De­liv­er­ing the Mar­ket

China Pictorial (English) - - Contents - Text by Wang Shuya

In most big Chi­nese cities, it’s hard to miss de­liv­ery peo­ple whizzing around on scoot­ers in brightly-colored uni­forms. Around the lunch hour, they tear through the streets and lanes at break­neck speed to de­liver tasty food as fast as pos­si­ble to of­fice build­ings and homes. In re­cent years, peo­ple have started see­ing lo­gos of the big­gest in­ter­net brands and their re­spec­tive food de­liv­ery plat­forms such as Baidu Waimai, Meituan Waimai and Ele.me on their backs.

Food De­liv­ery Apps in Ev­ery­day Lives

The lunch hour is over when 31-yearold Ms. Zhang fi­nally pulls her­self out from her work. In­stead of rush­ing out to fill her empty stom­ach, she grabs her cell phone and flips through a food-or­der­ing app. With its own pro­pri­etary al­go­rithm, the app ranks nearby res­tau­rants based on Zhang’s eat­ing habits. With just a few clicks, she or­ders and pays for her lunch. In about half an hour, the de­liv­ery ar­rives at her of­fice.

“Thanks to food de­liv­ery apps, I don’t have to starve to work over­time,” she beams. “You get far more choices than walk­ing into a restau­rant, and it’s faster and cheaper too, thanks to coupons and dis­counts from the apps. So, why not?” The food is still hot when it ar­rives. Seam­lessly, such apps have al­ready be­come in­dis­pens­able for peo­ple like Zhang and most of her col­leagues.

Food de­liv­ery apps are wildly pop­u­lar in China. Their wide-rang­ing, af­ford­able cater­ing op­tions weaken the will to cook at home. Hot food can be de­liv­ered to al­most any doorstep in the coun­try in a dozen min­utes, 24 hours a day, seven days a week. From cof­fee, noo­dles and roast duck to hot pot and Poached Sliced Fish in Hot Chili Oil, any­thing can be de­liv­ered. In ad­di­tion to fre­quent dis­counts, app users also get free drinks from time to time. Food de­liv­ery guys have only be­come more nu­mer­ous and busy, and now they are seen ev­ery­where.

This March, Meituan-di­an­ping, one of Chi­nese on-de­mand lo­cal ser­vices gi­ants, an­nounced that its take­out de­liv­ery app had be­come the first to reach ten mil­lion daily or­ders and de­liv­er­ies glob­ally. And ac­cord­ing to data re­leased by the com­pany, three out of ev­ery ten Chi­nese peo­ple use food de­liv­ery apps. Or­der­ing food on­line has truly be­come the third reg­u­lar din­ing method for Chi­nese peo­ple af­ter cook­ing at home and din­ing out.

Two Wheels Drive Fast

The con­cept of food de­liv­ery cer­tainly isn’t any­thing new to China, but it has never before been a con­sol­i­dated na­tion­wide in­dus­try. Decades ago, restau­rant own­ers would de­liver meal boxes to peo­ple work­ing nearby dur­ing the lunch hour. For many years, sales vol­ume, food op­tions and de­liv­ery speed were se­verely limited. Food de­liv­ery only served spe­cific groups like of­fice work­ers and small busi­nesses.

The rapid devel­op­ment of mo­bile in­ter­net in re­cent years has in­spired the tra­di­tional cater­ing in­dus­try to em­brace the in­ter­net wave. There was a spe­cific turn­ing point: Ac­cord­ing to Ii­me­dia Re­search, a Chi­nese mo­bile in­ter­net or­ga­ni­za­tion fo­cus­ing on third party data min­ing and in­te­grated mar­ket­ing, China’s on­line food-or­der­ing mar­ket be­gan surg­ing in 2011. When China’s big in­ter­net tri­umvi­rate known as BAT (Baidu, Alibaba and Ten­cent) joined the game and made many rounds of vig­or­ous in­vest­ments in on­line food de­liv­ery plat­forms Baidu Waimai, Ele. me and Meituan Waimai re­spec­tively, food de­liv­ery ser­vices in China fi­nally re­al­ized in­dus­tri­al­iza­tion and were quickly up­graded and ex­panded.

