Frost & Sullivan releases '2023 China Instant Delivery Industry Trend White Paper
Original Frost & Sullivan' Frost & Sullivan March 17, 2024, 10:18 shanghai
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With the rapid development of China's internet and e-commerce industries, the digital transformation process of retail continues to advance. In the field of local retail, instant retail is expected to become the next trillion-level digital retail segment. Instant delivery is the core infrastructure of instant retail, playing a crucial role after the sales process, ensuring consumer"Immediate demand, immediate satisfaction." The efficiency of instant delivery directly determines whether the instant retail business can meet market expectations for "instant" services, which is crucial for ensuring the healthy, rapid, and continuous growth of the instant retail industry. In addition, instant delivery service platforms have further expanded the boundaries of instant retail categories and services by introducing innovative delivery models and diversified service scenarios and types, as well as expanding the potential user base.
Frost & SullivanFrost & Sullivan (referred to as 'Frost & Sullivan') continues to monitor the current development status and new trends in China's instant delivery industry. Against this backdrop, it has officially released the '2023 China Instant Delivery Industry Trend White Paper'. The report points out that driven by multiple factors such as gradual consumer recovery, continuous policy improvement, ubiquitous instant access to everything, multi-polarized traffic, and accelerated digital transformation, China's instant delivery industry faces broad development opportunities and has sustained growth momentum.
This article delves into technology and industry development, analyzing the driving forces, trends, and core competitiveness of leading instant delivery service providers in China. It also selects cases such as SF Express Local Delivery, Meituan Delivery, and Dada to analyze the strategic measures, achievements, and core competitiveness of leading instant delivery service providers in China under market conditions such as rapid digital transformation of local retail, continuous expansion of instant retail categories, continuous improvement in the rate and level of digitalization of catering chains, and continuous channel penetration.
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1
Macroeconomic backdrop: Consumption recovery and retail digitization
In 2023, China's economic recovery trend is evident. The proportion of the tertiary industry in GDP has increased, and total retail sales of consumer goods have grown significantly year-on-year. Both revenue and commodity retail sales in the catering industry have shown significant growth, indicating a clear warming up of the consumer market, which has become an increasingly important component supporting national economic development. Looking at consumption types, the catering industry achieved a rapid rebound on the basis of a low base in 2022. By commodity type, high-frequency necessity categories such as clothing, daily necessities, and tobacco and alcohol performed strongly, while other categories such as clothing, footwear, and cosmetics also showed high growth.
In recent years, with continuous technological progress and changes in consumption habits, more Chinese residents are increasingly inclined to shop online, and the pandemic has accelerated the trend towards online shopping. Data from the National Bureau of Statistics shows thatFrom 20.7% in 2019 to 27.6% in 2023, China's online shopping penetration rate has significantly increased. It is expected that by 2028, with the further improvement of mobile internet network infrastructure, the further popularization of digital payments, continuous technological and business innovation in online consumption areas by digital retail platforms, continuous optimization and efficiency enhancement of logistics fulfillment services, the online retail penetration rate will further increase to 35.3%.
2
Overview of Instant Delivery: A New Logistics Model with Higher Timeliness and Flexibility
The digital transformation of retail has driven the rapid development of various intra-city logistics services such as intra-city freight, intra-city express delivery, and instant delivery. Among them, instant delivery has obvious advantages in terms of fulfillment timeliness and scenario flexibility:
Comparison of Three Main Intra-city Logistics Modes
Note1Flexibility is comprehensively evaluated from dimensions such as order response speed, whether door-to-door pick-up and delivery are provided, service scenario diversity, and customization level.
Source: Frost & Sullivan research
The value chain of instant delivery mainly consists of three parts: commodity suppliers such as brand merchants and local merchants; multi-polarized traffic channels connecting suppliers and consumers; and instant delivery service providers. As consumers become moreThe demand for 'instant needs, instant satisfaction' is increasing day by day, making instant delivery services a key bridge connecting online consumers with offline products.
Instant Delivery Value Chain
Source: Frost & Sullivan research
3
Core Drivers of the Instant Delivery Industry
The catering segment has a solid foundation and rapid growth in non-catering instant retail, becoming an important new driver for the industry.
