JD.com, number 2 in Chinese e-commerce behind Alibaba, plans to get into food delivery, a market with very high potential in the Middle Kingdom.
The logistics branch of JD.com at the wand
Xin Lijun, general manager of JD Retail, explained duringan interview granted to Bloomberg TV that the company was “considering and exploring” launching an on-demand food delivery service. ” As for when we will start doing that, it will depend on our capacity and when we can build a team of talents “, he added. Asked by the South China Morning Posta representative from JD.com’s logistics arm, Dada Nexus, said the food delivery service is ” still in planning stage “.
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Indeed, this service would be operated by Dada Nexus, which has strong delivery capabilities in cities. As an e-commerce platform, JD has long stood out for its courier services, which allow certain products to be delivered the same day. The company’s local grocery delivery service, JD Daojia, can even deliver fresh food to a customer’s doorstep within an hour. By the end of 2021, JD’s delivery unit employed more than 224,000 people, or 58% of the tech giant’s total workforce.
JD intends to use its knowledge and expertise in the logistics sector to operate its food delivery service. According to Li Yingtao, director of retail and brand analysis at market research firm Analysys, “ the company has established a complete delivery system and has rich experience in this field “.
The logistics branch of JD.com has a great deal of experience and contributes greatly to its turnover. Photography: Sam Balye/Unsplash
A very competitive market
In China, the food delivery market is booming. This sector was already growing before the Covid-19 pandemic, but the emergence of the latter literally caused it to explode. In 2021, the total number of food delivery platform users jumped nearly 30% to 544 million, according to Chinese consultancy Zhiyan.
However, JD.com will have to come up against strong competitors. Almost all of this market is dominated by two players: 69% market share for Meituan, and 26% for Ele.me, a subsidiary of the e-commerce giant Alibaba. In fact, Ele.me stood out as a safe bet for Alibaba in the last quarter of 2021 with revenue up 27%.
Other Chinese tech giants have taken an interest in food delivery, such as ByteDance, which entered the market in 2021, and Baidu, which nevertheless sold its Baidu Waimai service to Ele.me three years later. having deployed it in 2014.
The task can be complicated because of the regulation
You should still know that the context is difficult for JD.com. Indeed, expansion into new sectors has become rare among Chinese tech giants as regulators have vowed to weed out disorderly capital expansion. Moreover, Meituan was fined 456 million euros in 2021 for abuse of a dominant position. Beijing has also passed new laws to lower the costs of operating the sector. As a result, companies must charge lower commissions, which impacts their turnover.
For now, JD is in talks with some restaurants in cities like Zhengzhou in the central province of Henan, and it will probably take some time before its delivery service is up and running.