The key to understanding the battle between JD.com and Meituan is human resources

The competition between JD.com and Meituan in the food delivery and instant retail sectors is intensifying. This competition is not only a fight for market share, but also a deep layout of human and logistics resources. This article deeply analyzes the competitive strategies of JD.com and Meituan, explores the key factors behind the food delivery business, such as traffic, cost, merchant resources, and the far-reaching impact of this competition on both parties and the entire instant retail market, for your reference.

"Where is the real ending?"

In an interview with Caijing magazine in 2017, Wang Xing asserted that competition and cooperation would be the norm in the future. "The end game was originally a term in chess, but the actual situation now is that the chessboard is still expanding."

Now, direct competition has come between Liu Qiangdong and Wang Xing, forming another form of "Dongxing Dinner Party".

On February 11, JD.com recruited food delivery merchants under the slogan of "0 commission". Merchants who joined before May 1 will be exempt from commission for the whole year. According to wujicaijing, Meituan's food delivery commission is usually 6%-8%. In addition, merchants need to pay a certain percentage of delivery service fees on each platform.

In fact, JD.com and Meituan have already started a war in the instant retail track. In October 2020, Meituan Waimai also joined the army of selling iPhones, competing for JD.com's business. Recently, Alphabet List found that when opening Meituan Waimai, "iPhone discount of 1,000 yuan" appeared in the default search bar.

For JD.com, attacking the food delivery market is both an offense and a defense - defending against Meituan's move from food delivery to instant retail. This is Liu Qiangdong's response to Wang Xing.

Zhang Yiming once challenged Wang Xing, but after the competition, Douyin had both gains and losses. What it gained was the in-store business - Douyin's competition once reduced Meituan's profit margin, and as for the home delivery business, Douyin has been unable to gain it for a long time. After all, food delivery is a business that requires traffic, logistics distribution system, and merchant resources at the same time. Douyin relied on traffic to develop the home delivery business, but it lacked the other two factors, and the food delivery business was almost stagnant.

Can Liu Qiangdong succeed in achieving what Zhang Yiming failed to achieve?

JD.com’s strengths and weaknesses are very obvious.

The company's strength lies in its logistics system. It is Dada that is currently providing delivery services for Douyin's food delivery services. Compared with Douyin, which has to pay an extra intermediary fee, JD.com obviously has an advantage in delivery costs.

The shortcomings are naturally traffic and merchants. JD.com is not a high-frequency software. If it wants to snatch users from Meituan, it will need large subsidies in the early stages.

As for the merchants, JD.com has already taken action. 0 commission is attractive enough to many merchants. A Beijing catering merchant applied to join JD.com takeaway on the day he received the news. In addition, according to Zizibang, JD.com has been actively recruiting sales personnel in recent days. For every successful invitation of a catering merchant to join, there is a commission reward of 100-200 yuan.

However, JD.com’s main focus is on quality food. A restaurant merchant said that a merchant who has already settled in JD.com’s food delivery said that JD.com currently only accepts regular merchants with dine-in service, and does not accept take-out stores. Another salesperson said that currently only merchants with a score of more than 3.8 on Dianping.com are accepted. This means that JD.com cannot form a merchant density like Meituan, and its scale is bound to be limited.

Judging from actual actions, more frequent food delivery is more like a traffic channel. Just as the iPhone was once a traffic-generating tool for Pinduoduo's 10 billion yuan subsidy, food delivery also bears the heavy burden of promoting instant retail for JD.com. Instant retail is the real battlefield between JD.com and Meituan.

The deeper strategic significance of JD.com's instant retail lies in leveraging its human resources advantage, turning burdens into advantages, and ultimately creating a flywheel effect.

Whether it is takeout or instant retail, delivery is the biggest cost, which is precisely the advantage of JD.com and Meituan. With the advancement of urbanization, the importance of new Internet labor-intensive industries such as takeout and express delivery in solving employment has become increasingly prominent. For a long time, Meituan and JD.com do not need to worry about rising labor costs. On the contrary, the wider they expand the instant retail market, the more efficient they will be in using human resources, and the more manpower they will gather. Once a positive cycle is formed, the snowball will roll bigger and bigger, and it will be easier to produce economies of scale.

In this sense, it is clear how the competition between JD.com and Meituan will develop. The two companies, which have the advantage of manpower, will be winners no matter how they compete as long as the instant retail (including food delivery) pie continues to grow. As long as Zhang Yiming is unwilling to make TikTok heavier and is unwilling to bear the pressure of short-term increase in labor costs, he will most likely be a loser in the local life sector.

