In Beijing's Wangjing area, most buildings are tower blocks with 12 households per floor, each unit divided into three compartments. From close up, it's densely packed with sufficient population density. Due to proximity to internet companies, there are many young white-collar workers who typically work 996. After getting off work at 8 or 9 PM, they return home exhausted, lie down, and use their phones to order instant delivery. In less than half an hour, small shops near Wangjing begin preparing and sorting goods, and then riders pick up and deliver to their homes.
01 Local Supply
The Wangjing area can be considered the best scenario for instant retail: first, dense users; second, dense merchants; third, matching scenarios. Meituan's strongest online seller in Wangjing is a supermarket located in a residential complex, with a store area of over 130 square meters, including a 60-square-meter cold storage, and over 3,000 SKUs covering alcohol, beverages, and general merchandise, with daily online sales of 400 orders.
The owner told me that the employees are all fellow townspeople from Henan. They have opened several chain stores in Beijing, and daily orders rely heavily on Meituan's online platform, with gross margins exceeding 30 points. The owner not only sells alcohol and beverages but also makes craft beer at his Wangjing and nearby university stores, selling homemade beer to increase margins.
There is also a supermarket in the basement near a Wangjing residential area, with a store area of less than 100 square meters, run by one owner and one employee. The location is relatively remote, and sales rely entirely on online orders, which come through Meituan.
The location is remote, so rent is cheap. The owner said that the shops upstairs have gone through several rounds of closures. Online daily orders exceed 200. The owner has a background in physical retail and is excellent at inventory management. Currently, he focuses more on online operations, exploring categories suitable for instant retail. He said that the peak order time is after 7 PM, when Wangjing white-collar workers order during overtime or late-night snack times. Especially during overtime, the best-selling items are snacks.
During the visits, it can be observed that, unlike community group buying, Meituan's instant retail does not build its own supply chain but relies on local supply, depending on physical stores near consumers to provide goods. These stores include convenience stores, grocery stores, and other small formats, as well as medium and large supermarkets and brand direct-operated stores.
These retailers, brands, or warehouse points with physical storage and service capabilities are like capillaries, forming the vast local supply for instant retail. The prosperity of physical entities determines the service level of instant retail. Without supply, even the fastest delivery capability would fall into the dilemma of no goods to choose from or deliver.
Only when local retail formats are more prosperous, more densely distributed, and lower cost can instant retail better meet consumers' more diverse needs.
Additionally, Meituan's instant retail creates incremental orders for small shops. This incremental portion is not the squeezing and substitution of offline orders by traditional e-commerce retail; instant retail mainly captures a portion of traditional e-commerce's remote supply and remote consumption.
For example, when prices are similar, takeout can deliver tissues to your home in 30 minutes, while e-commerce logistics takes two days. Obviously, most consumers would choose the former. For offline physical retailers, their customer base is mainly limited by geographic location, typically residents within a 1-kilometer radius.
Instant retail effectively opens an online channel for these physical stores. With the intelligent delivery system, the business scope expands from the original 1 kilometer to 5 kilometers, directly expanding the customer base coverage.
Also, unlike JD, Meituan's local supply is dense and numerous, with many grassroots players, but they have strong vitality. These small and medium-sized stores support Meituan's instant retail development with their tenacious vitality. Next, let's look at the combat effectiveness of Meituan's local supply.
02 Supply Capability
Currently, the three giants in the instant retail track are Meituan, JD, and Douyin. Their local supply capabilities are completely different, and their strategies differ.
JD and Dada have joined forces, laying out for years, with local large chain supermarkets as the core supply, focusing on family consumption. They have high order volumes, high order amounts, and high average order values, especially for digital 3C brand products, which form their own moat that Meituan and Douyin find hard to capture.
Additionally, JD Daojia's delivery time is longer than Meituan's flash purchase because large supermarkets are located in core business districts, a certain distance from residential areas. High average order value, low frequency, and big brands are the characteristics of JD Daojia. JD's biggest advantage in instant retail is integrating core supermarket chain supply, possessing a vast and complete supermarket supply side, with the advantage of being numerous and comprehensive.
