Instant retail slows down

This article deeply analyzes the latest developments in the instant retail industry, explores the changes in consumer demand and the competitive strategies of major platforms, guides readers to fully understand the development trends of the instant retail market, and hopes to help you grasp the pulse of the industry.

Recently, it was reported that the brand name of JD.com's instant retail "Hourly Delivery" will be upgraded to "Second Delivery". At the same time, Dada also released a "Knight Recruitment" information on its official public account.

JD.com's series of actions, from changing its name to increasing its shipping capacity, have made many industry insiders smell the smell of "involution". It seems that the instant retail industry, which has not received special attention for a long time, is about to usher in a new round of battles over fulfillment timeliness.

However, it has been almost two years since the Ministry of Commerce first proposed the concept of "instant retail", and more than a year since instant retail was included in the "Central Document No. 1". Today's market background has undergone many changes. Is the "active volume" initiated purely with "fast" as the core still effective?

To put it more bluntly, when user demand is no longer focused on efficiency, does instant retail still need to be so “instant”?

1. Immediate, the need of the moment

When you want to eat ice cream in hot weather, would you go out to buy it or place an order on your mobile phone? According to iResearch’s survey results, 54% of users are unwilling to go out or travel far and choose instant retail.

In fact, the core needs of consumers for shopping can be summed up in four words: more, faster, better, and cheaper. The "faster" is to solve the "laziness" of consumers and to satisfy their pursuit of "convenience".

For the retail industry, its essence is cost, efficiency, and experience: if the cost is well controlled, then there will be "super low specials" and "hundred-billion subsidies"; if the user experience is good, then it will be "consumption upgrade" and "quality shopping"; and when the efficiency is improved to the extreme, instant retail will come.

According to Accenture's report "Focus on China's Post-95 Consumer Group", post-95s value delivery speed more than millennials. More than 50% of post-95s consumers hope to receive goods on the same day or even half a day, and 7% of consumers hope to receive goods within two hours. Time is more important than money, which is the general perception of the public at that time, and it is also the differentiated experience that consumers expect to get from instant retail.

It can be said that it is the consumers' demand for convenient shopping that has driven the rapid growth of the instant retail market. According to the "Instant Retail Industry Development Report (2023)" released by the E-commerce Institute of the Ministry of Commerce Research Institute, instant retail has maintained an average annual growth rate of more than 50% in recent years. The market size in 2022 will reach 504.286 billion yuan, and it is expected that the instant retail market size in 2025 will reach three times that of 2022.

However, as the consumption environment changes, people’s consumption preferences are also constantly changing. Nowadays, people’s sensitivity to the delivery time of instant retail is continuously decreasing - instant retail is no longer “emergency retail”, but has become a daily consumption habit.

According to the data from the "2023 Instant Retail Development Trend White Paper", among the scenarios for choosing instant retail shopping, daily replenishment ranks first with a proportion of 68.1%, followed by saving time and effort (62%) and seeking discounts (54.9%), and home emergency response only ranked fourth (52.6%).

It is not difficult to see that consumers ' demand for "more, better, and cheaper" instant retail is increasing. Therefore, on the basis of "fast", the market needs to provide more diversified shopping options, high-quality and price-performance products, and a more worry-free and hassle-free shopping experience. In particular, the price-performance ratio is becoming an important factor affecting consumer shopping.

According to the Nielsen IQ (NIQ) "2024 China Consumer Outlook" report, compared with the beginning of 2023, consumers' overall sensitivity to prices has increased. The overall proportion of "revitalizing" and "strapped" consumers who care about low prices has increased from 20% to 35%; the proportion of "cost-conscious" consumers who value cost-effectiveness and compare prices on multiple platforms has increased from 28% to 30%; while the overall proportion of "leisurely" consumers who have consumption freedom and pursue advanced value and "business as usual" consumers who maintain consumption habits and purchase preferred brands has decreased from 52% to 35%.

In short, the current market trend of the instant retail industry has changed. Therefore, for major players in the instant retail industry such as Meituan, JD.com, Ele.me and Douyin, it is more important to slow down and see clearly the current needs of users.

2. Platform competition, what are you competing for?

According to the Ministry of Commerce's monitoring of consumption during the Dragon Spring Festival, the Ministry of Commerce's key monitoring e-commerce platform instant retail sales increased by 32.2% year-on-year. While working together to push up the scale of the industry, players of different identities also achieved phased results through differentiated competition strategies.

For example, Meituan has always been focusing on the concept of "everything delivered to your home within 30 minutes", striving to achieve prosperity in all categories, all regions, and all scenarios of instant retail. Its Meituan flash purchase order volume increased by more than 40% year-on-year in 2023. On Double 11 last year, the number of participating products increased by 123% year-on-year, covering core categories such as digital home appliances, beauty and personal care, pet food, department store clothing, and maternal and child toys, with sales reaching a record high.

