Chinese e-commerce giants make expensive bets on fast deliveries
SHANGHAI, May 13 (Reuters) - Chinese e-commerce giants Alibaba (9988.HK), opens new tab and JD.com (9618.HK), opens new tab have opened a new front in the ongoing battle for market share, with both expanding aggressively into so-called instant retail centred around delivery speeds of 30 to 60 minutes this year.
Investors will be dissecting the strategy when JD.com reports its quarterly earnings on Tuesday and Alibaba on Thursday, as finding new avenues for growth has proven challenging for China's largest online retailers.
Their market penetration is already high and prices for goods are under pressure due to a consumer slowdown driven by concerns about employment and wages as well as a prolonged property market downturn.
The new turf war focused on speed is coming at a high cost in the short term as the e-commerce giants look to entice consumers with hefty discounts.
JD.com's JD Takeaway and Alibaba's food delivery app Ele.me last month each pledged 10 billion yuan ($1.38 billion) in subsidies. JD Takeaway said it would invest the sum over a year, while Ele.me did not disclose the timeframe.
"The competition is so intense, there's not a lot of incremental growth opportunities, so everybody is moving into everybody else's territories and instant retail is the latest example of that," said Jason Yu, general manager at CTR Market Research.
China's food delivery market leader Meituan (3690.HK), opens new tab has moved to grow its business by expanding its instashopping platform, which delivers non-food goods within 30 minutes and JD.com announced its entry into food delivery in February.
"In the past people would go to JD.com to buy a mobile phone and they would deliver to you in the same day, then suddenly they could go to Meituan and have the new Apple iPhone delivered within 30 minutes. That posed a direct threat to JD.com and they moved into food delivery in response," Yu said.
At the end of April, Alibaba expanded its instant shopping portal on its domestic e-commerce app Taobao. That gave users access to restaurants, coffee shops and bubble tea chains available on Alibaba's Ele.me - China's second-largest food delivery player behind Meituan - plus many other categories including pet food and apparel.
Alibaba, JD.com and Meituan did not respond to requests for comment.
Subsidised spending on instant retail from Alibaba and JD.com is being welcomed by cost-conscious consumers.
Users on JD Takeaway currently enjoy discounts of up to 20 yuan, or $2.77, per day for deliveries from restaurants including McDonald's, Haidilao and Burger King. On Taobao's instant shopping portal, consumers can receive a discount of 11 yuan on a bill of at least 15 yuan.
Liu Qi, 24, a small business owner in Tianjin, said he was pleased when he recently bought a coconut latte on JD Takeaway for only 5.9 yuan.
"I asked the deliveryman and he said he makes 4 yuan per delivery, so essentially, JD.com bought me a cup of coffee and delivered it to my door," Liu said.
He was even more surprised days later when he bought a coffee on Taobao's instant shopping portal for only 3.9 yuan. "It was 2 yuan cheaper than JD.com!" he said.
While subsidising consumer discounts for instant retail is expensive, China's e-commerce giants have significant cash reserves. As of December 31, Alibaba, JD.com and Meituan had net cash positions of 400 billion, 144 billion and 110 billion yuan respectively, according to Morningstar analysts.
And despite the low margins inherent in the business, a renewed focus on instant retail made sense for JD.com and Alibaba in part because both firms have armies of couriers already at their disposal, analysts said.
That means there is no need for an expensive build-out of delivery infrastructure as would be required for other potential entrants like Temu-owner PDD Holdings (PDD.O), opens new tab.
Beijing-based independent industry analyst Liu Xingliang said Alibaba and JD.com were leveraging high-frequency demand for food, coffee and bubble tea to boost lower-frequency demand for clothing, electronics and other higher-margin purchases - betting that if consumers open their apps more often, they might buy more overall.
For JD.com, the expansion into instant retail was particularly important given its traditional e-commerce business appeared to have hit a ceiling, he said.
"It must try to gain market share in new business areas."
