---
title: "Is Same-City Retail Worth All the Fuss for Alibaba, Meituan, and JD.com?"
description: "Same-city retail is a tough nut to crack. If there is one hottest battlefield in 2020, Alibaba, Meituan, and JD.com would likely point to same-city retail. From a growth perspective, the traditional e-commerce markets of Alibaba and JD.com and the local life services markets of Ele.me and Meituan are seeing slowing growth, but offline retail is vast: in 2019, online retail accounted for only 24.7% of total retail sales of consumer goods. From a competitive perspective, same-city retail has another significance: the core food delivery businesses of Meituan and Ele.me are daily-frequency, while B2C e-commerce like JD.com and Tmall is mostly monthly-frequency. These two have occasional competition but find it hard to truly penetrate each other's core territory."
author: "人民数字TMT"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-10-15"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/is-same-city-retail-worth-all-the-fuss-for-alibaba-meituan-and-jd-com-3d9c5436/"
markdown: "https://xinjignxiao.com/en/articles/is-same-city-retail-worth-all-the-fuss-for-alibaba-meituan-and-jd-com-3d9c5436.md"
original_source: "https://mp.weixin.qq.com/s/J8yJoKL7h6KMgg2UXyLKOg"
translation: "https://xinjignxiao.com/zh/articles/%E5%90%8C%E5%9F%8E%E9%9B%B6%E5%94%AE%E8%BF%99%E4%BA%8B%E5%84%BF%E5%80%BC%E5%BE%97%E9%98%BF%E9%87%8C-%E7%BE%8E%E5%9B%A2%E5%92%8C%E4%BA%AC%E4%B8%9C%E4%BB%AC%E5%A6%82%E6%AD%A4%E6%8A%98%E8%85%BE%E4%B9%88-3d9c5436.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/is-same-city-retail-worth-all-the-fuss-for-alibaba-meituan-and-jd-com-3d9c5436/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Is Same-City Retail Worth All the Fuss for Alibaba, Meituan, and JD.com?

> Same-city retail is a tough nut to crack. If there is one hottest battlefield in 2020, Alibaba, Meituan, and JD.com would likely point to same-city retail. From a growth perspective, the traditional e-commerce markets of Alibaba and JD.com and the local life services markets of Ele.me and Meituan are seeing slowing growth, but offline retail is vast: in 2019, online retail accounted for only 24.7% of total retail sales of consumer goods. From a competitive perspective, same-city retail has another significance: the core food delivery businesses of Meituan and Ele.me are daily-frequency, while B2C e-commerce like JD.com and Tmall is mostly monthly-frequency. These two have occasional competition but find it hard to truly penetrate each other's core territory.

**A tough nut to crack.**
If we were to identify the hottest battlefield of 2020, Alibaba, Meituan, and JD.com would likely point to same-city retail.
From a growth perspective, the traditional e-commerce markets of Alibaba and JD.com and the local life services markets of Ele.me and Meituan are all seeing slowing growth, but offline retail is vast: in 2019, online retail accounted for only 24.7% of total retail sales of consumer goods.
From a competitive perspective, same-city retail has another significance: the core food delivery businesses of Meituan and Ele.me are daily-frequency, while B2C e-commerce like JD.com and Tmall is mostly monthly-frequency. These two have occasional competition but find it hard to truly penetrate each other's core territory.
**The weekly-frequency same-city retail market holds a special position: whoever secures this advantageous market position occupies a very important strategic position, potentially impacting the landscape of Alibaba, Meituan, and JD.com.**

**-01-**
**Same-city retail in full swing**
Alibaba's same-city retail strategy is led by Daniel Zhang (nickname: Xiaoyaozi), Chairman and CEO of Alibaba Group. The front end is the Same-City Retail Business Group, with Tmall Supermarket, Taoxianda, Hema, and Ele.me (upgraded in July) as the main players. The transformation of small stores is handled by the Retail Tong business unit.
In April 2020, Tmall Supermarket was further upgraded to the Same-City Retail Business Group, absorbing the Ele.me new retail business that originally belonged to the local life services company. Since then, same-city retail has become Alibaba's new No. 1 project. Currently, Alibaba's local life vice president and Ele.me new retail head Xiong Bin reports to Li Yonghe.
