PDD enters the market, four giants in a fierce battle for instant retail

Author | Huang Yu

Editor | Zhou Zhiyu

The ever-astute and undefeated PDD has set its sights on a new target. Against the backdrop of slowing growth in traditional e-commerce, it is now focusing on the hottest and most crowded battlefield—instant retail.

According to Wall Street Insights, Duoduo Grocery will launch instant delivery services. Relevant personnel from PDD revealed that this attempt aims to enhance the platform's fulfillment efficiency, providing consumers with a better shopping experience.

Before PDD knocked on the door, this trillion-level track had already been filled with smoke and fire. The three giants—JD.com, Meituan, and Alibaba—are engaged in a fierce "Three Kingdoms" battle.

JD.com founder Liu Qiangdong personally entered the fray, declaring "war" on Meituan founder Wang Xing during a dinner: "Brother, I am officially entering the takeaway business." Subsequently, he not only delivered takeout himself and befriended riders but also unleashed the killer moves of "100 billion subsidies" and "five insurances and one fund," determined to carve out a niche with "quality takeout."

As the defender, Meituan's Wang Xing did not back down, stating, "We will spare no effort to win the competition," and quickly launched the "Meituan Flash Purchase" brand in response. Meanwhile, the once-silent Alibaba suddenly awakened, with group CEO Eddie Wu personally taking charge, merging businesses like Ele.me and Fliggy into the core e-commerce group, even founder Jack Ma made an appearance at Ele.me's weekly meeting, demonstrating unprecedented determination and investment.

Just as the "Three Kingdoms" were in fierce battle, PDD's entry has introduced the biggest variable, instantly upgrading it to a more unpredictable "four-way battle among giants." What it brings is not only its signature extreme low-price strategy and vast user base but also an "iron army" that has defeated numerous opponents in the brutal community group buying war, proving its super combat effectiveness.

This is no longer a simple market share competition but a comprehensive war among giants over retail infrastructure, logistics fulfillment, supply chain efficiency, and consumer mindset. The core of the war is to meet consumers' demand for "everything delivered to home in 30 minutes."

As the four strongest commercial forces in China collide head-on in the "last mile" concerning the future retail landscape, a new revolution that disrupts traditional e-commerce models and reshapes national consumption habits is vigorously unfolding.

The Combat Power of New Players

The entry of Duoduo Grocery under PDD marks an important step in its instant retail field, representing not only an upgrade of its business model but also a strategic defense against the existing market structure.

Since its establishment in 2015, PDD has maintained an industry-leading position with precise decisions from its leadership, rarely missing in core projects like the 100 billion subsidies, Duoduo Grocery, and TEMU. After the last core project entered a stable phase, PDD has always been able to find the next business breakout point in time.

Community group buying is a new business that PDD has ventured into after establishing its foothold in the e-commerce industry. In 2020, Duoduo Grocery was launched in Wuhan, directly overseen by a member of the founding team of PDD, COO Gu Pingping (alias: Abu) Community group buying is a challenging business, but after the pandemic in 2020, it gained momentum, with internet giants entering the market. In addition to PDD's Duoduo Maicai, there are Didi's Chengxin Youxuan, Meituan's Youxuan Division, and Alibaba's Hema Youxuan.

After a fierce battle in community group buying, Duoduo Maicai surpassed Meituan Youxuan in 2022, securing the top market share in the industry. It was also in this year that PDD established the cross-border e-commerce platform TEMU, led by Gu Pingping, with core team members primarily coming from Duoduo Maicai.

Clearly, in this battle that tests supply chain management capabilities and e-commerce operational abilities, the core management team of Duoduo Maicai has also been trained into an "iron army" within PDD Group.

However, although Duoduo Maicai has become the ultimate winner, currently achieving a transaction volume of 200 billion yuan (with the second place, Meituan Youxuan, accounting for about 50-60% of that), its growth has nearly reached a ceiling since its inception and remains at the breakeven point.