01

Qiu Linlin, a restaurant owner who already opened stores on Meituan and Ele.me, immediately applied to join JD Takeout after seeing its 0 commission. "Now you need an invitation code to apply."

According to the announcement released by JD.com, JD.com Takeaway is only recruiting "quality dine-in restaurants". According to the recruitment information of the service provider, it is currently only recruiting merchants with a Dianping score of 3.8 or above, and has not been fully opened to the public. However, takeaway merchants who want to join have already come one after another.

What attracts merchants is obviously the 0 commission. Compared with its peers, Meituan’s current commission is 6%-8%. Of course, the main deduction for takeout on each platform is the delivery fee, which will fluctuate according to the delivery distance, time period, etc.

A merchant who has already settled in JD Takeout told Alphabet List that JD currently has 0 commission and an additional basic shipping fee of 5 yuan.

At present, if you enter the "Second Delivery" channel in the JD App, you can see the JD Takeaway column, which is currently mainly occupied by brand merchants, including chain restaurants such as Yaojiwang and Zuimian, as well as tea brands such as Luckin Coffee and Bawang Chaji.

Compared with Meituan, JD.com requires users to pay a higher delivery fee. Take Zuimian, its main catering brand, for example: for the same location, JD.com requires a delivery fee of 3.5 yuan, while Meituan does not charge delivery fees, but JD.com has a lower price for the same product. Take Zuimian's popular "Signature Bolognese Noodles" as an example. The order price on JD.com is 26 yuan, plus the "6-5 coupons" given by the platform every day, the total amount is 21 yuan. The order price on Meituan is 29.9 yuan, plus the 8 yuan takeaway expansion coupon purchased by yourself, the total amount is 21.9 yuan.

Of course, this price advantage is limited to its main brands.

Browsing JD.com’s instant delivery channel, it is not difficult to find that “takeout” is just one of the columns in the channel, and columns such as supermarket convenience, coffee and milk tea have higher weights.

In fact, food delivery is just a continuation of JD.com's instant retail strategy. In 2015, JD.com began to provide home delivery services for supermarkets, fresh fruits and vegetables, medical and health products, etc. In 2021, JD.com expanded to all categories, including mobile phones, 3C, beauty, pets, clothing, etc. In the same year, JD.com and Dada launched the instant retail brand "Hourly Shopping".

For JD.com, entering the instant retail industry is both an offense and a defense. Five years ago, JD.com and Meituan had already entered each other's sphere of influence.

Just one year before JD.com launched its hourly shopping service, Meituan Delivery announced that it would shift from delivering meals to delivering everything. “We will invest everything in delivery construction in the next five years,” said Wang Puchong, then Meituan’s senior vice president and president of its home delivery business group.

And Wanwuranzi includes daily necessities promoted by JD Supermarket and digital products, which are JD Retail's advantageous categories. In October 2020, Meituan Waimai announced that users within the delivery range of stores in Beijing and Shanghai can place orders through Meituan Waimai and the Meituan APP to purchase iPhone 12 series products. Meituan can provide door-to-door delivery service in as fast as half an hour.

In the past few years, this instant retail has been going on. But compared with Meituan, JD.com has a disadvantage in instant retailing. Takeout is a high-frequency entry point. Meituan's instant retailing can take over the traffic brought by the takeout business, and the shopping migration from catering to tea and then to daily necessities is quite smooth. Meituan's goal even includes 3C digital products, which JD.com is good at.

However, JD.com is not a software that needs to be opened frequently, and its content construction is limited, and its user time is not advantageous. It urgently needs a high-frequency entrance to drive its instant retail business.

Just as the iPhone was once a magic weapon for Pinduoduo's 10 billion yuan subsidy to attract customers, food delivery is now shouldering the heavy burden of attracting customers for JD.com's instant retail business. JD.com's food delivery service is currently only available in some first- and second-tier cities, which also proves this point.

In fact, in addition to food delivery, JD.com also started recruiting local life merchants in early January this year. According to the investment information provided by a merchant, the current investment scope includes physical stores, brand chain stores, professional market merchants, and merchants in specific industries, such as catering, pharmaceuticals, fresh food, etc.

In addition to its defensive role, the instant retail business is also important for JD Retail in terms of improving the utilization rate of its huge distribution system. At the end of January, Dada announced that its board of directors had received a preliminary non-binding acquisition offer from its major shareholder JD Group. After privatization, the relationship between Dada and JD will obviously be closer, but maintaining such a large logistics team is both a strength of JD's supply chain and a burden. JD obviously needs to improve its distribution efficiency.

