Instant retail, don't learn from community group buying. In 2021, Meituan had 5.27 million riders, which is the confidence behind Meituan's slogan 'everything to home'. If starting from the delivery end, using these 5 million plus riders to solve the 'last mile' problem for e-commerce platforms, perhaps Meituan could imitate Pinduoduo and cut a gap in the already established e-commerce market. Of course, this sounds difficult. For example, how to get others to shop on Meituan, and how to connect long-distance transport with riders. Since e-commerce is a long-term thing, why not first find business in the 'last mile'? This gave rise to Meituan Flash Shopping, which serves the surrounding area with supermarkets as representatives. At the 2021 earnings call, Meituan mentioned that the annual transaction users of Flash Shopping reached 230 million, and the total transaction value (GTV) had already reached 12% of food delivery. In March this year, Meituan and Xiaomi reached a cooperation, with more than 3,000 Xiaomi Home stores in 276 cities going online on the Meituan platform, further expanding the scope of Meituan Flash Shopping. It seems that no one is more suitable than Meituan to do this 'last mile' business, but is the Flash Shopping business really beautiful? ****Meituan E-commerce's New Hope Business is a natural process, as can be seen from Meituan Flash Shopping. In 2018, the food delivery market had already formed a pattern of Meituan and Ele.me, and both inevitably had to find new tracks beyond food delivery, and supermarkets became their target. (Image source: Internet) Think about it, food delivery delivers restaurant food to consumers, while supermarkets are simpler, eliminating the waiting time for cooking, and just packing and picking up goods. Of course, the above is a result-driven inference, which can be used to create business myths and sell courses. In fact, Meituan food delivery started doing supermarkets much earlier. In July 2016, Meituan received strategic investment from China Resources Venture and United Fund. Over 10,000 offline retail stores under China Resources, including Vanguard, Suguo Supermarket, and Pacific Coffee, collectively moved to Meituan food delivery, starting to explore the new model of 'Internet + retail'. It can be seen that Meituan food delivery had already started to carry private goods. Subsequently, in early 2017, the chain comprehensive supermarket brand RT-Mart joined Meituan food delivery. A single flower does not make spring. The rapid growth of Meituan food delivery's supermarket business was also stimulated by peers. In 2016, Jack Ma proposed new retail. Then in 2017, he acquired Gaoxin Retail, gaining certain control over RT-Mart. Selling supermarket goods on Taobao is obviously not new retail, and having 'Four Tong and One Da' deliver express to RT-Mart is also impractical. So in April 2018, Alibaba acquired Ele.me for $9.5 billion. At this point, Alibaba had secured the supply and terminal delivery capabilities, and the prototype of new retail had emerged. Meituan could not ignore such a big move by its peers. According to the business rule of 'if competitors have it, I must have it', in July 2018, the entrances for supermarkets, fresh produce, etc., which were previously under Meituan food delivery, were separated and became the instant retail e-commerce 'Meituan Flash Shopping', providing 30-minute delivery and 24-hour uninterrupted delivery services. In November 2019, Meituan Flash Shopping launched a standalone app. But at that time, the independent Meituan Flash Shopping had many businesses, including the side businesses 'brought out' by Meituan food delivery, such as supermarkets, vegetables, fruits, etc. Since then, Meituan Flash Shopping has undergone many major changes. In April 2020, the pandemic spurred community group buying. The 'Meituan Flash Shopping' app was upgraded and directly renamed to 'Caid aquan' app. Meituan intended to do fresh produce, and the 'Flash Shopping' brand was weakened. The Flash Shopping team moved to the backend to handle non-restaurant instant delivery. At the end of 2020, the Flash Shopping business unit was split into Flash Shopping, Medicine, and Tuanhaohuo three independent business departments. From then on, the Flash Shopping business was truly put on the table by Meituan, and its value became prominent. In the second quarter of 2021, Meituan Flash Shopping's transaction volume and GTV grew over 140% year-on-year. Wang Xing mentioned at the earnings call, 'The order scale of Meituan Flash Shopping will exceed 