Search

What Online Food Aggregators in India are learning from China.



INTRODUCTION


Food Technology, particularly food delivery, has been one among the foremost heated sectors of dialogue over the past five years and maybe one that has attracted diverse critics and advocates from time to time. On-demand food delivery services are gaining prominence over the recent years, because of its convenience and straightforward accessibility. Thanks to the hectic lifestyles, consumers can easily request for food delivery services from a selected restaurant through an internet site or mobile app. Popular on-demand food delivery services include a variety of restaurants that allow users to match menus, prices, and a number of other reviews provided by former customers.

According to current market research on the Chinese O2O food delivery market, the food delivery company in China is poised for rapid expansion, owing to shifting consumption habits and increasing purchase power among the Chinese population. The country currently represents the world’s biggest online food delivery market. The rising share of income provided by online marketing services should continue to aid the food delivery segment's overall profitability. No other country spends as much money on meal delivery as China does. Chinese meal delivery companies made approximately $45 billion in sales in 2019, roughly double the amount made by the USA during the same year, making China the largest online meal delivery market in the world.


Due to the fierce rivalry among delivery apps in China, customers frequently receive substantial discounts and coupons when placing an order. This price war can make ordering meals less expensive than eating at home. Price battles between the industry's two largest competitors, Ele.me and Meituan, have resulted in extensive couponing.


Also read : Ele.me Vs Meituan

​No.

Table of Content

1

​Study of the Various Delivery Apps in China

2

Implications for Indian Delivery Platforms

3

Expansion Strategies into Other Markets

STUDY OF THE VARIOUS FOOD DELIVERY APPS IN CHINA

The food delivery market is a duopoly dominated by Chinese tech giants Alibaba and Tencent, who own Ele.me and Meituan, respectively. These two delivery apps together control 98% of China's meal delivery business. Alibaba and Tencent, long-time adversaries, have been battling it out across sectors for years, and China's food delivery is simply another battleground for them. The two behemoths are vying for the O2O food delivery industry (link O2O segmentation blog) in China and racing to gain new users who can be guided to other Alibaba or Tencent services.


Owning Ele.me gives Alibaba a treasure trove of consumer data, and the same goes for Tencent’s ownership of Meituan. Data from these Chinese food delivery apps can be used to determine consumer purchasing power, eating habits, and payment profiles, which is a valuable asset for companies Alibaba and Tencent.

The third-largest online food delivery platform was China is Koubei, with 6% of the market share in 2018. Koubei was also an online platform of Alibaba and was their only food delivery app before Alibaba acquired Ele.me in 2018. Later Koubei was merged with Ele.me to become Star Ele.me.

Meituan Waimai is Meituan Dianping's meal delivery service. Meituan Dianping is China's largest e-commerce platform for services. Meituan is presently the market leader in China's meal delivery sector, with a market share of 65 percent. As the firm expands its market share, it may generate revenue in the food delivery area by increasing the delivery order commission rate.

The disadvantage of a commission-based income model is that Meituan will be unable to raise prices without losing consumers or merchants at some time in the future. Assuming that fixed expenses (distribution fees) stay constant, profits growth should naturally decline. The chart below compares the commission rates of several online food delivery platforms in China.


The following table shows a detailed comparison of the different O2O food delivery platforms in China across several parameters. Meituam Waimai is clearly the largest delivery platform in China with a revenue and gross order value nearly double of Ele.me, its largest competitor.

Several other new players are now trying to enter the food delivery market in China due to the rapid expansion of the online food delivery market and the subsequent potential for huge growth. Zomato, the largest online food delivery platform of India is no exception. Funded and backed by Alibaba's portion partner Ant Financial, Zomato is likely to find reasonable success in China, which the US counterparts have failed to achieve so far.


In 2020, HSBC global investigation has esteemed Zomato at $3.6 billion (Rs25,000 crore), around 70% higher than the valuation credited to the eatery disclosure and nourishment conveyance firm once it raised capital as of late. The hop in valuation moreover pushes Zomato sooner than its furious adversary Swiggy that was esteemed at $3.3 billion posts a $1 billion financing it was done in December 2016. In a nitty gritty report on Info Edge, HSBC said Zomato's business has changed on a very basic level, with sustenance conveyance currently giving about 70% of absolute income.


The conveyance income of Zomato expeditiously increased by 308% to $155 million in 2019 from $38 million in 2018 (4 times the yearly development). This rapid expansion contributed nearly 75% to the complete income, up from nearly 55% in 2018. Over 100,000 restaurants and cafes in India benefited from the last-mile delivery service of Zomato, creating a yearly Gross Order Value of over $1.5 billion.

