Guotai Junan Securities: The instant retail forward market has vast potential, optimistic about companies like Meituan-W

According to the Zhitong Finance APP, Guosen Securities released a research report stating that competition in the retail market will return to efficiency comparisons across various segments. Similar to e-commerce, only players capable of bringing about efficiency transformations will have the ability to disrupt the market landscape. Meituan-W (03690) has significant advantages in organizational capability accumulation, refined user operations, the number of lightning warehouse coverage, as well as the scale and delivery efficiency of its self-operated business. The firm is optimistic about Meituan's ability to maintain its leading position in the instant retail market in the future. Alibaba-W (09988) has demonstrated stronger organizational capabilities in this round of competition compared to the past, leveraging its financial and user traffic advantages, and is expected to reshape user perceptions of the Taobao APP. However, it has not yet launched disruptive strategies in the food delivery and instant retail scenarios, necessitating further observation of market share changes. JD Group-SW (09618) is still in the construction phase regarding fulfillment and supply side, but in the long run, instant retail, food delivery, and the resulting cross-selling in e-commerce, along with corresponding supply chain layouts, are expected to achieve profitability overall.

Guosen Securities' main viewpoints are as follows:

Instant retail is a retail format that meets local instant demand through online immediate ordering and offline immediate fulfillment, relying on local retail supply.

Currently, the demand for instant retail mainly stems from the shift of offline scenarios, with the market size expected to reach 780 billion yuan by 2024, boasting a compound annual growth rate of 46% over the past five years. Analyzing from the dimensions of "more, faster, better, cheaper," "faster" is the core advantage of instant retail. Through enhanced operational capabilities and supply chain system construction, it is expected to narrow the gap with remote e-commerce in terms of "more" and "cheaper," and impact its market share. The firm estimates that the long-term market space for instant retail is expected to exceed 3 trillion yuan, which may lead to a slowdown in growth rates for some e-commerce platforms or even push them into negative growth territory. Therefore, major e-commerce platforms are actively promoting their layouts in the instant retail field.

Instant retail includes two models: platform and self-operated, with the platform model occupying 60%-70% of the market share, where Meituan maintains a leading position. The self-operated model encompasses formats such as front warehouses, store-warehouse integration, and "1+N," primarily focusing on fresh produce and supermarket categories. The three elements of instant retail are instant demand (users & traffic), instant delivery (fulfillment), and local supply (supply). Based on this, the firm divides the development history of instant retail into four stages. The firm believes that fulfillment capability is the long-term competitive barrier of instant retail. Currently, the market is competing for users through subsidies and traffic advantages, but the subsidy model is not sustainable, and the long-term competition focus will shift to the supply side. Therefore, Meituan and Alibaba will remain core participants in the market both now and in the future.

Analyzing the competitive landscape of instant retail from the dimensions of organization, users, supply, and fulfillment:

1. Organization: Compared to the food delivery wars of 2018-2019, the teams of various platforms are more mature, with Alibaba's multiple businesses returning to unity and significantly improving organizational efficiency; 2) Users: Subsidies are key to driving user growth, with competition revolving around financial strength and operational capability. Alibaba has a financial advantage, while Meituan has higher subsidy efficiency. 3) Supply: On one hand, lightning warehouses are key to meeting the demand for "more." Meituan has a significant advantage in the number of lightning warehouses, but as the order volume for Taobao flash sales increases, more lightning warehouses are beginning to try Taobao flash sales, gradually narrowing the gap in numbers. Additionally, Alibaba is also building near-field brand flagship stores, but the overall construction pace is relatively slow On the other hand, the layout of self-operated businesses is key to achieving "good" and "savings." The platform's data resources and traffic resources can effectively empower self-operated businesses. Currently, Meituan and JD.com have a richer variety of self-operated business formats, and their business layout has accelerated further this year. 4) Fulfillment: Meituan has built a strong delivery barrier through the scale effect of its food delivery business, a large delivery team, and a layered capacity system. In the long run, its advantages are difficult to shake.

In the long term, the bank estimates that Meituan's flash purchase GTV is expected to reach nearly 1.1 trillion by 2030, contributing 18.6 billion in profits. Alibaba's food delivery, instant retail, and e-commerce cross-selling will bring nearly 1 trillion GMV, but with limited profit contribution, the core goal is to achieve GMV growth. JD.com's future layout in food delivery, instant retail, remote e-commerce, and supply chain is expected to achieve overall profitability.

Risk Warning: Risks of intensified industry competition, risks of industry demand falling short of expectations, risks of macroeconomic downturns, risks of overly optimistic long-term space assumptions, risks of overly optimistic/pessimistic long-term space assumptions, risks of changes in rider costs, risks of new business models and new technologies disrupting market patterns