Introduction: Food delivery has become a part of daily life, and retail delivery is no exception.

Author 丨Chen Weilong Review 丨Gou Gou Layout 丨He Wen

Almost all secondary market investment institutions and giants like Meituan and JD.com believe that the instant retail market will reach approximately 1 trillion yuan by 2026, making it another massive track capable of reaching trillion-yuan scale after short video and live streaming. Thus, we saw Meituan adjust its 10-year development strategy to "Retail + Technology" in 2021, JD.com recently established an innovative retail division to focus on same-city retail and instant retail, and some within Ele.me have also proposed pushing into instant retail to reverse the decline in food delivery. In the long-silent retail and internet industries, it seems another wave is about to rise.

What is instant retail?

By definition, instant retail refers to a business model where orders are placed online and delivered within one hour or half an hour, such as JD Daojia, Hema, Dingdong Maicai, Meituan Flash Purchase, and Meituan Flash Warehouse. To understand the concept of instant retail more easily and deeply, we can call it retail delivery, i.e., understanding "instant" from the perspective of delivery. Why can we understand it this way? From the concept of "instant," there are currently only three types of online order fulfillment: e-commerce express delivery, community group buying three-tier fulfillment, and delivery rider fulfillment. Only delivery rider fulfillment can achieve delivery within one hour. Therefore, instant retail must be retail delivery. From the concept of delivery, delivery means not consuming in-store but completing transactions through delivery. Isn't instant retail exactly that—not consuming in-store but completing transactions through delivery? So, instant retail must be retail delivery. Our understanding of a concept reflects our entire perception of that thing. Only by using the concept of retail delivery to understand instant retail can we reflect the historical development and future direction of instant retail.

The Development History and Background of Instant Retail

The onlineization of fresh produce began in 2012-2013, when the main approach was to treat fresh produce like standardized products—fulfilled through express delivery, shipping nationwide from one or multiple warehouses. After a round of burning money, everyone realized that e-commerce could not achieve the onlineization of fresh produce. Therefore, setting up front warehouses or stores under city/regional warehouses for stocking, sorting, packing, distributing, and fulfilling became an inevitable exploration direction. Around 2015, Miss Fresh pioneered the front warehouse model. In the same year, Yonghui Life was established, using Yonghui supermarket stores as a base and opening online channels to achieve the onlineization of fresh produce/supermarkets. In 2015, JD Daojia was established, onlineizing local supermarkets and developing supermarket delivery business. In 2016, Hema Fresh was established, integrating store and warehouse models, operating both as physical stores and front warehouses, also achieving fresh produce internetization through online ordering. From the perspective of offline retail, because the e-commerce path was not viable, the exploration was based on offline stores or converting stores into warehouses, keeping the supply and circulation ends basically unchanged, and only moving user ordering online. This gradually led to the path of instant retail. We say that instant retail is not e-commerce, not the internet, but closer to retail—this is not just a conclusion but a lesson learned through countless blood and tears. However, this was only the first step of a long march. It wasn't until 2021 that instant retail truly grew, and the driving force behind this growth was Meituan, which is why I call instant retail the core of retail delivery.

From 2015 to 2016, Hema Fresh, JD Daojia, Yonghui Life, Miss Fresh, Meituan, and Ele.me were all called O2O platforms or projects. The former were retail O2O, and the latter were food delivery O2O, with the former expected to surpass the latter. At that time, JD founded JD Daojia, invested in Yonghui, strategically cooperated with Walmart, and acquired Dada. Alibaba founded Hema Fresh, acquired RT-Mart and Intime Department Store, and invested in Suning Cloud Commerce. Alibaba was at its peak, and Hema Fresh was the No. 1 project of Alibaba's New Retail. In 2015-2016, food delivery was still in chaos: Meituan had just acquired Dianping, the battle among Meituan, Ele.me, and Baidu Waimai was fierce, and the industry was suffering huge losses. Both the industry and its players were fraught with crises. Food delivery's impact on the public was relatively small compared to now, and it had not yet become a daily necessity. People did not connect food delivery with instant retail. All these actions proved a conclusion: at that time, everyone treated food delivery and retail delivery (instant retail) as part of O2O, and they had not fully realized that instant retail is retail delivery, and that retail delivery would start later than food delivery and rely on it. By around 2020, Meituan Waimai held over 70% of the food delivery market, achieved profitability, and daily orders exceeded 30 million. At that point, food delivery became a part of daily life, changing consumer habits. Meituan completely defeated its competitors, established a firm foothold, and then proposed the concept of "delivering everything to home," further confirming retail as the company's 10-year strategic direction in 2021. From then on, instant retail entered a period of rapid development.

