Chinese e-commerce giants make expensive bets on fast deliveries
[SHANGHAI] Chinese e-commerce giants Alibaba and JD.com 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 (S$1.8 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.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
China's food delivery market leader Meituan 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 US$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.
War chests
While subsidising consumer discounts for instant retail is expensive, China's e-commerce giants have significant cash reserves. As of Dec 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.
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.' REUTERS
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
3 hours ago
- Business Times
Vietnam's imprisoned tycoon seeks government nod for 930 trillion dong restructuring plan
[HO CHI MINH CITY] Imprisoned for orchestrating Vietnam's biggest financial fraud, property mogul Truong My Lan is seeking the government's nod for a 12-year, 930 trillion dong (S$45.5 billion) restructuring plan that proposes the involvement of global financial heavyweights Rothschild and UBS, as well as consulting firm Alvarez & Marsal and Singapore-based Greenmark Construction. According to recent local media reports, the proposal – submitted separately by Lan from jail and by her real estate group Van Thinh Phat (VTP) to the authorities – outlines a road map to mobilise capital for property projects and restructure Saigon Joint Stock Commercial Bank (SCB), from which she embezzled 304 trillion dong. The road map includes asset recovery, project revenue generation, and strategic investor participation in a bid to remedy the losses and reduce Lan's sentence by repaying at least three-fourths of the embezzled money. On Jun 18, Lan, currently detained at the T17 Detention Centre in Ho Chi Minh City, held a working session with representatives of her group and two German advisory firms that have agreed in principle to provide US$3 billion to fund the proposed plan. In a May letter to the authorities, she said that her decades of real estate experience and deep knowledge of the 1,166 secured assets for loans from SCB put her in the best position to turn them into 'golden geese' – income-generating assets that could help the state recover its losses. The latest 12-year plan reflects a last-ditch bid to secure leniency, as Vietnamese law allows a death sentence to be commuted if at least three-fourths of the embezzled funds are repaid. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Rothschild, Alvarez & Marshal, and UBS were invited as strategic partners for international capital mobilisation, while Germania Helvetica Group and Milcon Gulf are being tapped for their expertise in corporate and bank restructuring, according to VTP's proposal cited by online outlet VnExpress. Singapore-based Greenmark Construction also features among the invited partners, along with local property developers NovaGroup and Hung Thinh. Lan was sentenced to death in 2024 for embezzling billions of dollars, bribery, bond fraud, and money laundering. She will be spared from the death penalty following a law change on Jun 25. Lan has been ordered to repay 674 trillion dong to SCB and an additional 30 trillion dong to bond investors. The Business Times had reported that Lan's prior effort to secure foreign support saw Malaysian tycoon Vincent Tan, founder of the Berjaya Group, agree to acquire the Sterling Residence development. This was part of her broader asset-recovery strategy, but there has been no official announcement on the progress or outcome of that plan. A three-pronged plan Under the proposed remedy scheme, VTP and its group of investors will disburse an initial US$2 billion in capital immediately upon receiving government approval. This first phase aims to stabilise SCB's operations, ensure liquidity for deposited funds, repay overdue debts, supplement working capital, and fund the completion of several large-scale, viable projects. The second phase, spanning the next five years, will see investors deploy some US$8 billion raised from partners and investment funds to develop legally cleared projects, with the aim of generating revenue from these assets. In the final phase, over the following seven years, investors plan to raise additional financing from domestic and international lenders to support major development projects, projected to yield around 680 trillion dong in revenue. Key projects include prime real estate in Ho Chi Minh City, such as 87 Cong Quynh Street, 289 Tran Hung Dao Street, the Nguyen Hue-Amigo Quadrangle, and Mui Den Do (the Saigon Peninsula). During this period, VTP expects to use the generated income from the three phases to repay the special loans from the State Bank of Vietnam – the country's central bank – and fulfil other financial obligations. SCB had previously received a multibillion-dollar bailout from the central bank following a 2022 bank run, which was triggered by the arrest of Lan, the lender's de facto owner, Reuters reported in March. No further rescue from central bank VnExpress noted that under Lan's 12-year remedy plan, SCB would not require additional loans from the central bank. This differs from an earlier proposal made by Sun Group, which was mandated by the central bank in November 2023 to assist SCB, the Reuters report indicated. In February this year, the developer submitted a 15-year rescue road map that indicated the central bank's lending could reach 657 trillion dong in the first year of restructuring the troubled lender, which could then start repaying the debts from year 14, subject to market conditions. In April, Dau Tu newspaper reported that the central bank was also drafting a plan to restructure SCB and was seeking suggestions from relevant bodies, though details of the plan and its submission timeline were not disclosed. The central bank and government have consistently appealed to the private sector, particularly foreign investors, to support the troubled lender. Vietnam's standard foreign ownership cap in commercial banks is 30 per cent, recently extended to 49 per cent for selected lenders that have taken over struggling peers. As at end-February this year, the non-performing loan ratio at SCB – one of the five ailing banks that are under special supervision by the authorities – stood at 98.5 per cent, Viet Dragon Securities Corporation wrote in a recent analysis, citing a report from the central bank.