In order to improve delivery efficiency and profits, Dada once exported its delivery capabilities to Douyin to expand the takeaway scenarios, which was equivalent to it gaining a new C-end entrance beyond instant retail.

Once the order volume and delivery density of instant retail increase, the economic benefits of logistics business will naturally improve. High-frequency food delivery can take on the responsibility of increasing the order volume and delivery density.

Of course, the prerequisite is that the takeaway business starts to gain momentum.

02

Liu Qiangdong is not the first person to challenge Wang Xing's position in the food delivery industry.

In 2020, Douyin internally tested multiple entrances such as "ticket booking", "hotel booking", and "homestay booking", which was seen as an important signal that Douyin is focusing on local life and expanding horizontally.

Douyin's expansion into local life has indeed hurt Meituan. Even if it did not take away Meituan's original market size, it at least took away a large part of the incremental market. According to a report by Zheshang Securities, starting from 2022, Douyin's local life will rapidly increase in volume in 2022, and will achieve a transaction volume of over 300 billion yuan in 2023. In 2024, Pu Yanzi set a transaction volume target of 600 billion yuan. From January to August, it achieved a transaction volume of about 320 billion yuan, exceeding the total transaction volume for the whole year of 2023.

Realizing the threat posed by Douyin, Meituan increased its sales expenses from the second quarter of 2023, which naturally affected Meituan's profit margin. It was not until the first quarter of 2024 that the competition eased, as Douyin's offensive weakened and Meituan added live streaming and other businesses.

Looking back at Douyin's attack on Meituan in recent years, there have been gains and losses - the gains are naturally in the in-store and comprehensive services, but Douyin has not made much progress in the home delivery business.

Objectively, delivering takeout requires building a ground delivery team. Douyin does not have the experience or genes in this area and can only rely on external cooperation. Then in the delivery link, Douyin cannot control its own destiny or improve efficiency. Subjectively, delivering takeout is a tough business. Meituan Takeout has been losing money for many years, and any profit it makes is dissed by merchants for its high commissions. Douyin has always focused on selling high-profit online advertisements.

Wang Xing temporarily defended the takeout arena, but at the sound of a gong, Liu Qiangdong came to attack.

Interestingly, JD.com's strengths and weaknesses are exactly opposite to those of Douyin, which is why Douyin Food Delivery previously cooperated with Dada. JD.com's advantage lies in delivery logistics. Logistics is a large-scale business. The higher the order volume, the lower the cost. Compared with Douyin, JD.com naturally has an advantage in logistics costs.

In other words, JD.com is selling its delivery service to Douyin or to the merchants that have settled in the company. After all, the biggest cost of the food delivery business is delivery.

JD.com's disadvantages in food delivery are also obvious to the naked eye, that is, the premise for JD.com's food delivery to attract traffic to the instant retail business is that the volume of JD.com's food delivery is expanded. But the problem is that the entrance to JD.com's food delivery is buried in JD.com's non-high-frequency software. Adding a food delivery entrance to the Taobao APP does not bring much opening rate.

If JD.com wants to change user habits, it will have to pay high subsidies.

Another disadvantage is naturally the number of merchants. JD.com has already accumulated local supermarkets, tea and other KA-type enterprises through its home delivery and Miaosong services. For JD.com, the next step is to continue to expand catering merchants.

However, if JD.com insists on taking the route of quality merchants, it will not be able to compete with Meituan Waimai, which has opened takeout stalls, in terms of the number of merchants.

Due to the richness of merchants and user habits, in the short term, the impact of JD Takeout on Meituan Takeout is limited. However, looking back at the competition between Meituan and Douyin, for Meituan, the addition of a new player, regardless of whether it can grab market share in the long run, will to a certain extent affect the profit margin growth of the original company in the short term.

Moreover, Douyin has always been a company that prefers to do high-profit business, but JD.com is different. Meituan and JD.com are just a few companies in the Internet industry that are good at and willing to do hard work.

In this war, Meituan's situation is relatively passive and it can only rely on JD.com's strength for the time being.

The company that is most uncomfortable with JD.com’s entry into the food delivery business is not Meituan, but Ele.me. New players have entered the market with subsidies, and Ele.me must either increase its investment to compete or bear the risk of losing users.

At the same time that JD.com announced its 0 commission policy, Ele.me also quietly made some personnel changes.