10 million. When we achieve scale, we will be able to achieve profitability.' So, after the Meituan Flash Shopping brand had developed for 3 years, in September, Meituan held the '2021 Meituan Flash Shopping Digital Retail Conference' for the first time, announcing the launch of the 'Billion Brand Growth Plan' for brand owners and the 'Hundred Cities, Ten Thousand Stores Action' for chain supermarkets. Wang Puzhong, president of Meituan's Home Delivery business group, said that within 5 years, Meituan would capture 400 billion in the instant retail market. Soon after, Meituan Flash Shopping launched 'Lightning Warehouse' (front warehouse) through franchising, and planned to open 10,000 Lightning Warehouses between 2022 and 2024. At this point, Meituan Flash Shopping has jumped from a previously obscure state to become Meituan's new hope for growth. ****The Corner Traditional E-commerce Cannot Reach Meituan Flash Shopping, also known as instant retail, is relative to traditional e-commerce like Taobao and JD.com. It captures the time demand of shopping. Generally, goods purchased on Taobao can arrive in 3 to 5 days without accidents. JD.com is self-operated and has warehouses across the country, enabling same-day delivery for morning orders and next-day delivery for afternoon orders. However, traditional e-commerce, which calculates by 'days', still leaves gaps in consumer demand, because there are always needs calculated by hours or even minutes. Instant retail has become the gap Meituan uses to tear open traditional e-commerce platforms. One point to add is that instant retail can achieve minute-level delivery because it operates in the surrounding area, at most within the same city, which is equivalent to working on the 'last mile', the logistics shortcoming of traditional e-commerce. Meituan Flash Shopping's slogan is 'a life store with 30-minute delivery'. The actual delivery time depends on distance, but it is basically similar to food delivery time—after all, it is delivered by Meituan's food delivery riders. (Image source: Internet) According to the 2021 financial report, in December 2021, the peak daily order volume of Meituan Flash Shopping exceeded 6.3 million. Meituan said it will convert high-quality food delivery users into Meituan Flash Shopping users in the future. On the supply side, Meituan is not short of goods. During the Spring Festival this year, Meituan Flash Shopping held a New Year goods festival, with nearly 600 national chain supermarkets and convenience store brands such as Vanguard, Carrefour, and Yonghui participating, gathering nearly 100 consumer goods brands such as Yili, Procter & Gamble, and Coca-Cola, as well as digital dealers such as Apple, Huawei, and Xiaomi. With supply, demand, and delivery all not a problem, the biggest challenge for Meituan in instant retail now is external competition. As mentioned above, Alibaba has acquired Ele.me. Now Ele.me's business includes not only food delivery but also supermarket convenience, medicine, etc. In addition, Alibaba also has Taoxianda. Although it is a fresh produce brand, its categories have expanded to snacks and general merchandise. Another player in instant retail is JD.com. As a self-operated e-commerce platform, JD.com has its own logistics, but having couriers deliver fruits and snacks one by one is not impossible, but JD.com cannot afford so much social insurance. But at this time, no matter how rich JD.com is, there is no second Ele.me. So in 2021, JD.com acquired Dada Group, directly taking over more than 700,000 riders under Dada. In this way, the problem of terminal delivery capability was solved. Before Double 11 last year, JD.com launched the instant retail brand 'Hourly Purchase'. According to Dada's financial report, over 70% of JD Daojia stores went online with Hourly Purchase, and the number of physical stores connected exceeded 100,000. It can be seen that in the most critical delivery capability of instant retail, Meituan, with its 5 million plus riders, still has and can maintain a overwhelming advantage for a long time. But unfortunately, it cannot withstand the vast number of opponents, each with their own strengths. Alibaba is like a sleeping giant. It is not only focusing on instant retail now. Since Yu Yongfu took over Alibaba's local life last year, Alibaba has been moving Meituan's basic market. JD.com can rely on its brand image built in 3C digital and logistics to gain inherent advantages in areas such as offline electronic digital stores, which have high unit prices and low delivery costs. It