---
title: "Same-City Retail: A Battle Between Giants and Themselves"
description: "Amid the pandemic, same-city retail has surged as consumers demand faster delivery. Alibaba, JD, and Meituan are accelerating their layouts, with Pinduoduo also entering the fray, but the sector remains costly and challenging."
author: "深响"
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published: "2022-06-27"
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# Same-City Retail: A Battle Between Giants and Themselves

> Amid the pandemic, same-city retail has surged as consumers demand faster delivery. Alibaba, JD, and Meituan are accelerating their layouts, with Pinduoduo also entering the fray, but the sector remains costly and challenging.

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"For humans, disease has always been the most terrible killer and a key role in shaping history." This is a proverb from "Guns, Germs, and Steel," and it also reveals the reshaping of consumption patterns under the complex pandemic.
"I urgently needed daily necessities but couldn't leave the community due to lockdown," "Express from other cities is slower; only same-city delivery can guarantee timeliness"... Under the explosive demand during the special period, same-city retail has once again risen to prominence.
**Alibaba, JD, and Meituan are accelerating their layouts in the "same-city retail" track, and even Pinduoduo, which rarely ventures offline, has entered.** In April this year, Pinduoduo launched a "48-hour delivery" service in some areas of Shanghai, followed by the news that the platform's "same-city distribution" business was recruiting merchants, attracting much attention.
Same-city retail is not new; Alibaba, JD, and Meituan have been dormant in this field for years. With continuous business additions, adjustments, and integrations, the giants' thinking on same-city retail has gradually become clear: Alibaba has formed a "near-field retail" business matrix consisting of Ele.me, Taocaicai, Taoxianda, Tmall Supermarket, etc.; JD works closely with Dada Group; Meituan has honed three businesses—Flash Purchase, Youxuan, and Maicai—through trial and error and integration.
In the era of stock, same-city retail, targeting a trillion-yuan market, is undoubtedly a battleground for giants, but it is also a money-burning business. Amid drastic changes in the macro environment, the past tactics of high investment for high growth and rapid scale expansion are no longer glamorous.
How to achieve market expansion and business growth while "tightening the belt"? How to go further in what Yu Yongfu called "a competition that is not fierce but cruel"?
The opponent is oneself, which may be harder to crack than life-and-death competition.
**1**
### **From Testing the Waters to Entering Deep Waters**
Alibaba, JD, and Meituan have been early movers in same-city retail. **In recent years, their actions in this field can be summarized as integration and clarification.**
Alibaba's systematic layout of same-city retail began in 2020, but before that, Alibaba had frequently made moves in near-field e-commerce. Starting in 2015, Alibaba incubated Hema Fresh, acquired Ele.me, increased investment in Tmall Supermarket, acquired Sun Art Retail, acquired Keruyun, and entered community group buying.
Starting in 2020, Alibaba continued to integrate its same-city retail business. In April, Alibaba upgraded the Tmall Supermarket Business Group to the Same-City Retail Business Group, merging the Ele.me new retail business originally under local life services;
In June, Taobao launched the "hourly delivery" service in 16 cities nationwide, with products in the channel mainly from Tmall Supermarket, supermarkets on Taoxianda, and supermarkets and convenience stores on Ele.me; this entrance still exists today, and services in the channel are mainly provided by Tmall Supermarket.
**Today, Alibaba collectively refers to its same-city retail business as "near-field e-commerce," which falls under two major segments: China Commerce and Local Life Services** — In January this year, Alibaba's business adjustment placed Taoxianda, Taocaicai, Hema, and Tmall Supermarket under the "China Commerce" segment, led by Dai Shan; Ele.me was placed under the location-based services (LBS) local life segment last July, which also includes Amap and Fliggy, managed by Yu Yongfu.
It can be seen that Alibaba's same-city retail layout combines "asset-light and asset-heavy" approaches—both self-operated (Hema, direct-operated businesses) and platform-based (Taoxianda, Ele.me). Alibaba Local Life's Fengniao and Cainiao's Cainiao Direct Delivery (formerly Danniao Logistics) provide logistics support for Alibaba's same-city retail businesses.
**Compared to two years ago, Alibaba's thinking has become much clearer: the synergy of remote, medium, and near-field retail to meet different consumer needs.** In the first quarter of this year (Q4 of FY2022), Alibaba's annual active users grew by 89 million year-over-year and 21 million quarter-over-quarter. The company attributed the growth to its app matrix strategy, which creates personalized experiences for different consumption scenarios and business formats, helping attract and retain user groups with diverse backgrounds and shopping behaviors.
Image source: Official website
In JD's context, same-city retail refers to instant retail. JD's instant retail prototype was formed earlier but has undergone multiple adjustments.
