Recently, JD.com's instant retail brand 'Hourly Delivery' is rumored to be upgraded to 'Second Delivery'. Meanwhile, Dada also posted a 'rider recruitment' notice on its official WeChat account. From rebranding to increasing delivery capacity, JD.com's series of actions have made many industry insiders sense the flavor of 'involution'. It seems that the instant retail industry, which has not received much attention for a while, is about to usher in a new round of delivery speed competition. However, it has been nearly two years since the Ministry of Commerce first explicitly proposed the concept of 'instant retail', and more than a year has passed since instant retail was included in the 'Central Document No. 1'. The market background has changed significantly. Is the 'active involution' centered solely on 'speed' still effective? More bluntly, when user demand is no longer focused on efficiency, does instant retail still need to be so 'instant'?
Instant is the current demand When encountering hot weather and wanting to eat ice cream, would you go out to buy it or order it on your phone? According to a survey by iResearch, 54% of users choose instant retail because they are unwilling to go out or travel long distances. In fact, the core demands of consumers for shopping are just four words: more, fast, good, and economical. Among them, 'fast' is to solve consumers' 'laziness' and to satisfy their pursuit of 'convenience'. For the retail industry, its essence is cost, efficiency, and experience: if costs are controlled, then there are 'super low prices' and 'billion-dollar subsidies'; if user experience is good, then it is 'consumption upgrade' and 'quality shopping'; and when efficiency is improved to the extreme, instant retail arrives. According to Accenture's report 'Focusing on China's Post-95s Consumer Group', post-95s value delivery speed more than millennials, with over 50% hoping to receive goods the same day or even half a day, and 7% hoping to receive goods within two hours. Time is more important than money, which was the general perception at the time and also the differentiated experience consumers expect from instant retail. It can be said that consumers' demand for convenient shopping has driven the rapid growth of the instant retail market. According to the 'Instant Retail Industry Development Report (2023)' released by the E-commerce Research Institute of the Ministry of Commerce, instant retail has maintained an average annual growth rate of over 50% in recent years. In 2022, the market size reached 504.286 billion yuan, and it is expected that by 2025, the instant retail market size will be three times that of 2022. However, with changes in the consumption environment, people's consumption preferences are also constantly changing. Nowadays, people's sensitivity to instant retail delivery speed is continuously decreasing—instant retail is no longer 'emergency retail' but has become a daily consumption habit. According to data from the '2023 Instant Retail Development Trend White Paper', among the scenario motivations for choosing instant retail shopping, daily replenishment ranks first at 68.1%, followed by saving effort (62%) and seeking discounts (54.9%), while home emergency only ranks fourth (52.6%). It is not difficult to see that consumers' demand for 'more, good, and economical' in instant retail is increasing. Therefore, on the basis of 'fast', the market needs to provide more diversified shopping choices, high-quality and cost-effective goods, and a more worry-free and convenient shopping experience. Especially quality-price ratio is becoming an important factor affecting consumer shopping. According to NielsenIQ's '2024 China Consumer Outlook' report, compared with early 2023, consumers' price sensitivity has increased overall, with the proportion of 'revitalizing' and 'tight-budget' types who care about low prices rising from 20% to 35%; the proportion of 'calculating' consumers who value cost-effectiveness and compare prices across multiple platforms rose from 28% to 30%; while the proportion of 'carefree' consumers who consume freely and pursue advanced value and 'consistent' consumers who maintain consumption habits and prefer brands decreased from 52% to 35%. In short, the market trend of the current instant retail industry has shifted. Therefore, for major players such as Meituan, JD.com, Ele.me, and Douyin, it is more important to slow down and understand users' current needs.
