JD.com considers food delivery business, a market almost completely controlled by Meituan and Alibaba’s Ele.me
- The e-commerce giant’s logistics affiliate Dada Nexus said a food delivery service is ‘still in the planning stage’
- Meituan and Alibaba together control 99 per cent of the market, but JD.com’s strength in logistics is seen as an asset
Xin Lijun, chief executive of JD Retail, told Bloomberg News that the company was exploring a move into the business segment because Dada Nexus, JD’s logistics affiliate, has strong capabilities in same-city delivery. The launch time will depend on the company’s capacity, Xin said.
A Dada representative said that the food delivery service is “still in the planning stage”. JD declined to comment.
JD has already been in talks with some restaurants in cities like Zhengzhou, in central Henan province, and will let Dada handle the deliveries, according to a report by Chinese online media outlet LatePost earlier this month.
If JD fully commits to food delivery, its main strength will be in logistics, according to Li Yingtao, director of retail and brand analysis at market research firm Analysys. “The company has built up a comprehensive delivery system and has rich experience in it,” he said.
China’s food delivery market represents a big opportunity for any new entrant able to crack it. In 2021, total users of food delivery platforms jumped nearly 30 per cent to 544 million, according to Chinese consultancy Zhiyan. It had already been growing quickly before the Covid-19 pandemic, which created even more demand while people have been forced to stay home during various lockdown periods across different cities.
However, nearly the entire market is controlled by two companies: Meituan, with 69 per cent in 2020, and Alibaba’s Ele.me at 26 per cent, Zhiyan data showed. Alibaba owns the South China Morning Post.
In addition to a strong logistics base, JD has a lot of resources it can throw at a new venture.
“Another advantage is that as [a member of] Big Tech, JD will invest a lot of money, talent and other resources to support it,” Analysys’ Li said, adding that JD’s real challenge will be securing enough time.
“Rivals like Meituan and Ele.me have formed powerful and efficient business operations, have access to a loyal customer base and cultivated user habits,” he said. “People may not necessarily give JD time to grow.”
In February, Li estimated that a 5 per cent reduction in commission fees could result in a 14 per cent drop in revenue for Meituan.