With the rapid improvement of infrastructure for new business models and urban distribution service networks, instant retail characterized by half-day delivery, hourly delivery, and minute delivery has become a new trend in retail model innovation."Express delivery is not fast enough" has increasingly become an explicit pain point for consumers today. Instant delivery services, with their ability to "satisfy immediate needs," have become an increasingly important fulfillment method in the online consumption sector.
Currently, instant delivery mainly serves the catering and takeout sectors as well as the e-commerce retail market. Among them, catering takeout has developed relatively maturely with a penetration rate as high as24.5%, significantly higher than the current penetration rate of instant retail into overall commodity retail, which is only about 2.1%. Instant retail provides convenient shopping anytime and anywhere, meeting the new consumer value proposition of 'instant satisfaction, on-site enjoyment, personalized experience' in the new era. It has become a high-growth segment for traditional retail during the post-pandemic recovery process, bringing new volume to the retail industry. Under the trend of consumer demand being met instantly, instant retail has become a lifestyle with high certainty. Offline retail/catering, remote e-commerce, etc., are actively embracing instant services, while local online retail and fulfillment services will continue to be a high-growth track.
Core markets and new market entrants in the instant delivery industry
Source: National Bureau of Statistics, Frost & Sullivan research
The demand for personal delivery services has increased, making it a high-margin service type with a high customer mix.
With the popularization of a fast-paced lifestyle and consumers' growing demand for efficient and convenient services, errand services have emerged and developed rapidly. Errand services cover everything from purchasing daily necessities to handling personalized needs on behalf of clients. Compared with other instant delivery services, errand services stand out due to their high customization and flexibility. Consumers not only expect services to meet basic delivery needs but also hope that they can provide customized solutions tailored to specific individual needs, whether it's picking up and delivering items, purchasing goods on behalf of others, dealing with emergencies, or completing complex task lists. Therefore, compared with standardized ready-to-go services, consumers are more willing to pay a higher premium for errand services that offer added value and personalized experiences.
4
Instant Delivery Industry Scale: Annual Order Volume ExceedsA high-growth track worth 400 billion
In 2023, the order scale of China's ready-to-go catering industry achieved a relatively significant growth based on the recovery of catering services and retail. The total industry order scale reached approximately 40.88 billion orders, a year-on-year increase of 22.8%. Over the past five years, the average annual compound growth rate has reached 21.4%.
In the future, in addition to the catering and takeaway scene, the trend of instant retail for all things at home is accelerating, bringing continuous growth momentum to the instant delivery industry. It is expected that byIn 2028, the scale of instant delivery orders across the country will reach 81.31 billion orders, maintaining a double-digit growth rate of 14.7% per annum for the next five years.
The scale of China's instant delivery service industry, measured by order volume
Forecast for 2019 - 2028
Source: Frost & Sullivan research
5
Trends in the instant delivery industry
The trend of traffic polarization is deepening, and third-party direct connect services are seizing new market share.
The digital transformation of local retail is accelerating, with traditional e-commerce, content e-commerce, catering and retail brands, as well as instant delivery platforms, actively entering the local consumption market. The trend of multi-polarization in traffic is significant. In addition, leading supermarkets and catering brands are building their ownOnline channels such as apps and mini-programs obtain orders from self-operated channels, reducing dependence on a single external platform's traffic and capacity. At the same time, this helps to improve user stickiness, repurchase rates, and brand loyalty. In recent years, the proportion of orders from top KAs' self-operated channels has significantly increased. For example, a large chain supermarket had about 60% of its online orders in 2023 coming from self-operated channels. A higher proportion of orders from multiple channels, especially self-operated ones, will further drive demand for third-party distribution services with sufficient capacity and strong fulfillment capabilities. High-quality third-party distribution fulfillment has become a key approach for supermarkets and catering brands to improve service quality and brand image.
The sinking market presents broad opportunities
The sinking market refers to the markets in third-tier and lower-tier cities, counties, towns, and rural areas. It is the market with the largest population base, area, and potential in China. The number of retail stores distributed in the sinking markets such as third and fourth-tier cities accounts for a significant proportion of the total number of traditional retail small stores nationwide.Over 90%. In addition, the mobile internet user base in the underserved markets exceeds 700 million, with potential users for instant retail exceeding 250 million and for food delivery exceeding 300 million. Therefore, instant delivery has great development potential in the underserved markets. The same-city pick-up service, characterized by 'online ordering, offline delivery within 30 minutes', can meet the more diverse and evolving consumption needs of residents in these markets.
