Deep Dive
Shownotes Transcript
This is Roundtable.
Food, medicine, groceries, if it fits on a scooter, is part of the great delivery war. Tech titans such as JD.com and Alibaba are storming into Meituan and Ulema's territory with blazing fast delivery promises and billion yuan subsidies. But in a mature market where every minute counts, who's fast enough and fierce enough to come out
the winner. Coming to you live from Beijing, this is Roundtable. I'm He Young. For today's program, I'm joined by Steve Hatherly and Yu Shan. First on today's show.
Behind the flurry of scooters and app notifications lies something bigger. The essence of instant retail is quietly rewriting the relationship between people, goods, and the spaces where e-commerce happens in China. What used to be a model of planned purchases and patient delivery has rapidly evolved into a system built for impulse, immediacy, and proximity.
As tech giants such as JD and Alibaba push into Meituan and Ulema's stronghold, these are platforms that build their empires on food delivery and local services.
It's clear this is no longer just about food. It's about a new infrastructure of urban life in China. This is a war for your doorsteps, folks who live in China. And no one wants to be left behind the delivery bag, holding the delivery bag, so to speak. So what's happening in the delivery world in China right now? I mean, let's...
Look back at the past over 10 years, China's food delivery market has already been a near dual poly of sort. That's dominated by Meituan, which is a leading lifestyle platform here in China. And also Eleme, that's a delivery system owned by tech giant Alibaba. Or as I like to call them, the yellow one and the blue one. Yep.
As judged by their logo color, exactly. And these two alone, they together controlled over 90% of the market as of 2023, according to an industry analyzing report. So Meituan, the yellow one,
grew its market share from 30% in 2014 to over 65% by 2023. And Ulema, the blue one, held around 33%. And the market itself ballooned to 1.64 trillion yuan, that roughly equals to 230 billion U.S. dollars by 2024. And it's projected
to be nearly 2 trillion yuan or roughly 280 billion US dollars by 2027. So when we look at this whole market, we're talking about all of the deliveries sent out by the deliverers or what we call the riders here in China because they're always on their e-bikes with a huge box.
containing the food that they're delivering. So these people, they're the freelance couriers or riders that's hired via third-party labor agencies with relatively less social benefits or protections due to the gig or, say, part-time nature of this job. So that's how it's like right now in China with the delivery market. Yeah, and there's a lot of pressure on these delivery drivers to deliver
do it quickly and they're under tight time schedules. And when you live here in Beijing, and I'm sure this is true for other cities here in China as well, you see these riders everywhere, every day, all the time. They are constantly on the go. You walk down the street, you will see multiple riders delivering stuff, going into shops, coming out of shops.
If you're in the area of a shopping mall that has a lot of restaurants inside, you'll see multiple scooters parked outside from these delivery companies and the guys are coming in and out. It's just such a big part of the culture here. Yeah, that's true. And what's so astonishing lately at the earlier months of this year is that there are new players entering this game. So it's no longer just a yellow versus blue, but there are more. So recently, several teams
tech giants that previously failed to take their share of the food delivery market are now staging a comeback and kind of bringing big strategies with them as well. One of which is Alibaba, which launched their Taobao Flash at the end of April, which is an instant retail service that's upgraded from its original service called hourly delivery. That's my translation of it. But they're trying to develop that delivery system into a
better or higher functional one. So it's not just about delivering food, but also offering short time delivery on groceries, electronics and daily necessities, stuff like that. And also the software is backed by the Ulama system. That's the delivery system of Alibaba that's already been running for over a decade now.
And they're under the umbrella of the same company anyway. So this new function via Taobao is now merging their original e-commerce business with the newly emerged instant delivery function they're trying to develop right now. So that offers steep discounts and incentives to capture younger users. Hey, we're out.