Note: Data sourced from Huatai Internet team, company financial reports, and media reports.

From 2019 to 2022, the overall scale of the instant retail industry grew from approximately 75 billion yuan to 320 billion yuan, with Meituan Flash Purchase growing from 29.5 billion to 147.4 billion yuan. In 2022, Meituan Flash Purchase accounted for about 50% of the instant retail market, Ele.me accounted for about 15%, and delivery platforms accounted for 65% of the instant retail market. Based on existing data, we estimate that by 2025, Meituan Flash Purchase will grow to 400 billion yuan, accounting for about 60% of the instant retail market, Ele.me will account for about 15%, and delivery platforms will account for about 75% of the instant retail market.

Three facts to emphasize:

  1. From 2015 to 2019, the instant retail market grew from 0 to 75 billion yuan, taking 5 years; from 2020 to 2022, it grew from 75 billion to 320 billion yuan, taking only 3 years.
  2. In the periods 2015-2019, 2020-2022, and the future, delivery platforms' market share in instant retail has exceeded 65%.
  3. Miss Fresh, the pioneer of front warehouses, is now a thing of the past; Dingdong Maicai has been discarded by the industry; Hema Fresh has struggled for years without success; the only hope currently is Meituan Flash Purchase, while JD Daojia and Ele.me retail continue to strive.

The above facts reflect a conclusion: The essence of instant retail is retail delivery. It is because users have the need to stay at home that the demand for delivery arises, and it develops from food delivery to retail delivery. Only by understanding where instant retail comes from can we understand where it is going and its intrinsic meaning.

The Social Background of Instant Retail

Above, we elaborated on the development history and drivers of instant retail from an industry perspective. The deeper drivers lie in the social background—the current trends in China's population and economic development inevitably lead to a further deepening of the delivery-oriented lifestyle. Look at Japan's 7-Eleven in the last century. Its founder, Toshifumi Suzuki, proposed that the core of convenience stores is convenience, so he opened 7-Eleven stores near residential areas, operated 24 hours, provided convenience services like ATMs and printing, and offered products that meet the quick dietary needs of individuals or small families, such as instant food, fresh food, and single servings. These measures were industry firsts and unconventional. Why did he do this and succeed? Because Japan at that time faced factors like declining birthrates, aging population, oversupply, and economic bubbles. For example, a declining birthrate meant that one person only needed enough for one, and if they didn't want to cook, they needed instant and fresh food. We currently face declining birthrates, aging population, oversupply, economic downturn, declining economic capacity of young people, and increasing debt. These factors inevitably lead to staying at home, living alone, and seeking simple and fast lifestyles, which will inevitably give rise to new business models like food delivery and retail delivery.

Food delivery has become a part of daily life, and retail delivery is no exception. User consumption survey data also reveals this trend. According to a survey by Meituan Research Institute on "the main reasons for using instant retail shopping," the core of instant retail or retail delivery is not long-tail, niche emergency needs, but rather a change in users' shopping habits, such as demanding faster and more convenient delivery to their door. This fast-paced, home-based lifestyle applies not only to food delivery but also to retail delivery.

Main reasons for using instant retail shopping (Data source: Meituan survey data)

From an industry perspective, the retail mainline has gone through fresh e-commerce, front warehouses, and store-warehouse integration, while the food mainline has gone through food delivery, finally converging in retail delivery. From a social and economic background, retail delivery, like food delivery, is an inevitable product of fast-paced, high-pressure, small-family, and lazy lifestyles.

Forms and Differences of Instant Retail

The specific forms of instant retail include the store-warehouse integration model represented by Hema and Yonghui Life, the small front warehouse model represented by Dingdong Maicai and Meituan Maicai, the large front warehouse model represented by Pumu Supermarket, and the platform model represented by JD Daojia and Meituan Flash Purchase. More specifically, their differences are reflected in product structure, consumption scenarios, consumer groups, and positioning, as shown in the table below:

Most front warehouses focus on fresh produce, supplemented by food and FMCG, with very few general merchandise. Consumption scenarios focus on the kitchen, and positioning is for young people's daily kitchen or family consumption. The difference between large front warehouses and small front warehouses is simply that large front warehouses have significantly more general merchandise, food, and FMCG products. Hema, with its store-warehouse integration, has a product structure similar to front warehouses but is positioned higher-end and adds in-store dining. JD Daojia is based on large supermarkets like Walmart, so it focuses on fresh produce, food, and FMCG, with a small amount of general merchandise. Its consumption scenarios focus on the kitchen and family, and because JD Daojia users come from JD.com, its positioning is relatively high-end. Meituan Flash Purchase is based on hundreds of thousands of offline physical stores, including large supermarkets like China Resources Vanguard, high-end consumption like Ole, and numerous mom-and-pop stores. Therefore, Meituan Flash Purchase has the widest range of products, covering almost all offline retail products, from Nongfu Spring water to Qingming Festival ingots. Its consumption scenarios include kitchen, family, office, business travel, school, hospital, etc.

