Introduction: After the Spring Festival, JD.com entered the local life sector. Subsequently, it entered the market with "high-frequency food delivery," launching a combination of "zero commission + billion-dollar subsidies + full-time riders with social insurance." In April, Meituan unified its near-field retail business under the brand "Meituan Flash Purchase," quickly following up to consolidate the "everything to home" mindset. In June, Alibaba integrated Ele.me and Fliggy into its e-commerce business group, empowering instant retail with Taobao traffic to create a full-scenario "far-field e-commerce + near-field retail." The subsidy war initiated by the three giants has once again brought instant retail into the public eye. Along with it, we also hear many "panicked voices." "The giants have started crazy subsidies again, and traffic has been taken away. But even if we participate in platform activities and sales increase, profits haven't improved." Many merchants have similar feelings. This feeling seems to have become a panic for many merchants. But sometimes, market noise can distort our understanding of things. What really panics merchants is not instant retail, but the billion-dollar subsidies and the giants entering the market. As far as instant retail is concerned, setting aside subsidies, it is ultimately just one of many segmented retail formats. As a new retail format, instant retail is encroaching on traditional retail's share. But the retail business is large and fragmented enough that even with giants entering, instant retail's influence on the retail ecosystem is limited. Instant Retail Is Just New Wine in Old Bottles **Instant retail is not new; as early as 2014, Miss Fresh had already pioneered the model. At that time, it was still called fresh food O2O e-commerce, and later Hema Fresh, Dingdong Maicai, and Pumu Supermarket emerged. A Brief History of Instant Retail Development in China Later, giants paid attention and entered the market. Sam's Club launched its home delivery business, and there were Meituan Maicai, Meituan Youxuan, and flash warehouses (even competing with community group buying at one point). Later, Meituan Maicai was renamed "Little Elephant Supermarket." Even with so many players participating, the first 10 years of instant retail (2014-2023) did not develop quickly. It wasn't until the past two years, with drastic changes in the retail market, that instant retail began to accelerate its development and accelerate the disintegration of traditional retail. The battle has further escalated, leading to the current "Three Kingdoms" of Meituan Flash Purchase, Taobao Flash Purchase, and JD Seconds. But over the years, instant retail has not changed its business model; it still involves consumers ordering online and completing delivery to their doorstep. ** What has changed is the iteration and accumulation of products and models over the years, as well as market consumer education, which has continuously increased the market penetration of instant retail. According to the "Instant Retail Industry Development Report (2024)" by the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, the broad instant retail market has grown from less than 100 billion yuan in 2018 to an expected breakthrough of 1 trillion yuan this year. Data from the Ministry of Commerce's Chinese Academy of International Trade and Economic Cooperation "Instant Retail Industry Development Report (2024)" Improving Consumer Purchase Efficiency Is the Fundamental Reason for Rapid Development As a format born slightly later than snack discount stores (Mrs. Lao was established in 2010), one of the branches of new retail formats in the past two years, instant retail has shown growth trends not inferior to snack discount stores. In the retail business, achieving good results must mean doing many key elements correctly in the process. Back to the essence, retail is an efficiency business. If it can grow rapidly, it must have achieved a 10-fold improvement in efficiency. Further analyzing around efficiency, consumers' efficiency considerations when making purchases mainly include two points:
Speed of obtaining goods
Payment cost of purchasing goods For the speed of obtaining goods, the more timely consumers can obtain goods, the higher the satisfaction rate, and the faster the efficiency. Take snack stores as an example: they are at the doorstep, and you can buy them by going downstairs. Their speed of obtaining goods is faster than KA stores. Take instant retail as an example: compared to traditional e-commerce and content e-commerce, where delivery takes at least 1-2 days after ordering, delivery within 2 hours is a faster speed of obtaining goods. Retail itself is a business that pursues efficiency, and evolution will move towards high efficiency. But if only the speed of obtaining goods is significantly better than other retail formats, it is not enough to support such rapid growth of instant retail. Like snack discounts, improving efficiency while also considering payment costs is equally key for instant retail to satisfy consumers. Consumers only need to pay costs similar to or even lower than other channels, but can get delivery to their doorstep in 30 minutes. Why would they make purchases elsewhere instead of using instant retail? It's just that in the first 10 years, while balancing the speed of obtaining goods and payment costs, all platforms did not fully run the business model, so they were continuously optimizing. Now that the model is no longer a problem, it naturally begins to gain momentum. This is also why the subsidy war has been sparked in recent months, and JD.com initiated it first—the efficiency of instant retail has seriously affected e-commerce, and businesses based on e-commerce are facing severe challenges, so giants must enter the market. Future Outlook There Is a Reasonable Retail Penetration Rate, but It Will Not Be Far Ahead As mentioned at the beginning, instant retail itself does not cause fear; what truly causes fear are the giants and subsidies. Subsidies are not a sustained behavior, and it can be predicted that market panic is temporary. In the end, we need to clarify: how much impact can instant retail have on traditional retail? First, the conclusion: it has an impact, but limited. Even with rapid growth, and calculated according to the scale exceeding 1 trillion yuan, in China's overall 50 trillion yuan social retail market, instant retail's market penetration rate is less than 2%. With the development of retail, the needs met by channels are becoming more segmented, and instant retail cannot escape this rule. Unlike new retail models such as discount formats and membership formats, the biggest difference of instant retail is that its delivery does not occur in the store but at the doorstep. ** Delivery means distribution costs and time. For consumers, distribution costs and time mean a purchase threshold. With thresholds, it naturally limits the consumption scenarios of instant retail:
- Low unit-price purchases are difficult to penetrate by instant retail. Delivery fees are an additional cost; you get what you pay for. Only when the unit price is high enough can retail companies cover costs, and the business can last long;
- Products that are immediately available are difficult to penetrate by instant retail. Although delivery time has been shortened to 30 minutes, compared to buying on the go or buying downstairs in 5 minutes, there is still no efficiency improvement. These limitations mean that community formats (including CVS) and discount formats are unlikely to be impacted by instant retail. Relatively speaking, instant retail has a huge impact on KA stores that have a certain physical distance and where standard products are not so cost-effective. But the current retail environment is so harsh that traditional channels will not remain unchanged. KA store adjustments are the best illustration. Even for many KA stores, if you can't beat them, join them. Providing instant retail services is also adapting to the changes of the times and fighting against new retail. But currently, it is in a rapid development stage. What impact will China's current complex and changing retail environment have on the future development of instant retail? And whether a more efficient retail model is being nurtured? Everything is unknown. Objectively and reasonably viewing the development of instant retail can help us better understand instant retail.