In 2015, when the O2O trend was rising, JD Daojia was officially launched, and in 2016 it merged with crowdsourced logistics platform Dada Express to form the current Dada Group; in late 2019, JD Retail initiated the innovation project "Wujing Tianze," which extensively deployed offline outlets (convenience stores, supermarkets, department stores, etc.). After consumers place orders on the JD app, goods are delivered from these outlets, with the fastest delivery in half an hour.
At that time, "JD Daojia" was a partner of "Wujing Tianze." In April 2020, JD established the Large Supermarket Omni-channel Business Group, integrating the original JD Supermarket, Consumer Goods Division, New Channel Division, 7FRESH, and No.1 Store, in coordination with the "Wujing Tianze" project.
Before the Double 11 shopping festival in 2021, JD integrated its scattered instant retail capabilities into the "Hourly Purchase" brand. This brand integrated entrances such as "JD Daojia" and "JD Fresh" hourly delivery, giving JD's instant retail business a unified consumer-facing brand.
Dada Group is an important piece of JD's instant retail puzzle. In February this year, JD initiated an increase in its stake in Dada; after the increase, JD holds 52% of Dada Group and consolidated its financials.
Behind a series of actions, JD's intention is to advance its "omni-channel strategy." At the investor roadshow for JD's secondary listing in Hong Kong in 2020, JD stated that future growth points lie in the newly established Large Supermarket Omni-channel Business Group, **and instant retail is an important part of JD's omni-channel strategy.**
Unlike Alibaba and JD, which started with e-commerce, Meituan's main businesses are "Meituan Waimai" (food delivery) and "In-store, Hotel, and Travel" based on local LBS services. How to fully leverage the huge local traffic of its main business to connect with retail is the challenge Meituan faces in laying out same-city retail (which Meituan calls "service retail").
Meituan's attempts in service retail are not early but are very rich.
In 2018, Meituan launched the instant retail brand "Meituan Flash Purchase" and introduced Xiaoxiang Fresh, a Hema competitor; in 2019, Meituan established the self-operated platform Meituan Maicai and the market agency operation platform "Caid aquan"; in 2020, Meituan established the "Youxuan Business Unit" and launched the "Meituan Youxuan" business to enter community group buying; Xiaoxiang Fresh was shut down, with services migrated to the Meituan Maicai app.
In the second half of last year, Meituan integrated several new service retail businesses.
According to LatePost, Meituan's retail businesses were once scattered across different business units. In October last year, several core executives formed a special group to allocate resources for retail businesses. Kuailv, Maicai, and Youxuan were integrated into one business segment, led by one executive, to improve resource utilization efficiency and achieve synergy and reuse in warehousing and logistics.
In terms of models, Meituan Maicai is an asset-heavy self-operated business targeting high-tier cities; Meituan Youxuan is community group buying focusing on lower-tier markets; Meituan Flash Purchase is similar to JD Daojia and Taoxianda, aggregating offline supermarket resources to provide consumers with full-category instant retail services.
As an asset-light business, Meituan Flash Purchase recruits merchants to cooperate in establishing front warehouses called "Lightning Warehouses," which focus on food delivery operations and emphasize online services.
In September last year, Meituan upgraded its strategy from "Food + Platform" to "Retail + Technology," elevating retail and technology to a strategic level for the first time.
In recent years, Meituan has continuously tried and iterated its same-city retail business, intending to further penetrate the retail field beyond food delivery, in-store, hotel, and travel. **The polishing of Maicai, Youxuan, and Flash Purchase businesses is essentially about honing supply chain and warehousing capabilities to realize the "retail" dream.**
Image source: Meituan official website
Compared with Alibaba, JD, and Meituan, Pinduoduo has grown rapidly but has rarely touched offline retail. Until April this year, a poster circulated online showing Pinduoduo recruiting "same-city distribution" merchants, revealing its intention to enter same-city retail.
The recruitment targets merchants with 24-hour same-city delivery capabilities, mainly fruit merchants, including chain stores, front warehouses, stall wholesalers, and delivery service providers, with services aimed at super-first-tier cities. According to Ebrun, Pinduoduo's same-city distribution currently mainly recruits categories including gift flowers, low-temperature milk, and custom cakes.
From the recruitment information and public materials, Pinduoduo's same-city distribution currently does not use a warehousing and distribution network, but Duoduo Maicai's warehousing and logistics resources may provide synergy for "same-city distribution"—Duoduo Maicai's front-end processing warehouses and grid warehouses are completed by third parties to ensure next-day pickup, and this model expands rapidly.
On the terminal side, in February this year, Pinduoduo piloted "Duoduo Station," adding express station services for small shop group leaders with higher order volumes to enhance cooperation stickiness.
Image source: Ebrun
**2**
### **Endless Horizons and Immediate Challenges**
This series of layouts and changes has also brought some phased results.
According to the latest financial reports, with overall growth in single digits and slowing growth across all segments, Alibaba's local life segment's 29% quarterly growth stands out.