And we're pushing towards you this new function. So come use our coupons. So the already competitive market just got more competitive. Yes. And also to offer you two small truths of the e-commerce world here in China. One thing is here we're talking about instant delivery. So...
the riders who bring the goods to your doorstep, like you guys mentioned, dressed in single color uniforms. And this is different from the longer time delivery where you shop for all kinds of stuff on e-commerce platforms. Originally, these riders only delivered food, but in recent years, it's expanded to medicine,
Yeah, yeah.
And they're there in no time, it feels. The other thing that struck me as a difference from the other places that I've lived in the world is that you can get food or I assume anything delivered from anywhere in the city, which is a tip if you've just moved in.
and you're ordering food in Beijing, look how far away the restaurant is. I thought I was ordering food from a restaurant that was maybe 20 minutes away. This was two hours away on the other side of Beijing, but I was still able to order that food and get it delivered to my house. That
is impressive too. So geographically speaking, there's not many boundaries either. So also for the delivery riders of this type of instant delivery, they are under even more pressure because the
clock is literally constantly ticking and they need to deliver within like half an hour or less kind of thing. But when we're talking about a bigger group of deliverer, courier guys or women out there, then they have the quote unquote luxury of delivering like within a couple of days or something. Of course, they want to deliver as many packages
packages as possible, but the pressure is not as intense as this one. And also, one of the reasons why our delivery cost has been
quite low is that, like you guys mentioned, these delivery riders, they are gig workers, although they're dressed in uniform. So there's something kind of murky going on. And this is a discussion that's been going on all around the world. It's like your Uber driver. Like, you know,
How much corporate benefit should they enjoy? How much corporate protection should they enjoy? And here in China, this has been a constant battle of discussion for some years. But judging by the amount we're paying in delivery fees, delivery fees are
I don't think it's that much. And this is the part that we can get into a bit later in the discussion. But in recent months, actually, this has only been going on for almost a month, JD.com or JD, Jingdong, has entered the chat and it wreaked havoc earlier or actually in the later part of 2020.
February is that? Something like that, right? In recent months. Yeah, around the beginning of 2025. Exactly. And then, and most recently, it is Taobao that is
joining the chat as well. So could you kind of walk us through this heated battle that's been going on in this world in the last few months? So we just mentioned how the Taobao Flash was launched in late April and just within 48 hours after it was launched,
Well, Olima, the delivery system that's based on the same company, saw delivery orders reaching new highs across 13 cities. And one of the leading domestic coffee brand, the Cody Coffee Sales, just simply skyrocketed, increasing tenfold in a single day and leading the platform's coffee sales. And also, we just went...
went through the May Day holiday. So during the five days holiday, the demand for discounted beverages such as milk tea and coffee soared by over 110% comparing to the previous years. And that is also fueled by limited time promotions and the flash deals over the new delivery platforms as well. Yeah, that's showing how popular and how successful it is. But to get
to what's going on within the companies themselves and what's changing and what's becoming different. So JD, they launched their own takeout platform. It was around the beginning of 2025 in February, and they are challenging the labor model that you were talking about, Heung. They're doing that
head on. So they promised, this is what they did, they promised to recruit 100,000 full-time couriers. They offer social insurance, and that's a big deal because that's a significant shift away from the gig-based system that you were referencing. They also claim it will cap platform profit at 5% versus Meituan's alleged 8% to 30%.
So this is what's being done differently. The newcomers, they're shifting from gig to full-time models, and this could potentially improve worker protections. They're competing on logistics and supply chains and subsidies. You mentioned before, didn't you, Yushan, that it's not just food delivery anymore? I mean, it hasn't been for a long time in terms of the other items that you can
order, but still more diversification now. And now they're bundling their services too, combining delivery with e-commerce and including that in their ecosystem. So they're aggressively really targeting these new user segments. They're targeting travelers, young consumers, and they're targeting smaller cities too. And there's something you mentioned earlier that reminded me that that's also from JD.com that
I think by shifting from gig to full-time models, I think that's what you mentioned, Steve. They are, I mean, JD.com, they're really treating these riders as their employees. And one more evidence on that is that JD also announced that starting from March the 1st, 2025, it will gradually begin providing full social insurance and housing fund contributions for its full-time JD delivery riders.
while offering accident and health insurance for part-time riders. So there are coverage of what a proper employee should have for working for their company, and that's also including for the couriers of their delivery platform as well. And interestingly, just recently,
After JD.com launched its delivery service and claimed to do all that for their deliverers, Meituan, the yellow one, it also quickly announced it that in February is working on a system to provide social insurance for all of its riders. And in the meantime, they're starting to set up pilot zones all over China to carry it out in the following months. I think they mentioned in the second quarter of this year.