The revenue for Zomato also marked a 203% rapid growth to $500 million in 2019 from $68 million in 2018. However, this expansion of Zomato required significant cash burn as the firm’s total cost increased to $500 million in 2019 from $80 million in 2018, a sharp increase of 525%.

This comparison with Meituan Waimai or Ele.me reveals that inspite of the similar size of the population, India’s food delivery market has a long mile to cover to be equivalent to the Chinese market. Zomato is optimistic about its prospects in China because it has already developed an international footprint in over 23 countries and is backed by Alibaba.


IMPLICATIONS FOR INDIAN DELIVERY PLATFORMS


In China, the competitors are not focusing only on food delivery but building an ecosystem to deliver anything and everything. Both Meituan Waimai and Ele.me are trying to capture the market by offering customers discounts which can be used everywhere. Since they are delivering groceries, pharmacy, tickets on a single platform the coupons and cashbacks can be used in any of these orders which is a major reason that Meituan Waimai has acquired most of the market share.

Indian delivery platforms like Zomato and Swiggy must also use similar model in India. Instead of simply focusing on food delivery, Zomato and Swiggy must build their own ecosystem and introduce services such as online groceries, ticketing, hotel booking, travel, etc. Indian O2O food delivery platforms can also establish their cloud kitchen like Eat.Fit or with some other niche value proposition. The companies can also create niche platforms for hiring restaurant caterers and chefs for events, parties, marriage receptions, etc. They can also introduce additional services such as order from multiple restaurants, trading of unsold inventory among restaurants, pre-order, etc.

For Zomato and Swiggy to enter into the Chinese food delivery sector only as online food delivery platform will be challenging and will be possible only with large discounts and less commissions. As Chinese players benefit from economies of scale, it is extremely difficult for new competitors to enter the market and compete with the prices.


EXPANSION STRATEGIES INTO OTHER MARKETS

As the competition in the online food delivery sector is increasing every day, O2O food delivery platforms are now looking forward to expanding their products and services into similar or diverse market segments. Here, are some innovations relating to food business that online food delivery firms can follow to expand into other markets in China relating to restaurant business.


Also read: APP TESTING AND FIRST HAND COMPARISON

1. Pre-order

Since Covid-19 has changed the scenario of the food industry, pre-order can help maintain social distance and avoid fear among people. Pre-order can also onboard restaurants that are not willing to deliver. The order and pick at store option will also help more people download the app and use it. This strategy will also allow restaurants to manage peak hours and serve better.


2. Order from multiple restaurants

Currently, the order can be made only from single restaurants, but based on the distance between restaurants, suggestions can be made about nearby famous cuisine or dishes which can be clubbed with the same order. Allowing order and delivery from multiple restaurants can be an exciting feature for most consumers.


3. Marketplace for hiring restaurant caterers and chefs

A feature to connect caterers and chefs with the consumers can create a new market. Currently, people put a lot of effort into searching for chefs and caterers for their parties, weddings, and other celebrations. A new feature in the app can provide consumers a variety of options, compare the rates and book them online.


4. Buy unsold inventory from restaurants and sell them to consumers at dynamic discounts

In many cases, restaurants cannot make enough sales and do not have an option to store them and sell them the next day. A new app or feature by Zomato can be introduced to connect stores to buy from each other in high and low demands at discounts. Even consumers can be given dynamic values based on availability.


5. Cloud kitchen like Eat.Fit

Zomato and Swiggy can start their personal cloud kitchen in China for the health-conscious middle and upper-class segment, with a business model similar to Eat.Fit website. Each day will have a specific menu for breakfast, lunch, and dinner. The food will be sold to the consumer along with a nutrition chart containing the detailed specifications about the food – amount of fat, proteins, carbohydrates, calcium, iron, sodium, etc., contained in the food.



The above data is based on market research on the Chinese O2O food delivery market for an Indian food delivery company seeking opportunities in the highly profitable market of China by Trouver Trade.(link Trouver Trade homepage)


NOTE: The above report has been published with due consent from the client. The name of the client has been concealed due to confidentiality agreement.


ABOUT TROUVER TRADE

Trouver Trade Research and Technology Private Limited is a business development firm based in India that provides services such as market research, growth hacking, business intelligence, promotional strategies, and the development of innovative technology platforms that help businesses grow exponentially with a digital persona.

Trouver Trade empowers business Ideas with the most relevant Market Information and sustainable Growth Strategies. With our profound expertise and corporate experience, you will receive real solutions to understand your customers, expand your business, and beat the competition. Get in touch for a Free Consultation.

16 views0 comments

Recent Posts

See All