On-demand delivery services adapt to take advantage of growing market
Domestic on-demand e-commerce delivery has maintained robust growth and several listed fresh food vendors have reported strong revenues.
But industry watchers remain cautious about profitability as major players are beefing up investment in the early stages to grow logistical resources and facilities and expand their user bases.
JD-backed on-demand delivery and retail platform Dada Group on Wednesday reported revenue growth of 81 percent to 1.47 billion yuan (US$226.8 million) as it expanded product delivery service to include daily necessities as well as electronics and personal-care items.
The gross sales volume of on-demand delivery service JD Daojia jumped 77 percent to 32.3 billion yuan for the 12-month period ending June 30.
Supermarket chains remain the major category on Dada, and it also stepped up collaboration with smartphone brands, including Apple and Vivo as well as electronics and hardware vendors like Microsoft, ASUS and Dell.
Other major on-demand fresh delivery vendors also reported strong quarterly increases as consumer shopping habits shift toward daily food and grocery purchases.
Fresh food, snacks and dairy products are still top categories for on-demand delivery services, according to domestic consultancy firm iResearch.
It estimates that yearly on-demand delivery orders will reach 64.3 billion by 2024 and transaction size to boom to 33.9 trillion yuan from 23.8 trillion yuan last year.
Despite their growing business size, it's still too early to turn a profit due to strong competition in the industry.
Dada Now's on-demand delivery service that links offline merchants saw 140 percent annual revenue growth.
The number of annual active consumers on JDDJ also increased by 60 percent to 51.3 million as of June, but it reported a net loss of 549.2 million yuan compared with 390.4 million yuan the year prior.
NASDAQ-listed fresh food and grocery on-demand vendor MissFresh reported a 35.4 percent jump in total gross merchandise volume for the second quarter.
Net losses from MissFresh grew to 888.9 million yuan from that of 325.4 million yuan a year earlier.
Shanghai-headquartered Dingdong Maicai said gross merchandising volume for the second quarter of 2021 surged 80.8 percent and sales and marketing expenses surged more than two times to 410 million yuan to woo new buyers.
The NYSE-listed Dingdong reported a net loss of 1.7 billion yuan, increasing from 714.5 million yuan in the same quarter a year ago, and it expects its net loss margin to narrow in the second half due to improved efficiency.
Profitability will continue to face pressure due to strong competition as on-demand service will be an important backbone for online shopping in the coming years. It's too early to decide who will be the most dominant players, according to Southwest Securities.
Internet giants like Alibaba and Meituan are also investing aggressively in the on-demand delivery sector.
Meituan, which also reported fast growth of delivery orders, is still investing in on-demand fulfillment facilities, and operation cost per delivery package remains relatively high.