So around that time, we're going to see more riders under the protection of their platforms. This is, starting with JD, Jingdong, it's really stepping up its game to protect its riders.
Mm-hmm.
was that if they do, then their business model will break down. They argue that because they employ gig workers who do not enjoy full-time employee status and benefits, that's how they make money or a huge part of it. So this is...
hugely fascinating how Chinese delivery companies, or actually these are tech companies and delivery is only part of the business, how they're doing this. And I wonder whether the same kind of business model argument would hold water here. And I wonder if, of course, we would love the workers to have better protection and benefit packages. But would this mean that
average users, well, you will need to pay more. And now maybe they can argue, oh, there's the subsidies, but we've all seen the subsidy wars with all these different online platforms for more than a decade. It runs out after the initial period and then you'll have to pay more. You mean like the initial coupon offerings, things like that? Yeah, like when...
Didi or Uber first started in China, when all these delivery platforms first started in China, and when shared bike platforms first started in China. We've seen this. This is old story. So, okay, well, I wonder what's going to happen.
What happened ultimately on the user's end? Yeah, well, I mean, from the user's end, you mean our end, right? The average customer's end. For us, you could argue that it's going to be even more convenient than it already was because what they're doing now is they're fusing, and we mentioned this already, e-commerce with instant retail. So it's not just food.
The big players, they're merging these two worlds, real world retail with their deliveries. And Taobao Flash, they're integrating fast delivery options directly into product listings. And JD, they're promoting instant retail across its app, letting users do everything, order everything from snacks to smartphones for near instant arrival. When we think of
I mean, I'm relatively new in the country, but I think it still applies. When we think of these delivery drivers, we always think food, right? And that's probably the number one thing that they deliver on a daily basis. We don't think, oh, I need a new smartphone. I can have one in 15 minutes if I want to. But, right?
Well, actually, we kind of do. Oh, really? Sorry to say that, but we kind of do. In Canada, we definitely don't think like that. But that's what's going to be the more convenient aspect now is that it sounds to me like whatever you want, do.
that instant delivery will be available to you. Yeah, and talking about instant delivery, I think we were just having this chat earlier in the office as well that instant delivery means that the courier, he or she only has one mission. That's to head to the shop or restaurant and pick up what is being delivered and head directly to the one who paid. But nowadays, for most of the deliverers, they receive tens...
if not dozens of other orders at the same time, and they go, say, a planned route to try to minimize the distance they go. So comparing with that, the instant way of operating delivery system is perhaps a bit more costly. And also, from my personal point of view, I see that these companies, these leading companies in China, Meituan, JD, or Alibaba, whoever, they're trying to
well, at least they're stepping out and they're willing to, at least they're claiming to shoulder more responsibility in covering that extra cost. You mean with the benefits? Yeah. Like you can't raise your, say, shelf tag or...
value or price label simply because you're trying to cover more services and cover more instant trading on your platform. You can't have your recipient pay more in order for you to be able to run these services. So I would assume they are willing to cover these extra expenditures just so that their service is
getting elevated in a way that's more popular to the general market. And they're using this by integrating things that they already have. For example, JD, they're using their integrated supply chain and their already existing rider network to
to help fulfill this ultra-fast delivery promise. And that can be as low as nine minutes, the delivery time. Taobao Flash, they're tapping into Alibaba's consumer-facing super apps like Taobao and Tmall.
