment, the effects have also been reflected. Currently, over 3 million stores nationwide have activated the Taobao Hourly Delivery service, covering categories such as food and fresh produce, fast-moving consumer goods, 3C digital products, clothing, and sports and outdoor items.

This year, Ele.me also made some personnel adjustments. On February 11, Ele.me Chairman Wu Zeming announced the latest organizational adjustments via a company-wide letter: effective immediately, Wu Zeming will also serve as the CEO of Ele.me, while the former CEO Han Liu will focus on managing the instant logistics center and continue to report to Wu Zeming.

This adjustment emphasizes Ele.me's increased focus on instant retail and reflects Alibaba's overall shift of power towards a younger generation. At that time, Wu Zeming stated in the internal letter, "The strategic significance of considering instant logistics as Ele.me's second growth curve is continuously rising."

Now, with this round of Alibaba's entry, the instant retail sector among major internet companies has officially entered a "bloodbath" state.

JD's Counterattack

The reason Alibaba sent Taobao and Ele.me to jointly enter the market is mainly because JD had previously started targeting Meituan.

In late April, JD founder and Chairman Liu Qiangdong personally stepped in to deliver food, dining with delivery workers and forming brotherly bonds, attracting many riders to join JD. For a time, Liu Qiangdong became the most active entrepreneur after Lei Jun's social media silence.

With Liu Qiangdong personally involved, along with JD's previous limited-time "0 commission" for merchants, paying social security for riders, and issuing coupons to consumers, JD's entry into food delivery has become the biggest news in the internet sector this year.

After a series of subsidy efforts and stimulated by the order volume of coffee and tea drinks like Kudi, JD's daily order volume for food delivery has already surpassed 10 million orders.

JD's bold entry into food delivery is seen as a "surrounding Wei to rescue Zhao" move. In recent years, JD's position in the e-commerce sector has declined, with a significant share of the 3C market being taken by Meituan.

In the main battlefield of e-commerce, JD had long been second only to Alibaba, being the second largest player in the domestic e-commerce market. However, in 2022, users embracing cost-effectiveness began to flock to Pinduoduo, causing JD's second position to be overtaken by the rapidly growing Pinduoduo, relegating it to third place.

In 2024, JD's position has changed once again.

Last year, Douyin's e-commerce GMV was approximately 3.5 trillion yuan, with a year-on-year growth rate of 30%. Moreover, Douyin's e-commerce president Kang Zeyu revealed that the GMV in 2024 has helped Douyin's e-commerce market share increase, making it the third largest in the industry. This means that JD has failed to maintain even the third position.

What makes JD even more anxious is that for a long time, the user mindset cultivated by JD has mainly focused on 3C products, but Meituan is encroaching on this core area, directly threatening JD's fundamental base On April 12, Wang Puzhong, CEO of Meituan's core local business, revealed that Meituan's daily order volume for non-food instant retail has surpassed 18 million orders. From the segmented data, Meituan has also performed well across various categories. In 2024, Meituan's flash purchase orders for 3C home appliances are close to 40% of JD's total site orders, with orders for computer office products exceeding JD's total site and mobile communication product orders surpassing 40% of JD's total site.

With its e-commerce position at risk and core 3C categories being attacked, JD must respond. The recent series of operations is a direct response to the changes in JD's position.

An indicator directly related to JD's position change is user opening frequency. JD's series of measures aim to increase user opening frequency.

For a long time, although JD's average transaction value per user is relatively high, the user opening frequency is not high, not only lower than the higher monthly active users of Taobao but also inferior to the low-price-focused Pinduoduo, content e-commerce-driven Douyin, and Meituan, which attracts users through high-frequency essential takeout services.

Takeout, as a high-frequency essential consumption scenario, is a good lever to increase user opening frequency and can directly hit Meituan's core business, achieving the purpose of "surrounding Wei to rescue Zhao," thus becoming JD's counterattack weapon.

At the same time, to increase opening frequency, JD has also increased its investment in low-price channels this year. Previously, JD launched the factory goods replenishment plan for its discounted Jingxi channel, supporting white-label manufacturers to further compete with Pinduoduo, which is also a specific strategy to enhance opening frequency.