The financial report shows that the "delivery business" in the local life segment, due to a focus on user retention and operational efficiency in key cities, saw an increase in average order value in the second half of FY2022; benefiting from holiday marketing, order volume from non-food (fresh produce and medicine) also grew significantly.
Meanwhile, Taocaicai's GMV under Alibaba's China Commerce segment achieved sequential growth from January to March, mainly due to higher average order prices; direct-operated and other businesses grew 14% year-over-year in the first quarter and 43% in FY2022. In the entire FY2022, Sun Art Retail's online sales share increased to 29%, and Hema's online GMV contribution remained above 60%. **Alibaba management emphasized in the earnings call that due to users' obvious hoarding tendency, the average order value of Alibaba's "near-field retail" has significantly increased.**
JD and Meituan are similar. Dada Group's JD Daojia business generated revenue of 1.4 billion yuan in the first quarter of this year, up 80% year-over-year.
Meituan's "new businesses and others," including Meituan Maicai, Meituan Flash Purchase, and Meituan Youxuan, grew 47% year-over-year in Q1 2022, much higher than the growth of its other two businesses, and this business now accounts for 31.3% of total revenue. According to Meituan's latest financial report, Meituan Flash Purchase order volume grew 70% year-over-year in Q1, and Meituan Maicai order volume grew 120% year-over-year.
However, these businesses still burn a lot of money.
Alibaba's financial report shows that whether in Q4 of FY2022 or the entire FY2022, the decline in adjusted EBITA profit in the China Commerce segment is mainly due to increased investment in retail businesses such as Taocaicai; at the same time, the report shows that although the adjusted EBITA loss of the local life segment, including the delivery business Ele.me, narrowed in the latest quarter, the loss rate is still as high as 52%, making it the segment with the heaviest losses except for innovation businesses.
Meituan's new business losses are also still severe, with an operating loss rate of 62.3% in Q1.
The trillion-yuan market gives Alibaba, JD, Meituan, and Pinduoduo vast imagination space, and same-city retail can also synergize with main businesses and improve the industrial chain layout. But same-city retail itself is a tough track, with many difficulties plaguing players from the start, and today, the challenges are only increasing.
First, due to drastic changes in the macro environment, giants can no longer invest in "new businesses" by burning money, and expansion inevitably becomes "cautious."
High-quality growth and "cost reduction and efficiency enhancement" are the keywords at this stage. Currently, Alibaba, JD, and Meituan are all optimizing their investment in new businesses. In the latest financial reports, Alibaba's local life segment's adjusted EBITA loss rate narrowed, Dada Group's operating loss narrowed, and Meituan's "new businesses and others" operating loss and loss rate also narrowed. Meituan Youxuan closed some regional stations, emphasizing refined operations.
Pinduoduo has also focused on improving profitability since last year. Under the tone of controlling costs and ensuring profitability, it remains unknown how much Pinduoduo will invest in "same-city distribution." Pinduoduo's layout in same-city retail may, as some industry insiders describe, have "high uncertainty" and "whether it can form a long-term business remains to be seen."
Image source: unsplash
Another question is whether same-city retail will be affected if offline consumption fully recovers in the future.
Cost-effectiveness is an important perspective. From the current situation, the price difference for fresh produce between online and offline is relatively small, and platforms usually offer free shipping after a certain amount, so buying fresh produce on same-city retail platforms is relatively cost-effective.
But the situation for cosmetics and clothing is quite different. Take SK-II as an example; this product can be delivered free of charge on both Tmall and JD. However, because offline stores selling this brand are not densely distributed, if the user is far from the store, purchasing the product requires paying a higher delivery fee. "Deep Sound" tried and found that when the delivery distance is greater than 5km, Meituan charges a delivery fee of 25 yuan, and JD Hourly Purchase also charges 25 yuan.
For consumers, if they don't urgently need such products on the same day, their willingness to use same-city retail services may not be high.
The problems don't end there. For example, physical merchants may not have the warehousing, picking, and distribution capabilities to match demand, and finding the optimal solution for dispatching capacity and inventory is also a challenge. Behind this lies a series of offline digital transformation actions, requiring continuous investment from platforms.
Image source: unsplash
The same-city retail market is large, and industry players do not need "life-and-death" competition. But the difficulty lies in having sufficient investment and also reducing costs and increasing efficiency to truly form economies of scale.
The infinite possibilities of same-city retail also make players firmly bet on it: it is a key part of Alibaba's "remote, medium, and near-field e-commerce," an important path for JD to realize its "omni-channel strategy," an indispensable part of Meituan's "Retail + Technology" blueprint, and perhaps a way for Pinduoduo to expand the boundaries of "Retail + Agriculture."
They all hope to secure their positions in the second half of the new retail industry.
Source: Deep Sound (ID: deep-echo)


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