JD Daojia, founded in 2015, has now achieved hourly delivery for all categories. According to the financial report, in the fourth quarter of 2023, the average monthly ordering users of JD Daojia increased by 50% year-on-year. On the Double 11 day of 2023, the transaction volume of JD Daojia within an hour increased by 45% year-on-year. The transaction volume of JD Daojia live broadcast increased by more than 10 times compared with 618.

Alibaba released its third quarter financial report for fiscal year 2024, showing that driven by the healthy growth of Ele.me and the rapid growth of AutoNavi, the local life group's orders increased by more than 20% year-on-year. Data from Double 11 in 2023 showed that the transaction volume of more than 90% of the brands cooperating on the Ele.me platform exceeded the historical peak, and the transaction volume of nearly 100 brands increased by more than 100% compared with last year.

As for Douyin, the "Hourly Delivery" business of Douyin's instant retail business will be granted an independent entrance in October 2023. This year, Douyin launched the "Douyin Mall Edition" APP, and the homepage entrance has "Hourly Delivery", which is also a sign that Douyin has begun to accelerate the layout of its instant retail business.

Faced with such a market with a scale of over one trillion, every player wants to occupy a larger market share as soon as possible to achieve rapid growth in performance. However, judging from the current market situation, it is not yet time to form a stable industry pattern with a single dominant player in the short term.

From the data perspective, Meituan Flash Purchase, Ele.me, and JD.com Home Delivery, as the first echelon of the industry, have not yet opened up enough gaps between each other. According to the report of the consulting agency Jiuqian Zhongtai, in terms of GMV, Meituan Flash Purchase, Ele.me (non-catering part) and JD.com Home Delivery will account for 34%, 26% and 15% of the instant retail market share in 2022. Referring to the 2023 financial reports of each company, this ranking will not change at present.

In addition, instant retail needs to satisfy many categories and scenarios, and a certain sub-category may bring amazing growth. As for which vertical categories can find growth points faster, this is the problem that "Meijing Hungry Dou" needs to solve now.

3. Instant retail, waiting for "full prosperity"

As the industry is still in its early stages, the current instant retail market focuses on full-category coverage, thus lacking segmented specialization. When there are too many homogeneous players, consumers will make biased choices, which means losing their awareness and loyalty to the platform. Therefore, tapping into the growth potential of instant retail segmented categories is the only way for the industry to achieve full prosperity.

Taking the category of alcoholic beverages as an example, according to data released by Meituan Flash Purchase in 2023, 30% of its alcoholic beverage orders are delivered to restaurants where users dine. This data reflects two issues: first, the instant retail scene is not fixed and may not be a home or office area; second, the instant retail demand of each sub-category is unique.

For example, alcohol belongs to the demand that "disappears unless it is satisfied". Young people have a strong emotional demand for alcohol and they want to drink when the mood strikes. For example, cold beer needs to be delivered immediately, white wine needs to be delivered before the food is served, and there are scenarios where they need to buy alcohol at night.

The differentiation of scenarios determines the motivation for consumption and also affects decision-making. This requires the platform to grasp and meet the instant retail needs in different scenarios. In combination with the generation of scenario needs, the categories involved in instant retail are also expanding.

Since the beginning of this year, Meituan has made many attempts at cooperation: for example, in January, it announced a strategic cooperation with Decathlon (sportswear); in February, it officially announced cooperation with Supor (small appliances) and Lego (mother and baby toys); in March, it cooperated with PISEN (3C appliances) and Metro Beauty (lingerie and apparel); in April, Meituan’s Waima Wine Delivery started its national expansion, and cooperated strategically with Xijiu and Yanghe (wine).

According to Jingzhe Research Institute, Meituan has recently started cooperation with ONLY/jackjones, and the related clothing brand has now settled in Meituan. At the same time, Jingzhe Research Institute also noticed that when targeting major first- and second-tier cities in China, searching for large appliances such as air conditioners, TVs, refrigerators, washing machines, etc. on Meituan, you can see that the fastest delivery and installation can be made on the same day.

JD.com has also explored more in the wine and beverage industry. On April 9 this year, JD.com's 10-minute delivery service officially launched the "Famous Wine Authenticity" section, and joined forces with JD.com Wine World, 1919, Jiuxian, Huazhi Liquor Store and other branded wine merchants, and Walmart, China Resources Vanguard, Sam's Club, Yonghui, Metro and other chain supermarkets to fully guarantee the authenticity of Moutai sauce-flavored series, Wuliangye, Fenjiu, Guojiao 1573, Jiannanchun and other branded wines. Obviously, JD.com's 10-minute delivery service is trying to bind high-order users through authentic guarantees.