According to QuestMobile data, with JD's active promotion of the takeout business, by April 17, the daily active user scale of the JD APP reached 136 million, an increase of 20.73 million compared to the first day of the takeout launch, while user opening frequency and duration have also improved. This indicates that high-frequency attacks on low-frequency users are effective not only in Meituan's strategy but also in JD's efforts to enhance opening frequency.

In fact, since being surpassed by Pinduoduo, JD has been looking for new growth points or ways to improve opening rates.

Douyin has rapidly risen through content e-commerce, and last year, JD also attempted to engage in content e-commerce through Liu Qiangdong's digital persona and live-streaming sales, but the results were relatively limited.

Currently, on JD's APP, there are four primary tabs: "Discounts" competes with Pinduoduo, "Homepage" serves as JD's main platform against Taobao, "Instant Delivery" competes with Meituan, and "New Products" targets Tmall's new products.

With low prices hard to compete on and e-commerce stability, only takeout seems to provide an opportunity to exploit some of Meituan's shortcomings.

Is Meituan Afraid?

From the perspective of instant retail, Meituan is the defender in this round of competition, while JD and Alibaba are the attackers; however, from the e-commerce perspective, Meituan is extending its business into JD and Alibaba's territory, forcing the other two to play their cards.

In the short term, JD's aggressive offensive poses a certain threat to Meituan's position. However, the battle-hardened Meituan will not be easily slaughtered.

Over the past fifteen years, Meituan has experienced multiple fierce cash-burning battles on the internet From the group-buying war in 2010 to the food delivery war in 2015, from the shared bicycle war in 2017 to the community group buying war in 2020... In every round of life-and-death struggle in the internet sector, Meituan seems to have participated and survived, which directly reflects Meituan's combat effectiveness.

Around 2010, the number of group-buying startups reached 5,500, and each company needed to start expanding and dividing the market.

At that time, among many companies, Meituan was not yet a star, having limited funding and options. At that time, the leading company, Lashou, had raised a total of $160 million, and Dianping had raised $127 million, while Meituan had only raised $12 million.

Later, with the recruitment of Gan Jiawei from Alibaba, Meituan built its ground-promotion team, rising against the trend in lower-tier cities and achieving early market occupation, becoming the winner in the group-buying war.

Since then, it has surged and captured a large share of the food delivery market.

To date, Meituan has cultivated mature user habits, boasting a large number of merchants, users, and delivery riders (7 million active riders annually, nearly 15 million active merchants annually), with a delivery network handling about 70 million food delivery orders daily. This has placed Meituan's fulfillment capabilities at the top level in the industry, making it one of the most frequently opened apps by users, second only to social media.

After securing the food delivery market, Meituan is committed to rapidly transferring the capabilities accumulated in food delivery, extending its reach from delivering food to delivering everything, gradually entering flash purchase and other delivery businesses, while also venturing into ride-hailing, shared bicycles, hotels, and flights, competing for business from OTA platforms.

Its ability to gain a foothold in these areas is also due to Meituan's proficiency in handling tough businesses, as it can not only burn cash for subsidies over the long term but also endure hardships by promoting one by one.

When Meituan laid out its instant retail strategy, its approach differed from JD.com. JD.com mainly relies on partnerships with merchants for instant retail; meanwhile, Meituan connects with merchants while also laying out lightning warehouses.

Insiders at Meituan stated that by this year, Meituan has established over 30,000 lightning warehouses of various sizes across the country. These lightning warehouses act like capillaries, enhancing Meituan's capabilities on the supply side. In terms of categories, these lightning warehouses have over 6,000 SKUs. This year, Meituan's flash purchase plans to expand into digital home appliance brands by opening lightning warehouses.

The construction of these infrastructures further enhances Meituan's fulfillment capabilities and its voice in the instant retail sector. Through the higher-margin instant retail and group buying, Meituan has improved its overall profit margin, forming a solid core local lifestyle business model.

From Meituan's 2024 financial report, it can be seen that Meituan's fundamentals are very solid. In 2024, its operating revenue and net profit continued to rise, with revenue increasing by 22% year-on-year to 337.6 billion yuan, and net profit increasing by 158.4% year-on-year to 35.8 billion yuan.