is especially worth considering that after JD.com opened a cooperation case between e-commerce and instant delivery platforms, will it attract new competitors to enter and intensify competition in the instant retail track? After all, those with same-city delivery capabilities now include SF City, Dianwoda, UU Running, etc. Can Pinduoduo, which has been losing money for years, really afford to wait for agriculture? So the next question arises: Can the market size of instant retail accommodate so many people? ****Instant Retail: Real Opportunity or False Need? Dada Group's prospectus shows that in 2019, the instant retail market size was 46.7 billion yuan, with a penetration rate of only 1.4%; it is expected to reach 385.4 billion yuan in 2023, with a penetration rate of 10.6%. According to iResearch's forecast, the instant retail market will reach 900 billion in 2024. Meituan CFO Chen Shaohui is also very optimistic, estimating that the potential market size of Flash Shopping is 1 trillion, and the growth rate of Meituan Flash Shopping business this year will exceed that of food delivery. It is undeniable that instant retail is a gap in traditional e-commerce, but how large is the instant retail market, and is it enough for so many giants to divide? Currently, instant retail e-commerce is divided into two models: one is the platform model, such as Meituan Flash Shopping, Ele.me, JD Daojia, etc.; the other is the self-operated model, such as Hema Fresh, Pupu Supermarket, etc. (Image source: iResearch) Here, we only discuss the market size from two issues of the platform model. First, categories. Compared with the self-operated model, the platform model has rich categories because it costs nothing to bring in merchants. But since instant retail aims to be 'instant', it means it can only do the surrounding area, at most the same city, which means compared with Taobao and JD.com, the categories of instant retail are greatly reduced, which means instant retail can only cover some users of traditional e-commerce. Second, since it is instant, exchanging money for time, we must consider the relationship between demand and cost. In terms of demand, fresh produce, medicine, and gifts all have demand, and can be strongly bound with timeliness, thereby covering users' price sensitivity. This is why JD Health, Dingdong Maicai, and Miss Fresh can be listed, and why Meituan separated grocery shopping and medicine. The remaining Flash Shopping businesses such as supermarket convenience, beauty and clothing do not have strong timeliness, so they need to look more at costs. For instant retail, the hidden cost lies in the part where merchants pass on platform service fees to consumers, and the explicit costs are delivery fees and packaging fees. Moreover, these costs are fixed. On Meituan Flash Shopping ('supermarket/convenience store') and JD Daojia, the delivery fee is generally 5 yuan, and even if you choose next-day delivery, the price will not decrease. So at this time, we must consider: for these product categories that do not require strong timeliness, under the temptation of free shipping on Taobao, how much market size is left? This can be glimpsed from an example of Meituan. In the second quarter of last year, the fastest-growing categories of Meituan Flash Shopping were flowers and medicine; during Qixi Festival last year, the hot-selling categories of Meituan Flash Shopping were flowers, beauty, and 3C electronics. In summary, the instant retail market does exist, but the question is whether the cake is big enough to share. Remember when community group buying surged in 2020, many research institutions released reports that community group buying was growing rapidly and would soon reach a scale of 100 billion. Some insiders predicted that the future community group buying market would reach a trillion. However, this trillion market caused Tongcheng Life to go bankrupt last year, Chengxin Youxuan to lay off employees, and now Alibaba's Shihui Tuan has closed its national business. Instant retail, don't repeat the mistakes of community group buying. Source: Bohu Finance (ID: bohuFN) Author: Tang Bohu Reference sources: 1. Tech Planet: Meituan tests 'Meituan Trust Score', original 'Flash Shopping' upgraded to 'Caid aquan' *The cover image and accompanying images in the article are copyrighted by the copyright owners. If the copyright owner believes that their work is not suitable for browsing or should not be used for free, please contact us in time, and this platform will immediately correct it. Are you 'watching' me?