The Chinese e-commerce giant JD.com is pouring billions of dollars into its new instant-delivery business. Still, it’s quickly learning just how hard it is to break into the crowded and competitive food delivery market.
The company launched its JD Takeaway service in February as a way to find new sources of revenue and reduce its reliance on its core retail business, which has been hit hard by a weak economy. At first, the plan was working. The company’s latest earnings report showed that the new service helped boost its user base and revenue.
But recent data tells a different story. JD.com is struggling to steal customers from the two established giants of the industry: Meituan, the market leader, and Alibaba’s Ele.me. Data from M Science shows that the number of daily active users on JD’s delivery service has been falling steadily since mid-June, a sign that it is losing momentum and market share.
“Meituan and Alibaba already have considerable domain expertise in food delivery, and I don’t think JD has expertise in that area yet. It will be very challenging,” said one analyst.
The heavy investment in food delivery is also hurting JD.com’s bottom line, with its profit margins shrinking significantly. Meanwhile, its rivals are as strong as ever. Meituan holds nearly 70% of the delivery market, and Alibaba’s service is also seeing massive daily orders. The competition is so fierce that all three companies have pledged billions in subsidies, sparking a price war that has even drawn the attention of regulators.