Platform competition, what to 'roll'? According to the Ministry of Commerce's Dragon Year Spring Festival consumption big data monitoring, the instant retail sales of key e-commerce platforms monitored by the Ministry of Commerce increased by 32.2% year-on-year. While jointly pushing up the industry scale, players with different identities have also achieved phased results through differentiated competitive strategies. For example, Meituan has been promoting the concept of '30-minute delivery of everything to home', striving to achieve prosperity in all categories, regions, and scenarios of instant retail. Its Meituan Flash Purchase order volume increased by more than 40% year-on-year in 2023. On Double 11 last year, the number of participating products increased by 123% year-on-year, covering core categories such as digital home appliances, beauty and personal care, pet food, general merchandise and clothing, and mother and baby toys, with sales reaching a record high. JD Daojia, established in 2015, has now achieved hourly delivery across all categories. According to financial reports, in Q4 2023, the average monthly ordering users of JD Hourly Delivery increased by 50% year-on-year. On Double 11 in 2023, JD Hourly Delivery's transaction volume increased by 45% year-on-year. JD Daojia's live streaming transaction volume increased by more than 10 times compared to 618. Alibaba's Q3 FY2024 financial report shows that driven by healthy growth in Ele.me and rapid growth in Amap, the local life group's order volume increased by more than 20% year-on-year. Double 11 data in 2023 shows that over 90% of cooperative brands on the Ele.me platform broke historical transaction volume peaks, and nearly 100 brands saw transaction volume increase by more than 100% year-on-year. As for Douyin, in October 2023, Douyin's instant retail 'Hourly Delivery' business gained an independent entrance. This year, Douyin launched the 'Douyin Mall Edition' APP, with the hourly delivery entrance on the homepage, marking Douyin's accelerated layout in instant retail. Facing such a market exceeding one trillion yuan, every player wants to occupy a larger market share as soon as possible to achieve rapid business growth. However, from the current market situation, it is not yet time to form a stable industry pattern with one dominant player. From a data perspective alone, Meituan Flash Purchase, Ele.me, and JD Daojia, as the first tier of the industry, have not yet opened a sufficient gap. According to a report by consulting firm Jiuzhong QianTai, in terms of GMV, Meituan Flash Purchase, Ele.me (non-catering part), and JD Daojia accounted for 34%, 26%, and 15% of the instant retail market share in 2022. Referring to the 2023 financial reports of each company, this ranking will not change at present. In addition, instant retail needs to satisfy many categories and scenarios, and any specific sub-category may bring surprising growth. As for which verticals to find growth points faster, this is the current problem that 'Meituan, JD, Ele.me, and Douyin' need to solve.
Instant retail, waiting for 'comprehensive prosperity' Since the industry is still in its early stages, the current instant retail market mainly focuses on full-category coverage, lacking specialized segmentation. When there are too many homogeneous players, consumers will show biased choices, losing awareness and loyalty to platforms. Therefore, tapping the growth potential of instant retail sub-categories is the only way for the industry to achieve comprehensive prosperity. Taking the alcohol category as an example, according to data released by Meituan Flash Purchase in 2023, 30% of its alcohol order delivery locations are restaurants where users are dining. This data reflects two issues: first, instant retail scenarios are not fixed and may not necessarily be at home or in office areas; second, the instant retail demand for each sub-category has its own uniqueness. For example, alcohol belongs to the 'non-satisfied-then-disappear' demand. Young people have strong emotional needs for alcohol, and when emotions arise, they want to drink immediately, such as ice beer needing immediate delivery, baijiu needing to be delivered before serving, and there are scenarios of buying alcohol at night. The differentiation of scenarios determines the motivation for consumption and also affects decision-making, which tests how platforms grasp and meet instant retail needs in different scenarios. Combined with the emergence of scenario needs, the categories involved in instant retail are also constantly expanding. Since the beginning of this year, Meituan has made many cooperation attempts: for example, in January, it announced a strategic cooperation with Decathlon (sportswear); in February, it announced cooperation with Supor (small home appliances) and Lego (mother and baby toys); in March, with Pisen (3C home appliances) and Cosmo Lady (underwear clothing); in April, Meituan's Waima Wine Delivery began nationwide expansion and strategic cooperation with Xijiu and Yanghe (alcohol). In addition, according to exclusive information from Jingzhe Research Institute, Meituan has recently launched cooperation with ONLY/jackjones, and related clothing brands have now entered Meituan. At the same time, Jingzhe Research Institute also noticed that when searching for air conditioners, TVs, refrigerators, washing machines, and other large home appliances on Meituan in major first- and second-tier cities, it can be seen that they can be delivered and installed the same day at the earliest. JD.com has also expanded its exploration in the alcohol field. On April 9 this year, JD Hourly Delivery (Second Delivery) officially launched the 'Famous Liquor Authenticity Guarantee' zone, jointly with brand liquor merchants such as JD Liquor World, 1919, Jiuxian, Huazhi Liquor Store, and chain supermarkets such as Walmart, China Resources Vanguard, Sam's Club, Yonghui, and Metro, to fully guarantee the authenticity of Maotai sauce-flavored series, Wuliangye, Fenjiu, Guojiao 1573, Jiannanchun, and other famous liquors. Obviously, JD Hourly Delivery attempts to bind high-ticket users through genuine product guarantees. Third, consumption convenience can still be improved. Consumption convenience corresponds to delivery speed, which is not only based on the number of riders but mainly on the distance from the warehouse to the consumer's home. The closer the front warehouse is to consumers, the more obvious the improvement in delivery speed. According to media reports, on the peak day of Double 11 in 2021, just 7 minutes after the start, Ms. Tang from Chaoyang District, Beijing, received the Huawei P50 Pro phone she purchased through JD's 'Hourly Shopping'. The reason for achieving such 'minute-level' delivery is that the store front warehouse is very close to the consumer's delivery address. Therefore, 'Meituan, JD, Ele.me, and Douyin' might as well slow down and directly face consumers' needs for 'more, good, and economical': first, satisfy diversified shopping choices with 'full categories', 'full regions', and 'full scenarios'; second, cooperate with retailers and brand owners in more vertical categories to provide consumers with high-quality and cost-effective goods; in addition, accelerate the construction of instant retail infrastructure (such as front warehouses, flash warehouses, etc.) and strengthen after-sales service to bring consumers a more worry-free and convenient shopping experience.