Com­pared to for­eign on­line foodor­der­ing plat­forms that don’t pro­vide spe­cific de­liv­ery ser­vices, like the Grub Hub in the United States, China’s on­line food de­liv­ery plat­forms cre­atively adopted the “Two-wheels-driv­ing” mode that helps res­tau­rants de­liver food pro­fes­sion­ally and cre­ates a com­plete on­line-to-off­line (O2O) busi­ness cir­cle.

This mode broke the bot­tle­neck of tra­di­tional food de­liv­ery ser­vices in China and abroad. By re­fin­ing la­bor divi­sions and con­trol­ling the pro­cesses with ad­vanced in­ter­net tech­nolo­gies in­clud­ing au­to­matic

po­si­tion­ing, on­line or­der­ing, on­line pay­ment and data dis­tri­bu­tion, it suc­cess­fully matched small busi­nesses with large cus­tomer groups, which greatly im­proved users’ or­der­ing ex­pe­ri­ences and dra­mat­i­cally pro­moted devel­op­ment of the in­dus­try.

Statis­tics show that China’s emerg­ing “In­ter­net Plus” cater­ing busi­nesses, fea­tur­ing O2O food de­liv­ery ser­vices, gained ex­plo­sive growth from 2014 to 2015. By 2016, the mar­ket had reached a scale of over 100 bil­lion yuan (about US$14.7 bil­lion), which is ex­pected to sur­pass 700 bil­lion yuan (about US$103 bil­lion) and pen­e­trate 80 per­cent of the pop­u­la­tion by 2020.

It’s also worth not­ing that the Chi­nese in­no­va­tion in O2O food de­liv­ery ser­vices has be­gun to at­tract at­ten­tion from over­seas. Do­or­dash Food De­liv­ery, an Amer­i­can on-de­mand restau­rant de­liv­ery start-up founded in 2013, has fol­lowed the model of China’s “last-kilo­me­ter” food de­liv­ery ser­vice and used it to grab in­creas­ing shares of the mar­ket in its own coun­try.

Stay­ing on the Right Track

As new busi­nesses emerge in China’s “In­ter­net Plus” era, con­ve­nient and ef­fi­cient O2O food de­liv­ery ser­vice has stim­u­lated con­sump­tion and boosted eco­nomic growth. It has not only brought new op­por­tu­ni­ties to many res­tau­rants and cre­ated a wide range of jobs for the idle la­bor force, but also com­pre­hen­sively pro­moted the trans­for­ma­tion and up­grade of the tra­di­tional cater­ing in­dus­try. For ex­am­ple, it ef­fec­tively re­duced pres­sures plagu­ing tra­di­tional busi­nesses such as slow­ing rev­enue, surg­ing costs and de­clin­ing prof­its.

How­ever, keep­ing the new busi­ness mode de­vel­op­ing on the right track has be­come an in­creas­ingly con­cern­ing is­sue for many cus­tomers af­ter many prob­lems were ex­posed. On July 14, 2016, the China Food and Drug Ad­min­is­tra­tion (CFDA) is­sued the world’s first In­ves­ti­ga­tion Mea­sures on Il­le­gal Be­hav­ior of On­line Food Safety, which came into force on Oc­to­ber 1, 2016. The doc­u­ment im­poses new obli­ga­tions on both third-party on­line plat­forms and food traders. An­other high­light is that in­spec­tors will pre­tend to be cus­tomers to check prod­ucts from ran­domly se­lected on­line stores.