The core management of PDD is not satisfied with the development of the community group buying business, as it consumes such vast resources, ultimately facing a low-price, low-margin business with limited market scale.

This time, PDD is reusing the "iron army of Duoduo Maicai" to expand into the instant retail business, seeking new growth possibilities while also aiming to rejuvenate the old business of Duoduo Maicai.

At the same time, PDD's entry into instant retail still does not deviate from the basic e-commerce framework, but rather serves as a strategic defense and model upgrade for its core business, especially in agricultural products and fast-moving consumer goods.

This reflects PDD's concerns about the rise of instant retail platforms like Meituan Shanguo, as these platforms may impact Duoduo Maicai's existing community group buying business and further affect PDD's core categories primarily focused on staple foods.

Currently, it attempts to combine the cost advantages of community group buying with the timeliness of instant retail to create a new instant retail model with PDD's unique characteristics.

It is reported that Duoduo Maicai's instant retail business will initially draw on the business models of Meituan's self-operated retail (such as Xiaoxiang Supermarket) and platform retail (such as Meituan Shanguo). In terms of product selection, it will filter high-quality fresh produce, branded, and private label products from Duoduo Maicai and PDD's main site, attracting consumers with a consistent low-price strategy.

PDD's entry into instant retail has its greatest advantage in its deeply rooted extreme low-price strategy and vast user base.

If Duoduo Maicai can effectively leverage its low-price advantage into the "hourly delivery" model of instant retail, even if it initially relies on third-party delivery, its strong cost efficiency and deep penetration into lower-tier markets will lay a crucial foundation for its foray into instant retail.

Of course, instant retail will be a significant test of Duoduo Maicai's profitability. It is well known that Duoduo Maicai operates on thin margins, and instant retail demands high timeliness and high-quality fulfillment, which often means higher logistics and operational costs.

Additionally, the completeness of the logistics system will also be a major bottleneck for the development of Duoduo Maicai's instant retail business. To truly achieve high-timeliness "hourly delivery" service, Duoduo Maicai needs to further optimize its supply chain network and build an instant delivery team In summary, how to fill the gaps in quality, fulfillment, and merchant ecosystem without sacrificing core competitiveness (low prices) is key to whether PDD can establish a foothold in the instant retail market.

JD.com and Meituan Compete

Attracted by the large cake of instant retail, JD.com made a high-profile entry into the high-frequency business scenario of instant retail—food delivery—earlier this year.

In February, JD.com announced the launch of a recruitment campaign for "quality dine-in food merchants," offering zero commission for the entire year to attract merchants, which ignited the competition in the instant retail sector this year.

Over the years, JD.com has been continuously increasing its investment in the instant retail field. In 2023, JD.com's instant retail service was unified under the name "JD Hourly Delivery"; in 2024, JD.com integrated its instant retail brands "Hourly Delivery" and "JD Daojia," upgrading to launch "JD Express."

At a recent media exchange, JD Group founder and chairman Liu Qiangdong revealed that before entering the food delivery business, he specifically invited Meituan founder Wang Xing to dinner, saying directly, "Brother, I am officially entering the food delivery business."

At the same time, Liu Qiangdong pointed out that JD's major entry into food delivery aims at the underlying fresh supply chain.

After five years of setbacks, entering the food delivery market is an important attempt for JD.com to shine again. Directly declaring war on the main competitor highlights JD's unprecedented determination to enter the food delivery industry.

To enhance JD's food delivery brand perception, Liu Qiangdong has put in considerable effort. In late April, Liu Qiangdong personally delivered food, dining with delivery workers and building camaraderie, attracting many riders to join JD.

Additionally, JD's food delivery has employed two killer strategies to enhance its brand: the first is "five insurances and one fund"; the second is "quality food delivery."

On February 19, shortly after entering the food delivery market, JD announced that it would cover all costs of the five insurances and one fund for full-time delivery riders, including the portion that individuals need to contribute.