and then route orders through their company's fulfillment network. So each is using what they already have as their core strength to build a competitive advantage in this what we call last mile logistics battle. And also, when you look at the big name players, and also the biggest one, Meituan, right? Tencent, right?
the huge tech company is behind Meituan. So now in China, when you look at e-commerce and here instant delivery particularly, you can see that this is a mature market. It's all the big players, the major tech industry players, they are behind these companies. And to this point, it's difficult to even fathom that a nobody little potato can grow out of the field anymore because
Everything's so established. And it's also interesting to see that YJD, Jingdong, who's also a huge tech company, wants to get into this. It knows that it's going to sort of
ruffle some wrong feathers and it's going to start the dust. And, you know, when you look at the Chinese tech scene, the e-commerce scene, it's now maybe past the teenager growth period. It's now very mature. So for me as a casual observer, I just find it to be interesting or like I don't work in the industry, but I just find it
Why now? Why are you guys doing this? It's a huge market. I mean, it's a massive, massive market. This is a $230 billion industry in 2024, and they expect that to be a $280 billion industry by 2027. I'm no expert business person.
But that seems like a pretty good reason to get involved in the market, I would say. True, true. But also, I think you guys mentioned a very important point, too, because these companies, they're also trying to break through from their traditional e-commerce business model as well. Like we mentioned, how the JD and Alibaba, these companies, they're facing market saturation already in their traditional track, which is e-commerce. So why not breaking into this whole new, say, body of water, this whole...
big consumer potential and just try out their luck again. And it's also matching how the younger consumers are living nowadays. It matches with their lifestyle in a way because consumers nowadays, they use the delivery for everything, as we mentioned earlier on the show many times. Yeah, we are kind of... We have this tendency of just calling a delivery for whatever we need and thinking that it's...
It's very convenient to be paid online, so why not just get it delivered to you instead of going there to buy it yourself? It's already in the younger consumer's mind that this is the one major way to shop. So yeah, there's this advantage that they can take. You say it's new territory. We say it's new territory, but I wonder really how new this is because this is still part of e-commerce. You make that order on an app online.
Via the internet, you pay and you get stuff delivered to the door. It's just this time, it's in a flash. It is instant retail. That is the sort of new battle that two new big players are coming in, joining the...
It gives me the idea that previously you have the image in your mind of just opening up an app on your phone, ordering something, and it'll be at your door in 45 minutes. But human beings are spoiled. And 45 minutes, that's kind of the norm now, right? Sometimes faster, if you're unlucky, sometimes a little slower, maybe bad weather, something like that. But now, think about it like this. 3G.
Oh, 3G is amazing. Wow. This is cool. Oh, this is not so good anymore. Oh, but here comes 4G. Here comes 5G. Now 6G is on the way in development or whatever. It's kind of the same idea, I think. So what was okay before and what was the standard before of 45 minutes, 30 minutes, whatever, is now...
Oh, let's make it even faster. And people will get used to that, too. It's just it's an attractive thing for customers, I think. Do we need it to arrive at your doorstep that fast? Of course not. But what how many how much stuff in our life do we not need, but we love having? Well, because also we've talked about this, that this is an established concept.
mature market and therefore every single type of consumer need is diversified it's been calculated it's been included into the algorithms and these big big tech companies they
try to make smart decisions about. Therefore, maybe it's when you're still trying to finish stir frying that dish and you know you want your soy sauce immediately, you can use the instant delivery. It's when, let's say, unfortunately, Touchwood had this home injury,
let's just say paper cuts, and then I'm bleeding a little bit and I really need Band-Aids right now, I use the instant delivery. I think that makes sense. But I'll give you a quick example. The other night, just a couple of days ago, it was raining and my mom and I, my mom gave me the order, Ho-Young, get some Alaskan shrimp and we can have that for dinner two days later. And
And then I placed the order and guess what? A fine, nice, super professional delivery guy had to rush in the rain to deliver that shrimp we need in three days time to our door in 30 minutes. And I felt really bad for it. Why? He wasn't doing you a favor. It wasn't, but
Eat that shrimp that fast. Okay, am I like just too charitable or whatever? I now feel like am I like humanity completely wasted or something? I don't know. But at the time, I just felt really bad because I wasn't looking at the rain out there. And I really don't need this that fast. And I wasn't expecting it to come this fast. But somebody had to go through the trouble first.