Business Times
4 hours ago
- Business Times
This energy embargo has been going on for a decade
THERE are few things more calculated to strike fear into the world than an energy embargo. The mere possibility of Teheran harassing shipping in the Strait of Hormuz – a narrow stretch of the Persian Gulf through which about a fifth of the world's oil must pass – has sent commodities markets into turmoil since the US strike on Iranian nuclear facilities on Saturday (Jun 21). President Donald Trump then announced a tentative ceasefire between Iran and Israel on Monday. The worries are understandable, because in the roughly 15 decades that have marked the modern petroleum era, crude has hardly ever had restrictions on commerce. Even the autarkic, self-reliant economies of Nazi Germany and Stalinist Russia never sought to impose a tariff on the black gold. How different things are for green power. Back in 2015, when 195 nations came together to sign the Paris Agreement pledging to keep the planet well below 2 degrees Celsius of warming, there were just nine measures globally constraining trade in clean energy. As at last year, that number had blossomed to 212, according to a report this week by Ren21, a group backing renewable power. That's one of the main reasons the world is likely to build only about two-thirds of the renewables leaders had pledged to connect by 2030. The barriers to fossil energy imposed for just five months during the 1973 oil embargo are still remembered decades later. And yet we have spent 10 years building a similar set of restrictions against clean power, in the midst of an escalating climate crisis – and most of us barely give it a moment's thought. One reason is that the shackles on green energy are justified with the noblest of misguided intentions. A government promising to support domestic manufacturers of solar panels, wind turbines, and lithium-ion batteries sounds like a climate leader. That's especially the case when rapacious Chinese competitors seem on the brink of monopoly. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up In practice, such measures mostly just slow the necessary work of decarbonisation. Local clean energy manufacturers are perpetually begging for support. It's quicker, cheaper and easier for governments to quieten those complaints by stifling competition on the supply side of the industry with levies and regulations, such as the 3,521 per cent tariff the US is putting on Cambodian photovoltaic panels. Carrying out the more effective policy of stimulating demand via subsidies and mandates is harder. Such rules are legion. Ghana, for instance, requires a rising share of local content in renewable energy. Almost anyone working on such projects – manufacturers, contractors, lawyers, bankers, truckers and even caterers – must demonstrate their compliance by applying for a US$3,000 permit, more than a typical annual salary. Unsurprisingly, that's deterred development, leaving Ghana with just 188 megawatts of installed solar. That's less than what Malta, one of the world's smallest countries, has. Indonesia has similar rules, intended to foster a local manufacturing sector and originally targeting a 90 per cent share of local content in solar projects by 2025. That level was clearly impracticable and the requirement was cut last year to 20 per cent, but the damage had already been done. Despite having sufficient land to power all of South-east Asia with solar, Indonesia is currently generating less than tiny Singapore or frigid Estonia. Such trade restrictions can have a limited use in fostering infant industries, but in general they're applied too widely and removed too rarely, even when it's clear they're not working. The number of regulations has doubled since 2022, according to Ren21. This is desperately counterproductive. We tax and over-regulate things we want to discourage. With prospects of limiting warming to 1.5 degree Celsius already pretty much out of reach, we should be doing everything we can to make clean energy cheaper, and fossil energy more costly. We're instead doing the opposite. Even under former president Joe Biden and after the invasion of Ukraine, the US imposed higher trade barriers on Malaysian solar panels made with Chinese materials than it did on Indian diesel made with Russian crude oil. When President Donald Trump's 'Liberation Day' tariffs were announced in April, fossil fuels were one of a handful of sectors exempt. Such special treatment for oil, gas and coal is the tic of a nervy addict in fear of withdrawal. Oil embargoes are so feared because without an uninterrupted flow of crude, our non-electric trucks, trains, work vehicles, and cars would grind to a halt in a matter of weeks, threatening punch-ups at petrol stations and economic calamity. If China stopped exporting photovoltaic panels tomorrow, however, hardly anyone outside of the solar industry would notice. The sun would still shine, and your rooftop would still generate electricity. That's, to be clear, a virtue of this cheap, clean, resilient technology. But the lack of immediate blowback means that ill-considered policies hampering the growth of renewables can feel consequence-free. One virtue of crises is the way they concentrate the mind. The 1973 embargo sparked a boom in alternatives to imported Middle Eastern oil, from coal and nuclear power to North Sea, Alaskan and Soviet petroleum. Russia's 2022 invasion of Ukraine similarly drove the European Union to redouble efforts to switch to renewables. If there's one silver lining from the current grim geopolitical situation, let's hope it will prompt the world to start dismantling this metastasizing embargo on clean energy. BLOOMBERG