($1 = 7.2194 Chinese yuan renminbi)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
42 minutes ago
- Reuters
Crisis-hit Nissan braced for scrutiny on turnaround plan at shareholder meeting
TOKYO, June 24 (Reuters) - Nissan Motor (7201.T), opens new tab will face plenty of scrutiny over its deepening crisis at an annual general meeting on Tuesday, where investors will also vote on an activist proposal urging it to take action on listed subsidiary Nissan Shatai (7222.T), opens new tab. It is anyone's guess whether new boss Ivan Espinosa will be able to halt the sharp decline at the automaker, where shares have fallen some 36% over the last year and dividend payments have been suspended. Nissan reported a $4.5 billion net loss in the last financial year and there is no guarantee it will return to profit this year - so far, it has declined to give a full-year earnings forecast. Espinosa has laid out plans for big cuts, including closing seven plants and shedding a total of 20,000 jobs, or around 15% of Nissan's workforce. One Tokyo-based activist investor, Strategic Capital, thinks the overhaul should include Nissan taking action on its listed subsidiary. Japanese companies are under increasing pressure from the Tokyo Stock Exchange and regulators to clear up so-called "parent-child listings", which are seen as unfair to minority shareholders and a drag on governance. In one prominent example, Toyota Motor (7203.T), opens new tab this month unveiled plans to take private its listed subsidiary, Toyota Industries (6201.T), opens new tab, in a complex, $33 billion transaction that some shareholders have said undervalues the forklift operator. Toyota likely took action because "it felt pressure from shareholders and thought it had to change," said Tsuyoshi Maruki, the chief executive of Strategic Capital, in an interview with Reuters on Monday. He said he hoped Nissan's management could also give the issue similar consideration. Nissan owns 50% of Nissan Shatai, which manufactures cars for the automaker. Strategic Capital owns 3.5% of Nissan Shatai. It has also acquired a small stake in Nissan, allowing it to submit proposals to the general meeting. It has proposed that Nissan change its articles of incorporation so that it would be required to annually examine its relationship with listed subsidiaries and disclose what action, if any, it planned to take. Nissan's board has opposed that and said changing its articles of incorporation would hinder its flexibility.
The Guardian
an hour ago
- The Guardian
Aukus vital to ‘deter Chinese aggression', say US lawmakers, as Trump urged to recommit to submarine deal
The Aukus pact is vital to 'deter Chinese aggression in the Indo-Pacific region', Republican and Democrat lawmakers in the US have told the Pentagon, urging the US to recommit to the nuclear submarine deal with Australia and the UK. The Trump administration announced this month it would undertake a 30-day review of the Aukus agreement – the deal struck in 2021 that would see US nuclear submarines sold to Australia, and new-design nuclear-powered Aukus submarines built in the UK and Australia. A letter addressed to defence secretary Pete Hegseth, signed by five Republican and Democrat lawmakers, urged the Pentagon to back Aukus, despite growing concerns over laggard shipbuilding in both the US and UK. 'As the department of defense begins its 30-day review of the trilateral Aukus mission, we write to you to express our strongest support for the agreement. 'This is a defense alliance that is overwhelmingly in the best interest of all three Aukus nations, as well as the entire Indo-Pacific region. Indeed, as you noted in February when Australia provided the U.S. with a $500m Aukus payment, 'this is not a mission … America can undertake by itself. It has to be [done by] robust allies and partners. Technology sharing and subs are a huge part of it.' The letter said the breadth and depth of support for Aukus within the US Congress had grown dramatically and 'we have worked quickly to recognize Aukus's mission to deter Chinese aggression in the Indo-Pacific region'. Sign up for Guardian Australia's breaking news email It also pointed to progress made, saying 'legislation necessary for Aukus to proceed had passed Congress; shipbuilding rates in the US had lifted substantially; and Australian naval officers had begun joint training on US nuclear-powered submarines.' Australia's defence minister, Richard Marles, who is in London on his way to the Nato meeting at The Hague, said he was 'not going to speculate about what the review will ultimately say' but stressed a review of a major defence project was a 'perfectly natural step' for an incoming administration to take, one that was supported by Australia. Asked about workforce challenges faced by both the US and UK shipbuilding industries, Marles said the 'human dimension' was a key challenge in securing Aukus submarines. 