In the past two years, Tmall Supermarket's status within Alibaba has been rising. As early as November 2018, **Tmall Supermarket was spun off from Tmall to become a separate business group,** at the same level as the Tmall business group.
In Alibaba's third quarter of 2019, the same-city retail business showed a strong presence—the revenue share of new retail and direct sales businesses led by Tmall Supermarket and Hema reached 15%, surpassing commission income for the first time to become Alibaba's second-largest revenue source. For the e-commerce giant, advertising and commission income from Taobao and Tmall have always been the two core revenue sources.
Ele.me, which started with food delivery, naturally would not be absent. On July 10, **Ele.me announced a comprehensive upgrade, from food delivery to delivering "everything and services," laying out the "surrounding economy."**
Over the past year, non-restaurant demand on the Ele.me platform has continued to grow, especially in categories like supermarkets, fruits and vegetables, medicine, and flowers. Ele.me CEO Wang Lei said: "We have several teams, several troops. Today we hope to enter from different perspectives and different fields to meet as many of consumers' needs in urban life as possible."
Alibaba's same-city retail supply is centered on RT-Mart. Lin Xiaohai, Alibaba Group Vice President and General Manager of the Retail Tong business unit, said in an interview with China Entrepreneur: "The core supply for same-city retail is mainly RT-Mart, because RT-Mart's overall supply capability is very strong."
**For Meituan, same-city retail is also a No. 1 project,** but the logic differs from Alibaba's—offline retail is more closely related to Meituan's own business. Following the Food+Platform approach, extending from food delivery to more categories is a natural progression. Meituan has a huge rider network, but food delivery demand is high-concurrency in short periods; outside peak dining hours, riders are idle. With such a ready-made network, why not increase order density and reduce costs?
Meituan's same-city retail battle is mainly fought by the Meituan Flash Purchase business unit and the Youxuan business unit. Meituan Flash Purchase focuses on "30-minute delivery to door," led by Wang Puzhong, Meituan's youngest senior vice president. This business unit includes the physical goods e-commerce business "Tuanhaohuo." From this, one can see that this is Meituan's probe into Alibaba's e-commerce base.
According to LatePost reports, in March 2020, Wang Puzhong, Meituan's senior vice president and head of the Home Delivery business group, said at an internal meeting that Alibaba is now facing a pincer attack from Pinduoduo and JD.com, and he hopes that in the future, Meituan Flash Purchase can also besiege Alibaba. The next-stage goal for Meituan Flash Purchase is to achieve annual GMV of 100 billion yuan; current annual GMV is in the tens of billions.
According to Meituan's Q1 2020 financial report, during the pandemic, the new business segment (which includes Flash Purchase) generated revenue of 4.17 billion yuan, a year-on-year increase of 4.9%, making it Meituan's only growing business segment.
The new business segment includes ride-hailing, bike-sharing, Meituan Flash Purchase, micro-loans, and B2B restaurant supply chain services. Under the pandemic, growth was entirely driven by fresh produce and retail businesses. In Q2 2020, Meituan's financial report stated that Flash Purchase "achieved considerable year-on-year revenue growth."
In Q2 2020, Meituan also established the Youxuan business unit for community group buying, officially entering that track.
Just as Alibaba upgraded Tmall Supermarket to the Same-City Retail Business Group, **JD.com established the Large Supermarket Omni-channel Business Group,** integrating the original JD Supermarket, Consumer Goods Division, New Channel Division, 7FRESH, and No. 1 Store, and coordinating with the "Wujing Tianze" project to achieve a "half-hour delivery living circle."
Li Changming, General Manager of the Wujing Tianze business unit, said in an interview with media including PingWest: "Wujing Tianze will gradually become a strategic project for the company." JD.com has high expectations for Wujing Tianze, aiming to achieve sales exceeding 800 billion yuan by 2023.