Business Times
4 hours ago
- Business Times
Vietnam's death-row tycoon seeks government nod for 930 trillion dong restructuring plan
[HO CHI MINH CITY] Facing death row for orchestrating Vietnam's biggest financial fraud, property mogul Truong My Lan is seeking the government's nod for a 12-year, 930 trillion dong (S$45.5 billion) restructuring plan that proposes the involvement of global financial heavyweights Rothschild and UBS, as well as consulting firm Alvarez & Marsal and Singapore-based Greenmark Construction. According to recent local media reports, the proposal – submitted separately by Lan from jail and by her real estate group Van Thinh Phat (VTP) to the authorities – outlines a road map to mobilise capital for property projects and restructure Saigon Joint Stock Commercial Bank (SCB), from which she embezzled 304 trillion dong. The road map includes asset recovery, project revenue generation, and strategic investor participation in a bid to remedy the losses and reduce Lan's sentence by repaying at least three-fourths of the embezzled money. On Jun 18, Lan, currently detained at the T17 Detention Centre in Ho Chi Minh City, held a working session with representatives of her group and two German advisory firms that have agreed in principle to provide US$3 billion to fund the proposed plan. In a May letter to the authorities, she said that her decades of real estate experience and deep knowledge of the 1,166 secured assets for loans from SCB put her in the best position to turn them into 'golden geese' – income-generating assets that could help the state recover its losses. The latest 12-year plan reflects a last-ditch bid to secure leniency, as Vietnamese law allows a death sentence to be commuted if at least three-fourths of the embezzled funds are repaid. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Rothschild, Alvarez & Marshal, and UBS were invited as strategic partners for international capital mobilisation, while Germania Helvetica Group and Milcon Gulf are being tapped for their expertise in corporate and bank restructuring, according to VTP's proposal cited by online outlet VnExpress. Singapore-based Greenmark Construction also features among the invited partners, along with local property developers NovaGroup and Hung Thinh. Lan was sentenced to death in 2024 for embezzling billions of dollars, bribery, bond fraud, and money laundering. She has been ordered to repay 674 trillion dong to SCB and an additional 30 trillion dong to bond investors. The Business Times had reported that Lan's prior effort to secure foreign support saw Malaysian tycoon Vincent Tan, founder of the Berjaya Group, agree to acquire the Sterling Residence development. This was part of her broader asset-recovery strategy, but there has been no official announcement on the progress or outcome of that plan. A three-pronged plan Under the proposed remedy scheme, VTP and its group of investors will disburse an initial US$2 billion in capital immediately upon receiving government approval. This first phase aims to stabilise SCB's operations, ensure liquidity for deposited funds, repay overdue debts, supplement working capital, and fund the completion of several large-scale, viable projects. The second phase, spanning the next five years, will see investors deploy some US$8 billion raised from partners and investment funds to develop legally cleared projects, with the aim of generating revenue from these assets. In the final phase, over the following seven years, investors plan to raise additional financing from domestic and international lenders to support major development projects, projected to yield around 680 trillion dong in revenue. Key projects include prime real estate in Ho Chi Minh City, such as 87 Cong Quynh Street, 289 Tran Hung Dao Street, the Nguyen Hue-Amigo Quadrangle, and Mui Den Do (the Saigon Peninsula). During this period, VTP expects to use the generated income from the three phases to repay the special loans from the State Bank of Vietnam – the country's central bank – and fulfil other financial obligations. SCB had previously received a multibillion-dollar bailout from the central bank following a 2022 bank run, which was triggered by the arrest of Lan, the lender's de facto owner, Reuters reported in March. No further rescue from central bank VnExpress noted that under Lan's 12-year remedy plan, SCB would not require additional loans from the central bank. This differs from an earlier proposal made by Sun Group, which was mandated by the central bank in November 2023 to assist SCB, the Reuters report indicated. In February this year, the developer submitted a 15-year rescue road map that indicated the central bank's lending could reach 657 trillion dong in the first year of restructuring the troubled lender, which could then start repaying the debts from year 14, subject to market conditions. In April, Dau Tu newspaper reported that the central bank was also drafting a plan to restructure SCB and was seeking suggestions from relevant bodies, though details of the plan and its submission timeline were not disclosed. The central bank and government have consistently appealed to the private sector, particularly foreign investors, to support the troubled lender. Vietnam's standard foreign ownership cap in commercial banks is 30 per cent, recently extended to 49 per cent for selected lenders that have taken over struggling peers. As at end-February this year, the non-performing loan ratio at SCB – one of the five ailing banks that are under special supervision by the authorities – stood at 98.5 per cent, Viet Dragon Securities Corporation wrote in a recent analysis, citing a report from the central bank.