'We are confident that we can get this right, but we're not sanguine about it. There is a lot of work to be done to meet the human challenge, but we believe we can get it done.' Democratic Congressman Joe Courtney, co-chair of the Friends of Australia Caucus (and whose district in Connecticut includes the shipbuilding hub of Groton), as well as Republicans Michael McCaul, chair emeritus of the House Foreign Affairs Committee, and Mike Rogers, chairman of the House Armed Services Committee, were the lead signatories on the letter. Elbridge Colby, the under secretary of defence for policy at the Pentagon, is leading the 30-day US review, due to report in July. Colby has consistently declared he is 'very sceptical' about the pact and its benefits for America. He told the US Senate armed service committee that the US was not building enough submarines for its own defence, and would not sell submarines to Australia if that might jeopardise American interests. 'We don't want our servicemen and women to be in a weaker position and more vulnerable … because [the attack submarines] are not in the right place at the right time.' Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion Under pillar one of the Aukus agreement, the US will sell Australia between three and five Virginia-class nuclear-powered submarines, with the first to be delivered in 2032. These will replace Australia's ageing Collins class diesel-electric submarines to cover the 'capability gap' before Australia's own Aukus nuclear-powered submarines can be built. By the 'late 2030s', according to Australia's submarine industry strategy, UK shipbuilders will deliver the first specifically designed and built Aukus submarine to its own Royal Navy. Australia's first Aukus submarine – based on the UK design but to be built in South Australia – will be in the water 'in the early 2040s'. Aukus is forecast to cost Australia up to $368bn to the mid-2050s. Australia is providing significant subsidies to the industrial bases of both the US and UK. It has already paid $A798m (US$500m) – the first instalment of $A4.7bn pledged – to the US. It will pay A$4.6bn to the UK. But the deal's feasibility has come under significant pressure regarding both nuclear-capable senior partners. The US navy already has a shortfall of submarines, expected to worsen over coming years, and shipyards in America are running up to three years late in building new Virginia-class submarines, a 2024 US navy report found. The UK parliament announced its own inquiry into Aukus in April, which will examine whether 'geopolitical shifts since the initial agreement in 2021' have rendered the agreement unworkable. In Australia, there have been calls from a chorus of voices – including naval experts, former prime and foreign ministers, submariners, anti-war groups, and the Greens – for a domestic inquiry into Aukus, its feasibility and potential benefits to Australia.
Reuters
2 hours ago
- Reuters
Amazon to invest $54 billion in Britain over next three years
LONDON, June 24 (Reuters) - Amazon has deepened its commitment to Britain, with the e-commerce giant saying it plans to invest 40 billion pounds ($54 billion) over the next three years, a move the UK government hailed as a vote of confidence in its economic policies. Elected in 2024, the Labour government has made boosting Britain's anaemic growth a priority and wants to see a step up in foreign investment. Amazon (AMZN.O), opens new tab said on Tuesday its expansion in Britain, its third biggest market after the United States and Germany, would create thousands of jobs. It currently employs 75,000 in the UK, making it a top ten private sector employer. Its plan includes building two new state-of-the-art fulfilment centres in the East Midlands, central England, expected to open in 2027, as well as previously announced new centres in Hull, northern England, and Northampton, central England, that will open this year and next year respectively. The Hull and Northampton sites will each create 2,000 jobs. Amazon also plans new delivery stations across the UK, upgrades and expansions to its existing network of over 100 operations buildings, investment to enhance its transport infrastructure, two new buildings at its corporate headquarters in London and the redevelopment of the Bray Film Studios in Berkshire, southern England. The 40 billion pounds figure includes part of the 8 billion pounds announced by Amazon's cloud computing arm in September 2024 for building, operating, and maintaining data centres in the UK from 2024 to 2028. It also includes salaries for Amazon employees. Prime Minister Keir Starmer, whose government on Monday detailed its industrial strategy, said Amazon's plans represented "a massive vote of confidence in the UK as the best place to do business." On Friday, Britain's grocery regulator launched an investigation into Amazon, probing whether it breached rules on timely supplier payments. ($1 = 0.7423 pounds)