Okay, I can't even finish now because I feel like I'm one of those 生母, you know. And I don't mean to be. I totally echo with you on that, He Yang. When it's rainy, like how it is today in Beijing. Yes, a whole day. And when it's windy, like how it used to last month in Beijing, I find it really hard to open those blue and yellow apps and just order things because I feel that it's not worth it.
their sacrifice of rushing into the rain or the wind or whatever extreme weather it might be and just to get me food that I can perhaps just create for myself using ingredients in the kitchen. And I don't allow, like you, He Yang, we don't allow what's manageable within our reach to get into the kitchen
the whole system, but that is how this whole delivery system runs nowadays. And regardless of weather condition or whatever, I think, yeah, that's just how society moves on in a way. And I wasn't even using one of the apps we're talking about today. So it was, I thought it was just a regular delivery app, but because the warehouse is so nearby and thanks to the algorithm, all these riders are being, they're
timetable is dictated by the algorithm. And because I suppose the warehouse is so nearby and therefore they have to make the delivery within 30 minutes or so, otherwise, you know, I don't know if they get money deducted or they get a reprimand or something. So
Sometimes you can't help but wonder, yes, on the one hand, we're enjoying this superb, speedy delivery service where you cannot enjoy anywhere else. If you think differently, feel free to challenge me.
But it's only made possible in Chinese cities, especially the bigger cities, where you have such an incredible millions and millions of population, this kind of population density, super fast internet, and this very established warehouse and tech infrastructure that we fully enjoy. And I'm very grateful for that. But on the other hand, don't you wonder, are these delivery drivers...
Just a cog in the machine. You know, just think about the grueling hours, algorithmic pressures and safety risks that are part of the job. And thankfully now maybe JD and some of these other companies, they can make it better. Any final thoughts? Crystal balling guys, how this will go.
Well, just to echo a little back on what you mentioned just now, He Yang, I saw from Meituan that there are over 4 million riders on the Meituan system alone. And according to their calculation, over 60% of these 4 million riders, they see their salary earned through sending deliveries as their main income sources. So judging from that and
A lot of times we also hear that on special conditions or unfriendly weather cases, they also receive bonuses. Hopefully these can make you feel better. This is their job. And plus they're also receiving a little bit of extra money because of the rainy weather. And it's going to get more competitive, I think, because there's 535 million people in China that were using an online food delivery service online.
As of June, I think that's from 2024, and that's an increase of $13.7 million from the previous December. That's only a six-month difference. So as there are more players in the game, and as those players in the game try to do better to increase their service quality, then I think that's only going to attract more customers. The market may become even more saturated.
But that seems to be, again, going back to the numbers for the market size, $280 billion by 2027.
So that's evidence there's going to be even more players, perhaps in the future. And plus, as long as these companies, they're stirring up healthy competition among different platforms, then yeah, as long as it sparks innovation breakthroughs that benefits their writers, their employees, and also the ones like us who place the orders, then yeah, why not? But do you know what I see for the future? Mm-hmm.
You made the decision. Sorry, your mom made the decision. Let's order some shrimp in the future. I envision AI cameras in your home that will recognize that you need shrimp.
technology, it will contact the rider on your behalf. No, thank you. And when you turn around in the kitchen, you realize, oh, I need some shrimp. There's a rider at your door. Here's your shrimp. Okay, and that is the ultimate nightmare for He Yang, but that could be a dream for Steve. Right. Yeah, and like you guys said, more
For competition in the industry, usually us as users, we benefit from it. And if you live in China, I think we can all sing the praises of those very positive consequences in the last decade. But what I really like to see, and I think we're seeing this going in that direction, that is competition can also help the hardworking people who are performing the service. And that's my wish for the day.