Moreover, in 2024, Meituan's annual transaction user count, annual active merchant count, and average annual consumption frequency of annual transaction users all reached historical highs. By business segment, the revenue of core local commerce grew by 21% to 250.2 billion yuan; new business operating losses narrowed to 7.3 billion yuan, but compared to the nearly 20.2 billion yuan loss in 2023, it has significantly narrowed by 64% JD's offensive, in the long run, is still unlikely to shake Meituan's position. However, JD's entry can increase Meituan's costs, forcing Meituan to make changes, and perhaps some changes in the takeaway industry are expected.

Industry Landscape Changes

Undoubtedly, this round of the takeaway war is essentially a competition for discourse power in the instant retail market among various players.

For JD and Alibaba, if they do not join the instant retail battle at this time, their e-commerce market share will also be taken away by instant retail players.

However, instant retail, as a faster form of e-commerce fulfillment, has already become a battleground for these e-commerce platforms.

In the past few years, the e-commerce industry has been engaged in endless competition on multiple fronts, speed, quality, and cost, with each company hoping to capture more labels in these dimensions. Now, instant retail can deliver everything at the speed of takeaway, allowing users' consumption to have almost no cooling-off period, and the return rate is also lower, naturally becoming one of the directions for giants to explore the future form of e-commerce.

Especially from Meituan's report card, it can be seen that the realization of instant retail does not necessarily follow the online and offline linkage model that Alibaba previously adopted, which relied on large chain supermarkets offline and online delivery to capture traditional retail market share.

Meituan's lightning warehouse has no offline presence, and the range of online delivery includes beverages, pets, beauty products, adult products, etc., with both order volume and categories increasing, directly capturing market share that originally belonged to traditional e-commerce.

Moreover, as the instant retail market itself expands, while various e-commerce platforms are laying out their strategies, chain brands have also noticed these opportunities. For example, brands like Decathlon, Miniso, and HLA have also collaborated with these platforms to deliver goods to consumers as quickly as possible.

Traditional e-commerce has already become a basic infrastructure, with growth having become very weak. In contrast, instant retail is one of the few businesses still experiencing explosive growth, and all players view it as a future growth point.

Analyst Ding Zhechuan from China Merchants Securities believes that in the future, as instant retail categories extend further from fresh food/restaurant/daily necessities to 3C, beauty, and clothing categories, the penetration rate of high-ticket items will further increase, and the continuous improvement of logistics delivery efficiency and service experience will likely maintain high-speed growth in the industry. Therefore, he is optimistic about the growth potential of the instant retail industry.

At the same time, data from the Ministry of Commerce shows that the current market size has surpassed 1.5 trillion yuan, accounting for 6% of the total retail sales of consumer goods, with users' daily opening frequency increasing by 1.8 times. This market is still expanding. A report released by the International Trade and Economic Cooperation Research Institute of the Ministry of Commerce predicts that by 2030, China's instant retail market size will exceed 2 trillion yuan.

Industry insiders say that compared to traditional retail, the instant retail model is easier to form barriers, making it difficult for competitors to replicate. Although significant investment is required in the early stages and the profitability cycle is long, once it reaches a scale, it will have better user stickiness, more stable market share, and profitability will strengthen as order volume increases.

This has also provided a new opportunity for the e-commerce industry, which has been battling in low prices for several years, with profit margins affected.

This instant retail war has just begun, and beyond the order volume supported by milk tea, the outcomes of each player still need further observation. In the future, the main competitive points will still be each player's merchant resources, rider reserves, and location construction capabilities Regarding the competitive landscape, analysts at CMB International believe that Meituan, with its high-frequency scenarios and distributed network, is most likely to become the "default operating system"; JD.com needs to prove its supply chain migration capabilities; Alibaba faces a life-and-death test of ecological integration, needing a victory to regain capital trust.

However, some industry insiders believe that with several strong competitors coming together, it is likely that each will leverage its advantages to capture a specific label, such as JD.com continuing to focus on quality, Meituan on high-frequency essential needs, and Alibaba on ecological synergy.

Previously, JD.com CEO Xu Ran stated that food delivery is a large market that can accommodate multiple players. However, past experiences have shown that the number of players in food delivery is relatively limited.

Now, the story has just begun, and the outcome is yet to be determined; it remains to be seen whether each company can find its niche in the instant retail market