Policy guidance has further enhanced the development momentum of the instant retail and delivery industry in the lower-tier markets.In July 2023, the Ministry of Commerce, together with eight other departments, released the 'Three-Year Action Plan for County-level Commerce (2023-2025)', aiming to strengthen the commercial network and diverse business forms in counties. Third-party instant delivery platforms represented by SF Express Local Delivery and Flash Express are becoming the infrastructure for building a 'fast channel' for county-level logistics. They not only enhance the scale of instant retail in county-level commerce but also significantly activate the consumption vitality and potential of county-level markets. In addition, the sinking market not only has enormous potential but also shows a clear trend of upgrading consumption. Brand-based consumption is becoming increasingly popular, and leading chain brands have announced a focus on expanding stores in the sinking market.
The synergy with express delivery has been further enhanced.
China's express delivery business volume has exceeded 100 billion pieces for three consecutive years, showing a huge scale, especiallyDuring peak shopping seasons such as '618' and 'Double Eleven', the short-term high growth in express delivery volume puts immense pressure on express capacity. However, the instant delivery model, through its massive capacity scale and efficient coordination mechanism, helps improve fulfillment efficiency and service quality in aspects such as first-mile pickup and last-mile delivery, optimizing user experience.
For logistics groups or e-commerce groups, their instant delivery platforms can more effectively leverage internal business synergies. This includes warehousing facilities, transportation networks, delivery express services, as well as a rich order and inventory information system. Through close internal coordination, express services and instant delivery can seamlessly connect at a lower cost, not only improving resource utilization efficiency but also providing consumers with faster and more reliable delivery services.
The integrated platform has made corporate social responsibility an even more important strategic task, introducing a series of measures to protect the rights and interests of riders
The protection of employment rights and interests has become a key concern for flexible employment platforms such as Zhipai, with multi-level guarantees of riders' rights and interests becoming a common trend in the industry. Leading companies in the industry, such as Meituan Distribution, Bird Distribution, SF Express Local Delivery, Dada, etc., have introduced a series of measures to protect riders' rights and interests, including extending delivery hours, ensuring rider safety, emphasizing rider training and career development, investing funds to motivate riders and further increasing their income.
With the rapid development of unmanned delivery, cloud services, and artificial intelligence, emerging technologies are helping to intelligently improve and upgrade the same-city delivery industry.
driverless vehicleThe cost-saving and efficiency-enhancing role of drones is significant: drones/drone vehicles, thanks to their automation, intelligence, and ease of positioning, can autonomously complete delivery services in special areas such as parks, scenic spots, and under specific working conditions. In the long run, large-scale application will significantly reduce delivery costs.
And artificial intelligenceCurrently, cloud computing applications are more mature, mainly improving fulfillment efficiency and optimizing the rider experience through more intelligent and efficient capacity allocation and route planning.
6
Analysis of Leading Enterprises in China's On-Site Services Industry
SF Express Local Delivery
Under the trend of rapid digital transformation in local retail, continuous improvement in the chain rate and digitalization level of catering, SF Express Local, as a leading third-party instant delivery service platform, leverages its fully covered and capable elastic transportation network, neutral and open attributes, and intelligent new technology application capabilities across all links. It grasps the diversified trend of multi-polar traffic scenarios, accurately understands the pain points of individual consumer needs, deeply collaborates with SF Group's large network, and provides high-quality fulfillment delivery services that are scenario-specific, customized, integrated, and one-stop for merchants, individual consumers, and logistics service providers.