According to Li Changming, the Wujing Tianze project was initially created to solve the loss problem of heavy FMCG products like drinking water, rice, and flour sold online. "These products have very serious losses." Taking Nongfu Spring mineral water as an example, under the original JD self-operated model, the brand had to ship water to JD's large warehouses, then through logistics layers of sorting, taking half a day or next-day delivery to consumers.
Wujing Tianze connected with Nongfu Spring's distribution network: when a consumer places an order on JD, the nearest distribution point delivers, reducing the time from order to receipt to about two hours. Due to the shortened delivery distance, fulfillment costs are roughly halved.
Later, JD found that the scenarios for linking socialized businesses are very extensive, and consumers have strong demand for instant delivery. Beyond the supermarket sector, JD's 3C, apparel, home, medicine, and flowers have all been connected to Wujing Tianze.
In Li Changming's view, the genes and business logic of Alibaba, Meituan, and JD.com are different: Meituan started with food delivery, its business is based on geographic location fulfillment, and its local life services are broad, but "it is still shallow in the supermarket sector, and its relationship with supermarkets and brands is just beginning"; Alibaba has its own ecosystem advantages; JD.com emphasizes its supply chain genes, and JD Supermarket has cooperated with FMCG brands.

**-02-**
**The contradictions of same-city retail**
**Whether large chain or small retailer, profit margins are far smaller than in the food delivery industry. The food delivery industry already suffers from high commissions; low-margin same-city retail must balance the interests of chains, platforms, and brands.**
Li Changming told PingWest that to do same-city retail well, one must connect with more offline chain outlets to provide more supply; at the same time, large brand owners need to participate more deeply; and large platforms play a leading role in the middle. This is the key to the success of same-city retail.
This is the challenge facing same-city retail, and it is also its awkwardness.
First, the depth of merchant inventory is a problem. Zhuang Shuai, founder of Bailian Consulting and analyst of the retail e-commerce industry, pointed out to PingWest that on the e-commerce "infinite shelf," inventory is basically unlimited; but traditional offline stores pursue high turnover and do not stock much inventory. **Orders in same-city retail are based on different locations and scenarios, making orders extremely unstable, leading to a situation that is neither here nor there, and product richness becomes a big problem.**
Second, Zhuang Shuai believes that there is too little data connecting consumers and merchants. And data is precisely the key for same-city retail players to leverage brand owners and earn profits. **Compared with e-commerce, same-city retail business is closer to consumers, and consumers' demands for diversity and localization are stronger.**
Li Changming told PingWest that JD's same-city retail profits come from three aspects: first, optimization of last-mile logistics costs; second, changing consumer perception so they are willing to pay separate shipping fees for same-city instant delivery; and third, user digitalization.
"User digitalization is what brand owners most want to do, but it is very difficult. In offline hypermarkets, brands find it hard to know who bought what. Through same-city retail, user IDs, user profiles, purchase behavior, etc., can be co-created with brands for consumer insights. Brands are willing to invest."
"Same-city retail is decentralized, capturing long-tail sales. Food delivery is a fixed demand; there are only those nearby merchants, with few choices," Zhuang Shuai said. Taobao's personalized recommendation "thousands of people, thousands of faces" has been done for over 7 years, and yet "Guess You Like" is still not accurate. Scaled up to the same-city retail scope, this data is far from sufficient—how can the platform establish a data connection between "eating at Xibei Oat Noodle Village" and "buying lipstick"?
Third, **the demand for same-city retail is very immediate and scenario-based, which places very high demands on the dispatch system.** How is order information transmitted? How is it synchronized? How is it settled? Order receiving, dispatching, delivery, and confirmation all require a complex dispatch system.
Furthermore, if a consumer orders two items from two stores, should they be combined into one order for delivery or delivered separately? If separately, which store should be picked first? If a consumer orders a book online, who picks it? How do you find the specific book from a complex book inventory? These questions are not hypothetical; Xinhua Bookstore encountered them during the pandemic when selling books online.
"These things are not clear even after two sessions and a year of discussions at Walmart and Wangfujing Department Store," Zhuang Shuai said.
