Caixin
Jun 06, 2019 07:13 PM
BUSINESS & TECH

Ele.me joins Meituan in Expanding Delivery Services Beyond Takeout Food

Meal couriers from Ele.me in Tianshui, Gansu province, on June 3, 2019. Photo: VCG
Meal couriers from Ele.me in Tianshui, Gansu province, on June 3, 2019. Photo: VCG

China’s two dominant takeout delivery services have now both decided to start delivering more than restaurant fare, with Ele.me announcing its logistics arm will expand into other businesses like grocery delivery under its own brand name.

The expansions illustrate the pressure that China’s takeout delivery giants are under to make better use of their armies of delivery workers to both lower costs and boost revenues.

Ele.me, which was bought by Alibaba Group Holding Ltd. in a $488 million buyout in May 2018, said Wednesday that its FN Logistics — FN stands for “fengniao” or “hummingbird” in Chinese — is set to expand its client base and the regions it serves.

Ele.me and its rival Meituan’s efforts to expand outside of food and beverage delivery shows their need to better utilize “downtime” periods before and after mealtimes, when many of FN’s more than 667,000 delivery workers sit idle.

“It’s hard to further tamp down on delivery manpower costs, as the online takeout sector is still ultra-competitive and abundantly subsidized,” said an executive whose company has invested in one of the takeout platforms. “The inclusion of other products such as fresh produce, medication or electronic gadgets will help drive revenue.”

Chinese industry tracker iResearch expects the average cost of manpower to fall to 7 yuan ($1.01) per real-time delivery in 2019, down from 7.6 yuan in 2017. The cost was 10.3 yuan in 2013. It added that 7 yuan is the base level and delivery costs won’t drop further going forward.

Ele.me takes 4.5 million daily food delivery orders on average, while Meituan boasts more than 25 million, according to company websites.

Chinese consumers have grown accustomed to same or next-day delivery when they order goods on JD.com Inc. or competing e-commerce platforms run by industry titan Alibaba.

However, real-time food delivery services run by smaller retailers, such as MissFresh, have upped the ante by offering customers cash compensation if orders don’t arrive within a guaranteed timeframe, typically 60 minutes.

Founded in 2014, MissFresh, which is backed by Canadian grocer Metro Inc. and Chinese tech titan Tencent Holdings Ltd., is an online grocery retailer that sells fresh produce, such as fruit, vegetables, dairy and seafood.

Ele.me said FN Logistics has already signed up vendors such Starbucks, beauty chain Watsons, e-commerce site Tmall and AliHealth, an online health care platform.

Meituan last month said its own delivery brand had secured vendors such as Carrefour, food franchise CFB Group, fruit distributor Pagoda, online supermarket Dmall, and pharmacy app Dangdang.

Contact reporter Jason Tan (jasontan@caixin.com)

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