SF Express's capabilities and resource matrix for local deliveries
Source: SF Express' Local Network official website, SF Express' Local Network annual report, Frost & Sullivan research
SF Express Local Market focuses on tapping into the growth potential of the underserved market and non-food categories, and is dedicated to enhancing the refined operation of local delivery. Strategic measures include:
1) Precise the service accuracy from the city dimension to the business district dimension. Make different classifications and stratifications for business districts to precisely allocate transportation capacity and discount levels, continuously optimize the rider's fulfillment experience and improve fulfillment efficiency;
2) Develop customized service plans based on the specific needs and order characteristics of merchants of different scales and C-end users;
(3) Build a diverse and multi-level highly elastic and resilient transportation capacity system, introduce four-wheel vehicle and drone transportation capacities, and launch 'half-day' and 'two-wheel + four-wheel' shuttle service products to meet the needs of various non-standard distribution scenarios such as long-distance transportation, heavy cargo handling, and multi-point distribution;
4) Actively adopting cutting-edge technologies, we have launched the Fengbaidu Cloud and CLS urban logistics integration solutions. Leveraging our deep accumulation in distribution big data and multi-category instant delivery services, we have built an 'all-scenario, full-process' instant delivery service system for merchants.
Elastic Capacity Network and"Technology first" sets the foundation and core competitiveness of SF Express's local delivery capabilities.
Source: SF Express's official website, annual report, and Frost & Sullivan research
Meituan/meituan delivery
Meituan is a leading comprehensive local life service platform and technology retail company in China. In recent years, Meituan has focused on catering and delivery, leveraging its massive merchant flow andC-end user traffic has successively seen the launch of new businesses such as Meituan Flash Shopping and Little Elephant Grocery, actively expanding the boundaries of 'Everything at Home'. Meituan Delivery is an instant logistics platform under Meituan, providing merchants and C-end users with flexible instant delivery and courier services, becoming the most important fulfillment guarantee for Meituan's new catering, takeout, and instant retail businesses. Currently, Meituan Delivery has completed over 40 million orders per day, with an average delivery time of only about 30 minutes per order, connecting 6.3 million merchants, 460 million consumers, nearly 4 million couriers, and various ecological partners.
Source: Meituan official website, Meituan annual report, Frost & Sullivan research
Ele.me/Bumblebee is a must-have
In March 2023, Alibaba carried out the '1+6+N' organizational restructuring, with Local Life becoming one of the six business groups operating independently: Kuaishou and Ele.me's in-store services were merged into Gaode Map, while Ele.me retained its focus on the home delivery business. This restructuring will grant greater autonomy to both the Local Life Group and Ele.me, but it also faces challenges such as the divestiture of 'in-store' services, loss of Taotian support, and reduced stability of Alipay's traffic entry points. Therefore, Ele.me urgently needs to find new business growth points, such as non-meal instant retail.
atIn the financial report for the fiscal quarter ending June 30, 2023, Alibaba attributed the growth in GMV from Ele.me to improved consumer demand, an increase in active merchants, and enhanced delivery capabilities. It also declared that it will 'continue to focus on diversifying the supply of high-quality products across non-meal categories'.
Ele.me/Birds of a Feather Seek New Growth Curves
Source: Ele.me official website, Alibaba financial report, Frost & Sullivan research
Dada Group
Dada Group attaches importance to the growth potential in the underserved market and non-food categories, and is committed to refined operations of same-city delivery:1) Continuously improving the rider fulfillment experience and efficiency; 2) Providing personalized service solutions tailored to different customer needs and order characteristics for large stores, small and medium-sized stores, micro-stores, and C-category stores; 3) Actively applying new technologies to optimize the hierarchical operation of riders, empowering the entire operational chain from volume distribution, route area operation, to rider recruitment through digitalization; focusing on unmanned delivery and building an open platform for unmanned delivery. During the performance period, Dada Express achieved significant year-on-year growth in orders to the lower-tier market and non-meal orders.
Through continuous refined operations and efforts in the offline market, Dada's orders from the offline market and non-food categories have witnessed rapid growth.
Source: Dada Annual Report, Dada official website, publicly available materials compiled, Frost & Sullivan research
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Frost & Sullivan
Global growth consulting firm, Frost & SullivanFrost & Sullivan, abbreviated as 'Frost & Sullivan', integrates 64 years of global consulting experience and has been serving the booming Chinese market with dedication for 27 years. With a global perspective, it helps clients accelerate their business growth, enabling them to achieve growth, technological innovation, and leading benchmarks within the industry.