Third, consumer convenience can still be improved. Consumer convenience corresponds to delivery time. The improvement of delivery time is not only based on the number of riders, but more importantly the distance from the warehouse to the consumer's home. The closer the forward warehouse is to the consumer, the more obvious the improvement in delivery time will be.

According to media reports, just 7 minutes into the 2021 Double Eleven peak day, Ms. Tang, who lives in Chaoyang District, Beijing, received the Huawei P50 Pro phone she purchased through JD.com's "Hourly Purchase". The reason for such "minute-level" delivery is that the store's forward warehouse is very close to the consumer's delivery address.

Therefore, it is better for "Meijing, Hungry and Douyin" to slow down and face the consumers' demands for "more, better and cheaper": first, meet diversified shopping choices with "all categories", "all regions" and "all scenarios"; second, cooperate with retailers and brand owners in more vertical categories to provide consumers with high-quality and cost-effective goods; in addition, speed up the construction of instant retail infrastructure (such as forward warehouses, lightning warehouses, etc.), strengthen after-sales service, and bring consumers a more worry-free and trouble-free shopping experience.

4. Beware: Competitors Outside the Door

As the saying goes, "Industry disruptors often come from outside the industry." While a number of Internet companies are embracing the instant retail battlefield with online channels and starting points, traditional offline supermarkets are also not idle.

Let’s first look at two sets of financial report data:

In the first quarter of 2024, Yonghui's online business revenue was 4.1 billion yuan, a year-on-year increase of 1.99%, accounting for 18.92% of the company's operating income. In 2023, Yonghui's own brand achieved sales of 3.54 billion yuan, accounting for 5% of operating income, a year-on-year increase of 8.26%; focusing on the creation of fresh standard products and Yonghui Farm brand, the fresh own brand increased by 41.3% year-on-year.

The annual report of Shandong supermarket leader Jiajiayue also shows that its online sales increased by 23.9% in 2023, driving 3.06 million offline store traffic and a store conversion rate of 35%. At the end of the reporting period, the supermarket's online business sales accounted for 5.98%. In 2023, Jiajiayue also launched a mini program on Alipay. As of the first quarter of 2024, the number of stores with home delivery services reached 250.

Judging from the data, traditional chain supermarkets have not only not fallen behind, but have also achieved good growth in instant retail business. In particular, Yonghui Supermarket has shown a positive attitude in embracing change, and recently accepted the "help" of Pang Donglai: Pang Donglai will first pilot in Yonghui's two stores in Henan, and the specific details of the adjustments include employee salaries, store planning, product structure, shared supply chain, and optimization of store prices and services.

In addition to traditional chain supermarkets, according to the Nielsen IQ "2024 China Retail Industry Development Report" data, in offline channels, snack discount stores have attracted young consumer groups with their rapid store expansion and low-price strategy, and the industry scale will grow by 75.8% in 2023. In 2023, convenience stores and grocery stores will still maintain a growth of 1.2% and 2.5% respectively. Convenience, time-saving and rich products are the main reasons for the high frequency of convenience store consumers, and snack discount stores are more attractive to price-sensitive young people.

At the same time, warehouse membership stores are entering a development period by providing a unique quality/price ratio that other channels do not have. The number of stores of major membership store players will increase by 37.8% in 2023. Avoiding competition in high-tier cities, early layout of sinking markets, finding differentiated product selections based on local characteristics and regional needs, and highlighting the brand value exclusive to retailers have become the winning path for domestic membership stores.

For offline supermarkets, instead of competing with "Meijing Elephant" in all categories, it is better to do something more focused on consumer needs:

One is to open a boutique. Even in the current era of cost-effectiveness, consumers will still pay for "self-pleasure". The advantages of boutiques are that the products are new, rare, personalized and high-quality. According to the "China Consumer Trend Report 2024", spiritual self-pleasure has become a consumption trend that everyone is paying more and more attention to.

Specifically for modern young consumer groups, they pursue not only the quality of the product or service itself, but also care about whether their self-worth and personality characteristics can be reflected in the consumption process. They expect businesses to provide customized and differentiated products and services to meet their personalized needs.

The second is to speed up the layout of integrated stores and warehouses. The survival space of traditional offline retail is destined to be further squeezed by traditional e-commerce and instant retail. Accelerating the construction and layout of integrated stores and warehouses can, on the one hand, make offline supermarkets closer to users and more quickly understand changes in user needs, while also laying a solid foundation for their accelerated transformation to instant retail.

The days of the past have become slower, and so have cars, horses, and mail. So people have time to think about how to move forward and where to go next.

Players such as Meituan, JD.com’s 24-hour delivery, Ele.me, and Douyin’s 24-hour delivery have been running at full speed for many years. Perhaps it’s time to slow down and think about: What is the most “instant” thing about instant retail?

Author: Chuxia; Source public account: Jingzhe Research Institute (ID: 1080045)