JD aiming to expand food delivery services

Chinese e-commerce giant JD.com aims to expand its food takeaway service following encouraging results since it launched the service earlier this month.

JD said on Thursday its takeaway service now covers 39 cities with nearly 200,000 merchants having applied to open online shops, and the number of orders at some cities had surged more than 100 times.

JD hopes to leverage the logistics network it has built over the years, which allows it to offer same-day or next-day delivery to most of the country's regions.

The new food delivery service will recruit "quality dine-in restaurants" with the promise of a one-year commission-free period for those that sign up with JD Takeaway before May 1.

Earlier this week, JD said it will provide full-time delivery riders with comprehensive social insurance and housing fund contributions under China's social security system starting next month. Part-time riders will also receive accident and health insurance.

Meituan also followed suit on Wednesday, but both JD and Meituan shares closed lower on Thursday, amid fears that this might bring additional operation costs.

JD dipped 0.32 percent to HK$153.7 and Meituan closed down 6.44 percent to HK$156.9.

JD is also offering subsidies for consumers for most food and beverage items to woo shoppers.

In Jing'an District, it would cost around 20 yuan (US$2.75) for a cup of red rose milk tea from local teadrink chain store Chagee from both Meituan and Ele.me, and about 15 yuan from JD thanks to the waiving of delivery and packing fees and an additional discount for first-time buyers.

Domestic digital giants have been vying for a piece of cake in local services and on-demand delivery has been a key sector in their intensifying competition.

According to the Ministry of Commerce, China's on-demand retail market reached 650 billion yuan (US$89 billion) in 2023, up 28.89 percent year-on-year, accounting for 4.2 percent of online retail sales, with a growth rate much higher than that of physical retail over the same period.

Although Meituan still dominates the food delivery sector, Alibaba-backed Ele.me also leverages an extensive digital and physical network while livestreaming giant and e-commerce newcomer Douyin and Kuaishou have rolled out similar services.

Market watchers suggest a wait-and-see attitude over the long-term prospects of JD's takeaway service despite its strong logistics infrastructure and differentiated approach of targeting "quality" merchants.

Chen Liteng, a digital lifestyle service analyst at private consultancy 100EC.cn, says out it requires a longer process to foster growth in the food delivery sector despite the initial incentives.

"The market landscape for takeaway services remains largely unchanged despite newcomers such as Kuaishou and Douyin, and JD requires a long-term effort to offer comprehensive service optimization, extensive merchants network and preferential subsidy," he said.