Food delivery is Meituan's core business, and facing JD's aggressive approach, Wang Xing could not sit idly by. On the same day JD announced it would cover the riders' five insurances and one fund, Meituan announced it would provide social insurance for full-time and stable part-time riders nationwide, expected to be implemented in the second quarter of 2025.

Quality food delivery has also been a label that JD has emphasized since its launch. On April 9, Nio founder, chairman, and CEO Li Bin posted a video on social media of himself eating food delivery with Liu Qiangdong. In the video, Liu Qiangdong stated, "JD's food delivery is serious; we want to provide quality food delivery that parents, children, and customers can trust."

The next day, JD's food delivery seized the opportunity and announced that it would officially launch a "100 Billion Subsidy" at 8 AM on April 11.

As the competition escalated, the management teams of JD and Meituan began to exchange barbs.

On April 12, Meituan's core local business CEO Wang Puzhong published an article stating that JD is not the first company to want to do food delivery, and it may not be the last. He also pointedly mentioned that if food delivery is considered part of instant retail (30-minute delivery of everything), Dada and JD Daojia started as early as 2014, but with little effect "In recent years, instant retail has developed rapidly, as everyone can see; especially in categories such as fresh produce, alcoholic beverages, 3C digital products, and pharmaceuticals, the progress has far exceeded expectations," Wang Puzhong pointed out. Meituan's daily orders for non-food categories have surpassed 18 million, which can be said to make some companies feel like a thorn in their throat and a prick in their back.

On that day at noon, a conversation between JD.com's spokesperson and Liu Qiangdong regarding Wang Puzhong's comments circulated online. In the screenshot, Liu Qiangdong told him to "help the delivery workers in difficulty when you have time, instead of engaging in a war of words that cannot create social value."

Soon, Meituan made a further counterattack in its business strategy. On April 15, Meituan officially launched its instant retail brand "Meituan Flash Purchase." The brand is positioned as "a new generation shopping platform that accompanies consumers 24 hours a day," providing consumers with the shopping service of "flash purchase, 30 minutes to get quality goods."

Meanwhile, JD.com, which stated that "a war of words cannot create social value," quickly published an article saying: "Today is a good day; JD.com's quality takeaway order volume will exceed 5 million orders, as they are all takeaways from quality dine-in restaurants, with GMV larger than the 'ghost takeaways' of 10 million orders."

Key point: "Ghost takeaways" refer to those takeaway stores that do not have dine-in services or have qualification issues.

It is reported that less than four months after officially entering the takeaway market, JD.com's daily order volume has already surpassed 25 million orders, with over 1.5 million quality dining stores onboard and more than 120,000 full-time delivery riders recruited.

In this instant retail war, both sides are heavily armed.

In Meituan's first-quarter earnings call in May, Wang Xing stated when discussing how to respond to JD.com's competition: "We will spare no effort to win the competition. Currently, Meituan is the largest player in the takeaway industry. Over the past decade, we have experienced multiple rounds of intense competition and are confident of winning again."

Alibaba Begins to Fight Back

As the century-long battle of instant retail unfolds, Alibaba, as a veteran in the e-commerce industry, naturally will not be absent.

On the last day of April, Alibaba upgraded its instant retail business "Xiaoshida" under Taotian to "Taobao Flash Purchase," securing a primary traffic entry on the Taobao APP homepage.

At the same time, Taobao Flash Purchase and Ele.me jointly increased subsidies, with Ele.me's supply fully open to Taobao Flash Purchase, integrating the inventory and pricing of Tmall's official flagship and Xiaoshida. On the organizational side, all instant retail-related businesses within the Taobao system will be fully managed by Taobao Flash Purchase, with Ele.me fully cooperating.

Thus, the three giants JD.com, Meituan, and Alibaba have gathered in this instant retail war.

Originally, the newly upgraded Taobao Flash Purchase was expected to launch in over 50 cities first and planned to cover the entire country by May 6. However, unexpectedly, just two days later, the progress of the Taobao Flash Purchase business far exceeded expectations.