Beware: competitors outside the door As the saying goes, 'industry disruptors often come from outside the industry'. While a group of internet companies are engaged in the instant retail battlefield starting from online channels, traditional offline supermarkets are not idle. Let's look at two sets of financial data: In Q1 2024, Yonghui's online business revenue was 4.1 billion yuan, a year-on-year increase of 1.99%, accounting for 18.92% of the company's operating revenue. In 2023, Yonghui's private brand achieved sales of 3.54 billion yuan, accounting for 5% of operating revenue, a year-on-year increase of 8.26%; focusing on fresh standard products and the Yonghui Farm brand, fresh private brand increased by 41.3% year-on-year. The annual report of Jiajiayue, a leading supermarket chain from Shandong, also shows that in 2023, its online sales increased by 23.9%, driving 3.06 million offline store visits, with a store conversion rate of 35%. At the end of the reporting period, online sales of supermarket business accounted for 5.98%. In 2023, Jiajiayue also launched a mini-program on Alipay. As of Q1 2024, 250 stores provided home delivery services. From the data, traditional chain supermarkets have not only fallen behind but have also achieved good growth in instant retail business. Especially Yonghui Supermarket has shown a positive attitude in embracing change and recently accepted 'assistance' from Pangdonglai: Pangdonglai will first pilot in two Yonghui stores in Henan, with specific adjustments including employee salaries, store planning, product structure, shared supply chain, and optimizing store prices and services. In addition to traditional chain supermarkets, according to NielsenIQ's '2024 China Retail Development Report', in offline channels, snack discount stores have attracted young consumer groups with their rapid store expansion and low-price strategies, with an industry scale growth rate of 75.8% in 2023. In 2023, convenience stores and grocery stores maintained growth of 1.2% and 2.5% respectively. Convenience, time-saving, and rich products are the main reasons for high-frequency visits by convenience store consumers, while snack discount stores are more attractive to price-sensitive young people. At the same time, warehouse membership stores have entered a development period by providing unique quality/price ratios not available in other channels, with the number of stores of major membership store players increasing by 37.8% in 2023. Avoiding competition in high-tier cities, early layout in lower-tier markets, combining local characteristics and regional needs to find differentiated product selection, and highlighting the exclusive brand value of retailers have become the winning path for domestic membership stores. For offline supermarkets, instead of competing with 'Meituan, JD, Ele.me, and Douyin' in all categories, it is better to do things more focused on consumer needs: first, do boutique stores. Even in the current era of cost-effectiveness, consumers will still pay for 'self-pleasure'. The advantage of boutique stores lies in the novelty, rarity, personalization, and high quality of products. According to the '2024 China Consumption Trend Report', spiritual self-pleasure has become a consumption trend that everyone pays more and more attention to. Specifically for modern young consumer groups, they pursue not only the quality of the product or service itself but also whether the consumption process can reflect their self-worth and personality. They expect merchants to provide customized and differentiated products and services to meet their personalized needs. Second, accelerate the layout of store-warehouse integration. The living space of traditional offline retail is destined to be further squeezed by traditional e-commerce and instant retail. Accelerating the construction and layout of store-warehouse integration, on the one hand, can make offline supermarkets closer to users and obtain changes in user needs faster, and on the other hand, it lays a solid foundation for accelerating their transformation to instant retail. In the past, the days were slow, and cars, horses, and mail were slow. So people had time to think about how to move forward and where to go. Players such as Meituan, JD Hourly Delivery, Ele.me, and Douyin Hourly Delivery have been running fast for many years. Perhaps they should also slow down and think: what is the most 'instant' thing about instant retail?