Compared to JD, Meituan's instant retail supply is richer. Due to the requirement for "fast" and "instant," Meituan's local supply density is higher than JD's. It includes both large supermarkets and small and medium-sized supermarkets and convenience stores, with the latter being more numerous. The advantage lies in dense distribution and strong vitality.
For example, the owner of a shop in Wangjing brought fellow townspeople from Henan to start a business, providing room and board with lower wages. The shop is located inside a residential area, with low operating costs. If profitable, they continue to open more shops. Unlike supermarkets, these small shops have an average order value of 40-50 yuan, not high, but with high repurchase frequency. Thanks to the reuse of Meituan riders, delivery costs are low, unlike JD Dada, which relies on high average order values to offset delivery costs.
As these small shops densely cover the 3-kilometer radius of users, order volume increases, and the average delivery cost per order decreases. That is, once the density of the local supply side is achieved, scale and efficiency can be improved, costs lower, and scale larger. Meituan's instant retail strategy is clear.
Compared to Meituan and JD, Douyin Supermarket faces greater difficulty. Although Douyin has the largest traffic, its supply side is insufficient, and fulfillment costs cannot be reduced. Later, despite cooperation with Ele.me, the hardest part is building a massive supply system and getting the snowball rolling. This involves merchant support, category operations, inventory management, etc. Each step is complex. How to quickly build a huge and complex supply system is the biggest problem Douyin will face.
Finally, let's summarize. Whether it's Meituan, JD, or Douyin, physical supermarkets, offline stores, and front warehouses constitute the basic goods supply for instant retail. This is because instant retail's delivery speed is at least within one hour, which determines that the delivery distance must be short. Remote supply relying on national long-distance logistics or central warehouse supply on the outskirts of cities cannot meet the demand.
The core competitiveness of Meituan, JD, and Douyin lies in their local supply capability. The point-to-point 30-minute delivery service experience of instant retail determines that they must simultaneously achieve a large number of orders in the region and reasonable supply distribution to reduce the average delivery cost per order. The more physical merchants within a 3-kilometer radius of users, the larger the order scale, and correspondingly, the lower the average delivery cost per order.
Therefore, the scale, layout, and efficiency of local physical retail directly affect the service experience and delivery cost of instant retail, and indirectly determine the ceiling of the instant retail industry. Whoever has strong local supply capability can go further.
03 Future Direction
From the perspective of supply and demand, currently, instant retail is still in the early stages of development. The richness of product supply categories and the available options are insufficient. Many categories have growth potential. For example, the Wangjing owner told us that young white-collar workers are willing to try new things and pursue novel leisure snacks. Traditional snacks like Daliyuan and Panpan are hard to sell now. There is still significant room for growth in leisure snacks.
Additionally, there are alcoholic beverages, such as homemade craft beer, fresh fruits and vegetables, specialty products from other regions, as well as pharmaceuticals, flowers, and other categories. Currently, no player in the instant retail track can meet all consumer needs. For example, if a consumer wants to buy a toy car on Meituan, either there is no stock or only one or two options are available. Supply is less than demand, so market prices are dominated by the supply side, and early entrants can obtain higher profits.
As consumption frequency increases and user penetration rises, instant demand will further expand to other categories, and supply scarcity will intensify. In the short term, instant retail will be a supply-dominated market, which is a dividend period for local supply merchants.
For consumers, instant demand is growing, and there is an urgent need for richer product supply. From the merchant side, instant retail is a new channel for physical stores to expand incremental orders. For instant retail players like Meituan, JD, Douyin, and Ele.me, the future snowball rolling follows the path: enrichment of local physical retail formats -> emergence of new formats like instant retail -> new formats feeding back into local physical retail growth -> further promoting the revitalization of the local physical economy. Instant retail will coexist and thrive with physical retail, inseparable, and will reshape the entire retail industry.
In summary, local supply actually determines the future development space of instant retail and is also the direction of the industry's future development. Whoever controls supply controls the future.
Source: Liuge Research (ID: liugekandianshang)