Currently, the biggest cost in same-city retail is freight. Li Changming admitted that Wujing Tianze, in addition to JD Logistics and Dada's crowdsourced logistics, also connects with merchants with self-delivery capabilities, such as water stations and milk stations. Of course, introducing third parties means higher requirements for delivery quality control.
Because of these inherent contradictions, although same-city retail theoretically has a huge space—all social retail except online retail is the market for same-city retail—its inherent contradictions determine that the business will be neither large nor small in the short term, awkwardly positioned.

**-03-**
**A tough nut to crack**
When the same-city retail model is implemented in a company, it faces even more challenges.
Take JD's Wujing Tianze as an example. First, it must solve the problem of internal innovation in large companies. "The Innovator's Dilemma" proposed that every large company forms an invisible "value network" around its mature main business, with all rules, management mechanisms, corporate culture, path dependencies, and even customer communication methods built around it. When disruptive innovation appears, it often represents a completely new "value network" that is extremely immature, so it will almost certainly be judged as "unreliable" by the old "value network." The more mature and perfect the management, the more it considers it unreliable.
Li Changming introduced that JD's previous major changes were all top-down, but Wujing Tianze grew bottom-up from the business, which poses great challenges to human resources, finance, and innovation mechanisms.
Just in terms of product display, JD's original shelf-style B2C business model displays all products based on the delivery address, while same-city retail must display based on the consumer's real-time geographic location. This transformation involves many underlying changes.
JD started with self-operated business and later opened the platform to merchants, but the current openness is far from meeting the needs of same-city retail. Li Changming said, "For projects like Wujing Tianze, we will reconstruct the nodes of the entire order flow, and even each node may be opened to the outside, cooperating with various types of merchants. This is actually a huge internal challenge."
Internal challenges mean reshaping the existing interest pattern. In the Nongfu Spring case mentioned earlier, the profit link shifted from JD self-operated price differences to logistics and delivery. Opening up the delivery link may affect the inherent interests of JD Logistics.
We have already analyzed that **same-city retail places very high demands on logistics.** Li Changming once told PingWest that Wujing Tianze's self-operated business was initially fulfilled basically by JD Logistics. In mid-2019, JD had a deep discussion and reflection: What does JD self-operated really mean?
The conclusion was: a commitment to service standards for consumers. This means subverting JD Logistics' self-operated mechanism and opening it up. Of course, this consensus was "reached after many discussions."
Furthermore, the supply side of same-city retail—**the digitalization capability of offline supermarkets—is also a tough nut to crack.** After all, not every retailer has Walmart's boldness and financial resources to invest hundreds of millions of dollars in online store and app upgrades five years ago. Li Changming introduced that many offline supermarkets set aside a small area for home delivery business, and picking capability and order fulfillment capability need to be gradually established.
For large brands like Nongfu Spring that have their own network system, JD Wujing Tianze can connect with their system interfaces to share data; but many brands' own systems are not complete, requiring the platform to deploy its system into their networks, which is a considerable project.
In addition, the online-offline coordination of offline supermarkets is also a challenge. Traditional large brands like Feihe often strictly separate online and offline channels to avoid price system conflicts, and online and offline teams are also separated.
A few years ago, when e-commerce was just starting in the FMCG field, to leverage brand owners, they were encouraged to differentiate online and offline. Now, with same-city retail, purchases are completed online and fulfillment is done offline. JD.com and Alibaba hope brand owners will merge online and offline for omni-channel operations. This is a significant transformation for brand owners.
The same-city retail business: looking up, it's a sea of stars; looking down, your legs are covered in mud. The awkward model means its current scale is small, and the core contradictions determine that short-term returns are meager. **Same-city retail will continue to exist as a supplementary model to local life services and remote e-commerce.**
But the major players all have some relevant experience, and it would be a pity to abandon it. In the current difficult search for growth, if each city can add a little revenue, it would be a huge increment.
In JD.com, Alibaba, and Meituan, you can almost always find multiple columns shooting arrows left and right. To improve the cost-effectiveness of this business, perhaps integrating the various columns and concentrating forces is the answer.
Source: People's Digital TMT (ID: RMSZ-TMT)
Tips will be paid 400-2000 yuan once the tip is adopted.


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671