On the morning of May 2, Taobao's official Weibo announced: Taobao Flash Purchase has been fully launched ahead of schedule, and users nationwide can now access the Taobao Flash Purchase entry to receive large red envelopes for takeaway purchases.

Since June, many users have also seen advertisements for Taobao Flash Purchase on Alipay.

To further enhance the organizational collaboration between Ele.me and Taobao Flash Purchase, on June 23, Alibaba Group CEO Eddie Wu announced that, effective immediately, Ele.me and Fliggy would merge into Alibaba's China e-commerce business group, with Ele.me Chairman and CEO Fan Yu and Fliggy CEO Nan Tian reporting to the e-commerce business group CEO Jiang Fan According to information obtained from Alibaba's internal sources by Wall Street Watch, Ele.me and Fliggy continue to maintain a corporate management model, aligning their business decision-making and execution with the centralized goals and unified operations of Alibaba's China e-commerce business group.

On the second day of the organizational adjustment, it was reported that Alibaba founder Jack Ma and Eddie Wu appeared at the Ele.me work area, reportedly participating in the weekly meeting for Taobao Flash Sale.

It is evident that instant retail has now become a top priority for Alibaba's China e-commerce business.

At the first quarter earnings conference, Jiang Fan also stated, "Flash Sale is a high-frequency scenario for Taobao, where user activity and scale can be better reflected, and there will be more possibilities for integration between Taobao and near-field e-commerce (instant retail)."

Alibaba's firm investment in Taobao Flash Sale has yielded good results, with both scale growth and efficiency improvements exceeding the expectations of the company's management.

According to Wall Street Watch, in less than two months, the takeaway orders from Taobao Flash Sale, in collaboration with Ele.me, have increased sixfold, with order volume reaching two-thirds of Meituan's, significantly enhancing Ele.me's competitiveness.

In the near future, Alibaba's focus will be on actively converting more Taobao users into instant retail users, upgrading Taobao's business model based on this business in the long term.

As Alibaba advances, its competitor Meituan is also actively responding. At the same time that Alibaba announced the merger of Ele.me and Fliggy into Alibaba's China e-commerce business group, Meituan announced a comprehensive expansion into instant retail, with its self-operated model, Little Elephant Supermarket, set to cover all first- and second-tier cities.

While increasing its investment in instant retail, Meituan is also phasing out its community group buying business. On June 23, Meituan announced a strategic adjustment to Meituan Preferred, exiting the loss-making area of the next-day self-pickup model, which means that its traditional community group buying business is now limited to Guangdong and Zhejiang provinces.

Additionally, after this adjustment, the formal employees of Meituan Preferred will be reassigned to Little Elephant Supermarket, Meituan Fast Donkey, or other departments within Meituan. The supply chain accumulated by Meituan Preferred will support Little Elephant Supermarket and Meituan Fast Donkey, with both businesses accelerating city openings to further expand market scale.

Who will be the final winner?

In today's environment where traditional e-commerce growth is generally slowing, the reason why the four major giants are investing heavily is that they are all eyeing the same vast new territory: instant retail. This is not only a huge market expected to exceed one trillion yuan by 2025 but also the strongest growth engine in the industry at present.

The vision of "30-minute delivery of everything" promised by instant retail precisely meets consumers' extreme pursuit of efficiency and convenience, providing the giants with an irresistible future amid growth anxiety.

According to a research report by Huaxi Securities, the e-commerce market occupies 35% of the overall retail market, with an annual growth rate of about 10% since 2020, gradually narrowing the industry's incremental growth. In contrast, instant retail maintained a growth rate of over 50% from 2020 to 2022, with a year-on-year growth of 29% in 2023, becoming the incremental engine for e-commerce.

Additionally, the Ministry of Commerce's "Instant Retail Industry Development Report (2024)" predicts that the scale of instant retail will exceed one trillion yuan by 2025 and will surpass two trillion yuan by 2030, with a CAGR of approximately 15% over the next five years Zhongshan Commercial Group Internet Analyst Ding Zhechuan pointed out that instant retail has grown rapidly in recent years, and future demand for convenience is expected to drive an increase in user penetration rates, while the supply side's offline retail stores accelerate their online transformation and full-category expansion, which is likely to continue driving industry growth.

