Chinese e-commerce giant JD.com is actively expanding its instant delivery business to diversify revenue, but breaking into a highly competitive market is proving difficult.
The company has invested billions into JD Takeaway — a food delivery unit launched in February — to reduce reliance on its core retail business, which has been hurt by a weak economy and intense competition.
According to results released on Thursday, the service increased its user base, traffic, and revenue: both the number of active customers and purchase frequency rose by more than 40% quarter-on-quarter.
Still, JD.com is finding it difficult to gain market share from long-time leaders Meituan and Alibaba’s Ele.me. Data from M Science shows that JD’s active delivery users fell by more than 13% by July 27 from a peak in mid-June. By comparison, in the previous two weeks Meituan lost 6% of users while Alibaba saw a 1% increase.
“These data indicate a significant loss of momentum for JD.com and a likely loss of market share,” said M Science analyst Vinci Zhang, adding that Meituan and Alibaba have years of experience in food delivery, whereas JD currently lacks the necessary expertise.
Investments in delivery have also eroded profitability: JD.com’s adjusted operating margin fell to 0.3% in Q2 from 4% a year earlier.
Meituan’s daily orders for food and retail products hit a record 120 million, and Morningstar estimates the company holds about 70% of the market. In early July, Taobao’s instant commerce business together with Ele.me processed 80 million daily orders, with active users exceeding 200 million.
Executives warn of fierce competition: the three companies together pledged about 200 billion yuan ($27.87 billion) in recent months to subsidize instant delivery, sparking a price war and attracting regulatory scrutiny.
“Competition began to intensify in July,” said JD.com CEO Sandy Xu, emphasizing that the company is focusing on improving its platform to attract more users, merchants, and partners.
Meituan and Alibaba have yet to release their quarterly results.
