Shanghai: The largest online shopping companies in China, Alibaba and JD.com, are now underway to deliver orders faster than ever.
This year, the two began to offer instant retail services, aimed at obtaining goods from customers in just 30 to 60 minutes. They spend big and move quickly to win this new battle for speed.
Investors will dissect the strategy when JD.com will report its quarterly results on Tuesday and Alibaba on Thursday, because finding new growth paths has proven difficult for the largest online retailers in China.
Their penetration of the market is already high and the prices of goods are under pressure due to a slowdown in consumers motivated by concerns about employment and wages, as well as prolonged slowdown in the real estate market.
The new gear -focused lawn war is at a high -term cost in the short term while electronic commerce giants seek to attract consumers with important discounts.
JD.com Takeaway from JD.com and the food delivery application of Alibaba last month, each promised 10 billion yuan ($ 1.38 billion) of subsidies. JD Takeaway said he would invest the amount over a year, while Ele.me did not disclose the deadline.
“Competition is so intense, there are not many incremental growth opportunities, so everyone moves into everyone’s territories and instant retail trade is the last example,” said Jason Yu, CEO of CTR Market Research.
The Chinese food delivery market Meituan has decided to develop its activities by expanding its Instashopping platform, which delivers non-food products in 30 minutes, and JD.com announced its entry into food delivery in February.
“In the past, people were going to JD.com to buy a mobile phone and they would give you the same day, then suddenly, they could go to Meituan and have the new Apple iPhone delivered within 30 minutes.
At the end of April, Alibaba expanded her instant shopping gate to its national electronic commerce application Taobao. This has given users access to restaurants, cafes and tea channels with bubbles available on Ele.me d’Alibaba – the second largest Chinese food delivery player behind Meituan – as well as many other categories, including food and pet clothes.
Alibaba, JD.com and Meituan did not respond to requests for comments.
Subsidized expenses on the instant retail trade in Alibaba and JD.com are welcomed by consumers concerned for costs.
JD Takeaway users currently benefit from discounts up to 20 yuan, or $ 2.77, per day for restaurant deliveries, including McDonald’s, Hailaao and Burger King. On the Taobao instant shopping portal, consumers can receive a delivery of 11 yuan on an invoice of at least 15 yuan.
Liu Qi, 24, owner of a small business in Tianjin, said that he was happy when he recently bought a coconut lanch on JD Takeaway for only 5.9 yuan.
“I asked the delivery man and he said that he made 4 yuan by delivery, so essentially, JD.com bought me a cup of coffee and delivered it to my door,” said Liu.
He was even more surprised a few days later when he bought a coffee on the Taobao instant shopping portal for only 3.9 yuan. “It was 2 yuan cheaper than JD.com!” He said.
War chests
Although the consumer discount subsidy for instant retail is expensive, China electronic commerce giants have significant cash reserves. As of December 31, Alibaba, JD.com and Meituan had net cash positions of 400 billion, 144 billion and 110 billion yuan respectively, according to Morningstar analysts.
And despite the low margins inherent in the company, a renewed concentration on instant retail sales was logical for JD.com and Alibaba in part because the two companies already have armies of letters at their disposal, analysts said.
This means that there is no need for an expensive construction of the delivery infrastructure, as would be necessary for other potential participants such as the owner of Temu-Owner Holdings.
Independent analyst of the independent industry based in Beijing, Liu Xingliang, said that Alibaba and JD.com were part of high -frequency demand for food, coffee and bubble tea to increase the demand for clothing, electronics and other higher margin purchases – betting that if consumers open their applications more often, they could buy more.
For JD.com, expansion in the instant retail trade was particularly important since its traditional electronic commerce activity seemed to have struck a ceiling, he said.
“He must try to obtain market share in new areas of activity.”