"Compared to e-commerce, instant retail is stronger in 'speed' but relatively weaker in 'variety and savings,' contributing differentiated value creation to consumers and generating incremental markets, while not significantly replacing traditional e-commerce."

However, this new territory is no longer uncharted; a battle over the ultimate winner has already begun.

As the champion, Meituan has built the deepest moat with its vast network of delivery riders and efficient fulfillment capabilities honed through the fierce competition in the food delivery war. According to data from CMB International, in 2024, Meituan's market share in food delivery is about 65%, with Ele.me accounting for about 33%, and JD Daojia's share is negligible, having not broken through in the past two years.

In the non-food instant retail market, Meituan's flash purchase market share has risen from 33% in 2022 to 45%, continuously squeezing Ele.me (which fell from 23% to 21% during the same period; JD Daojia has long stagnated at 5%).

Instant retail can be further divided into platform models and self-operated models based on traffic sources and product ownership.

It is understood that the platform model adopts a light asset operation mode, providing local merchants with traffic, fulfillment delivery, and after-sales services while charging merchants related fees, represented by Meituan Flash Purchase, JD Instant Delivery, Ele.me, etc.

In the self-operated model, merchants have their own traffic, own product rights, and earn the price difference between purchase and sale, represented by models like Xiaoxiang Supermarket and Dingdong Maicai, as well as self-operated supermarkets like Yonghui and Hema.

With a new round of industry competition approaching, who is likely to become the winner?

Huaxi Securities analysts pointed out that compared to traditional retail, the business model of instant retail is better at forming barriers, making it difficult for competitors to replicate. Although significant initial investment and a longer profit cycle are required, once scaled, it has better customer stickiness and more stable market share.

As the defender, Meituan's greatest advantage lies in its vast network of riders and efficient fulfillment capabilities.

After years of deepening its food delivery business, Meituan has established a nationwide, responsive delivery system that is difficult for other platforms to replicate in a short time. Secondly, the occupation of user mindset is crucial; the Meituan app has become the first choice for many users to access local life services, and the cultivation of user habits brings natural traffic to the instant retail business.

Moreover, Meituan's deep binding with offline merchant resources is also its core competitiveness, as its merchant operation and data analysis capabilities can help merchants improve their online capabilities.

Of course, challengers also have their own advantages. JD's core advantage lies in its strong self-operated supply chain and warehousing logistics system; Alibaba's greatest advantage is its massive user traffic, mature e-commerce ecosystem, and the foundation laid by Ele.me in the food delivery sector; PDD's biggest advantage is its extreme cost control ability and strong penetration into lower-tier markets.

Supply chain management and digital transformation will be core competitive advantages. Instant retail has high demands for fulfillment efficiency and product quality, so building a supply chain network and improving the coverage density and cost balance of the rider network will be key for platforms to ensure product quality and delivery timeliness In addition, with the intensifying competition in the instant retail market of first- and second-tier cities, the sinking market will also become a new growth pole. According to data from the Ministry of Commerce Research Institute, the scale of instant retail in county areas reached 150 billion yuan in 2023, a year-on-year increase of 23.42%, accounting for 23.08% of the total scale of instant retail. From January to August 2024, the order volume of Meituan's instant retail in county areas and other sinking markets increased by as much as 54% year-on-year.

To open up new market growth space, major players may increase their investment in county markets to compete for user and merchant resources.

As an emerging growth pole in China's retail industry, instant retail is rapidly reshaping the consumption pattern at an astonishing speed.

In this "battle of the four giants," there are no lucky winners. It is a competition not only of strategic tactics but also of capital, patience, and organizational execution limits. Whoever can establish the most resilient and efficient fulfillment system in this protracted war of attrition, and successfully integrate all resources online and offline, will win this trillion-level war and write the next chapter of China's retail industry