On February 12, Wu Zeming, chairman of Ele.me, announced Ele.me’s latest organizational adjustment. Wu Zeming will concurrently serve as Ele.me’s CEO, and former CEO Han Liuzhu will be in charge of the instant logistics center. Wu Zeming said in an internal letter that this management division adjustment was made considering the continued increase in the strategic significance of instant logistics as Ele.me’s second growth curve.

03

As for the competition between Meituan and JD.com, the bigger battlefield in the future will still be in instant retail, and even the broader local life battlefield.

Half a year ago, JD.com also made a personnel adjustment. In August 2024, Guo Qing, a former Meituan executive who has been a consultant to JD.com and Dada Group since April 2024, became chairman of the board of directors. In addition, it is understood that Yang Wenjie, the former general manager of Meituan's food delivery business development department, became the head of "Dada Second Delivery".

Regardless of whether JD Takeout can grow bigger or become a traffic-driving tool for instant retail in the future, in the short term, "0 commission for joining JD Takeout" has obviously successfully created a brand advertisement for JD's delivery service.

In fact, in the long run, JD.com's increased investment in food delivery and instant retail will be a win-win situation for Meituan and JD.com.

Whether it is food delivery or instant retail, sufficient local delivery teams are needed. Although from a business model perspective, platform-based companies have limited benefits from the food delivery business and merchants often complain about high delivery fees, compared with other industries, delivery is a labor-intensive industry.

The biggest problem that prevents the U.S. food delivery industry from reaching the scale of China’s food delivery market is the high costs. In some cities with low population density, delivery drivers even need to drive to deliver food.

But the situation facing the domestic food delivery industry is obviously different. The tide of urbanization is surging, and the new labor-intensive industries of the Internet have provided a large number of jobs, which are still growing. Correspondingly, the human resource advantages of JD.com and Meituan are also growing.

In the foreseeable future, there is no risk of rising labor costs in the distribution link. According to statistics released on the official website of the Beijing Municipal Bureau of Statistics, from January to June 2024, the average number of employees engaged in catering distribution and takeaway delivery services in the accommodation and catering industry was 17,000, a year-on-year increase of 49.7%.

This means that labor resources are still gathering in the food delivery industry. Meituan and JD.com are not facing much pressure from the increase in labor costs. On the contrary, the delivery costs will be diluted due to the concentration of resources. It should be pointed out that this does not refer to the reduction of the cost of a single employee, but the reduction of marginal costs due to the flywheel effect.

In other words, the larger the market size of food delivery and instant retail, the less cost pressure JD.com and Meituan will face, and the faster their profits will grow. Competition can actually promote market development.

In 2018, Pinduoduo entered the lower-tier markets and also helped Taobao and JD.com discover a broader lower-tier market. The market share of Taobao and JD.com was challenged, but the market size also grew. The emergence of Pepsi and its century-long war with Coca-Cola made both of them century-old brands.

In fact, compared with the huge offline business, online catering still has room for growth. According to data released by the China Hotel Association, the scale of my country's catering takeaway market will be about 1.2 trillion yuan in 2023, accounting for 22.6% of catering revenue; according to Gangtise investment research data, the market size of the takeaway industry is expected to reach 1.9 trillion yuan in 2027, and the industry penetration rate is expected to reach 30.4%.

The market for instant retail is even broader. According to a report by Bocom International at the beginning of last year, it is estimated that by 2025, the market size of instant retail will be 740 billion yuan, with a penetration rate of only 7%.

In the past few years, the competition in the food delivery market was not too fierce. On the contrary, the pattern had been set for a long time and there was a lack of competition. Now, JD.com is the catfish. Regardless of how much share it can eventually gain in the food delivery market, its entry will obviously bring more offline stores online and expand the food delivery and even instant retail business.

The competition between the two companies will inevitably have an impact on the C-end and change user habits. After all, compared with the huge offline retail, the instant retail market still has considerable room for growth.

In fact, JD.com has one foot in the food delivery field, and the other foot in Meituan's other core business - in-store and comprehensive business. In January this year, the JD.com App launched a group buying channel in the second delivery area, where users can buy coupons from well-known tea, coffee and catering brands such as Luckin Coffee, Kudi, Bawang Chaji, Burger King, Domino's, etc., and then go to the store to redeem them.

A JD.com business recruiter said that currently, local life categories such as leisure and entertainment, beauty salons, sports and fitness are also recruiting businesses. Food delivery is just the tip of the iceberg of the competition between Meituan and JD.com.

Written by: Tan Xiaohan Edited by: Wang Jing