Thus, the ma­jor on­line food de­liv­ery plat­forms be­gan to raise the ac­cess thresh­olds for food providers to res­o­lutely avoid res­tau­rants with­out proper li­cens­ing. They also in­tro­duced var­i­ous post-sale ser­vice mech­a­nisms to guar­an­tee cus­tomers’ rights. For ex­am­ple, Meituan Waimai im­ple­mented Mea­sures for Food Safety Man­age­ment and set up a mech­a­nism to pro­vide re­funds and com­pen­sa­tion to the cus­tomers as soon as they re­port a prob­lem. Sim­i­larly, Ele.me is co­op­er­at­ing with the Ant Fi­nan­cial Ser­vices Group, Alibaba’s fi­nan­cial arm, to start a fast track for com­pen­sa­tion claims. Meituan Waimai and Baidu Waimai an­nounced that they set up spe­cific po­si­tions to check busi­ness qual­i­fi­ca­tion of food providers and the qual­ity of the food.

The driv­ing habits of de­liv­ery guys are an­other con­cern for many peo­ple. Be­cause of their er­ratic and ag­gres­sive driv­ing, ac­ci­dents are up. Many cities in­clud­ing Shang­hai, Qing­dao and Shen­zhen have launched spe­cial rec­ti­fi­ca­tion ac­tions on safety man­age­ment for elec­tric food de­liv­ery ve­hi­cles.

The an­a­lysts at Ii­me­dia Re­search be­lieve that on­line food de­liv­ery plat­forms still have many prob­lems, but their ser­vices meet the rigid de­mands of vast swaths of cus­tomers, leav­ing the cur­rent out­look bright. With im­prove­ment of their de­liv­ery sys­tems, longer ser­vice hours and ex­pan­sion of de­liv­ery to fruits, veg­eta­bles, bev­er­ages and other daily ne­ces­si­ties, de­mands will con­tinue to be stim­u­lated, so the mar­ket potential is enor­mous.

Now, most Chi­nese on­line food de­liv­ery plat­forms fo­cus on first-tier cities with good mo­bile in­ter­net cov­er­age. How­ever, with the ex­pan­sion of in­ter­net cov­er­age and the im­prove­ment of con­sump­tion lev­els, sec­ond- and third-tier cities are the next new mar­kets with big potential for the on­line cater­ing in­dus­try.

July 6, 2017, Beijing: A Meituan Waimai de­liv­ery worker braves the rain. Fre­quent thun­der­storms and swel­ter­ing sum­mer heat in many Chi­nese cities in­spire many to stay in­doors in­stead of din­ing out. VCG

July 21, 2017, Beijing: In the morn­ing, many Meituan Waimai de­liv­ery work­ers wait in front of res­tau­rants for or­ders. Ac­cord­ing to a re­cent re­port re­leased by Ii­me­dia Re­search, com­pared with the boom­ing on­line or­der­ing for lunch and sup­per, break­fast de­liv­ery is com­par­a­tively rare and in­suf­fi­cient in cat­e­gories, de­liv­ery speed and user experience. by Chen Jian

July 21, 2017, Beijing: Near the lunch hour, food de­liv­ery driv­ers are seen ev­ery­where in Zhong­guan­cun. Ac­cord­ing to a re­cent re­port re­leased by Big­dataRe­search, in the first quar­ter of 2017, Ele.me con­tin­ued to lead the in­dus­try with a mar­ket share of 36.5 per­cent, fol­lowed by Meituan Waimai with a share of 33 per­cent. Com­pared to last quar­ter, the dis­tance be­tween the two still re­mained within 3 to 5 per­cent. Baidu Waimai, how­ever, suf­fered a se­ries of set­backs and fell far be­hind. by Guo Shasha

June 13, 2016, Xiangyang City, Hubei Prov­ince: Yang Jing­bing, a Meituan Waimai de­liv­ery driver, picks up food for the cus­tomer. As a gym coach, Yang likes his part-time job as a de­liv­ery driver be­cause of its flex­i­ble sched­ule. VCG

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