Popular product categories in instant retail (Data source: Meituan 2021 Flash Purchase order data)

Distribution of order scenarios in instant retail (Data source: Meituan 2021 Flash Purchase order data)

The Relationship Between Instant Retail and Offline Retail

Hema Fresh itself is an offline Hema supermarket; Yonghui Life's foundation is Yonghui supermarkets; Meituan's Flash Purchase is also composed of individual offline mom-and-pop stores. Therefore, the foundation of all instant retail is actually offline retail. The merchant side and upstream circulation side of instant retail are completely unchanged from offline retail. The core difference between instant retail and offline retail is that instant retail's consumption comes from local life service platforms, while offline retail's consumption comes from offline foot traffic. That is, only the consumption channel and fulfillment method have changed. This raises an additional topic: because e-commerce, compared to offline retail, has changed in circulation, merchant side, consumption channel, and fulfillment method, instant retail's impact on offline retail may not be as profound as e-commerce's. Offline retail participants can more easily join the wave of instant retail.

The Future of Instant Retail

No matter how many forms instant retail takes or how each player positions itself, it inevitably consists of three elements: users/platforms, merchants/supply, and riders. Regarding users/platforms, I believe it is unlikely that a platform-level project will emerge in the future, whether in instant retail, e-commerce social, short video, or any other direction. The fundamental reason is that the traffic dividend has ended, giants have formed, and no major hope is seen in technology or model iteration. The closest platform-level opportunity was Pinduoduo and Douyin/Kuaishou in 2018. Pinduoduo's counterattack was a combination of WeChat channel opportunities, lower-tier market, and low-end supply chain, which opened a differentiated gap in the mature e-commerce market. Instant retail lacks these opportunities. The user perception of half-hour delivery was established by delivery platforms. Which startup project has the confidence to change this user perception?

On the merchant/supply side, although fresh produce is an unconquered opportunity, the key is that it remains unconquered after nearly a decade of effort, and giants have already entered. Startup projects fighting giants hand-to-hand contrasts sharply with Pinduoduo's quiet and rapid development. Even if entrepreneurs conquer the fresh produce challenge and giants temporarily haven't, it would be meaningless because instant retail is localized supply and fulfillment, heavily regionalized, with enormous infrastructure requirements, severely constraining development speed. The overall situation is comparable to community group buying, with Xingsheng Youxuan being the best outcome. Riders are equivalent to e-commerce express delivery. Instant retail players must build rider teams while doing business, and competing with giants that already have millions of riders is incredibly difficult. Whether it's the positive case of Pinduoduo or the negative case of community group buying, I find it hard to believe that startup projects like Dingdong Maicai, Pumu Supermarket, or Hema Fresh can seize the instant retail opportunity to create a platform, especially considering this is the core battlefield of Meituan, JD.com, and Ele.me.

In summary, I have the following conclusions:

  1. It is almost 100% certain that there is no platform-level opportunity in instant retail.
  2. It is highly likely that Meituan will hold the majority share of the instant retail platform market, with JD.com and Ele.me holding smaller shares, and other players also existing.
  3. There are opportunities on the supply/merchant side in instant retail—creating new retail channel brands under the retail delivery trend, similar to RT-Mart under the supermarket consumption trend and 7-Eleven under the convenience store trend.
  4. The supply/merchant side will form regionalized markets, with market concentration higher than offline retail, but even the top player will find it difficult to reach 10% market share.

Based on the above conclusions, the following inferences can be drawn:

  1. Any project that is independent of delivery platforms like Meituan, JD Daojia, and Ele.me and wants to build its own platform will likely not develop significant scale.
  2. Any project that completely relies on JD Daojia or Ele.me and is insulated from Meituan will likely not develop significant scale.
  3. Any project that cannot clearly differentiate itself from offline retail players will likely not develop significant scale.

The next article will elaborate on the opportunities on the supply side.

** PS: If you have unique thoughts and insights on instant retail, or want to have in-depth exchanges with expert teachers, you can add the editor's WeChat to establish a communication group. **

Chen Weilong, entrepreneur in instant retail (flash warehouse), expert in community group buying, former VP of Shu Dongpo Product

Operates flash warehouse projects in Beijing, Chengdu, Nanjing, Changsha, and other places; has served almost all top secondary investment institutions in China, with cumulative scale exceeding one trillion; has served middle and senior management of multiple leading community group buying platforms.

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