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Takeaway Food Delivery Apps Woo Mainland Convenient Cuisine Fans

Battles lines are drawn as e-commerce giants sign up to support emerging generation of home delivery services.

Photo: Convenient cuisine: Online food ordering. (Shutterstock.com)
Convenient cuisine: Online food ordering.
Photo: Convenient cuisine: Online food ordering. (Shutterstock.com)
Convenient cuisine: Online food ordering.

Ordering takeaway food via a mobile app is becoming increasingly popular on the mainland. A number of apps, notably ele.me and a range of services available via Meituan, Dianping, Baidu and Taobao, have made particular inroads in the sector, winning the approval of a generation of white-collar workers and students with a penchant for convenient cuisine.

Having established a user's location, a food-ordering app typically identifies a number of local catering outlets, both large and small, willing to make deliveries. With just a few clicks, customers can then place an order, make payment and even specify the time of delivery, all via their smartphones. The apps have scored highly for their facility to streamline the ordering-in process, reducing both queuing and waiting time.

The operating models adopted by the apps have evolved into two distinct formats. The first – typified by dd.taobao.com – is principally just an ordering platform, with restaurants handling their own fulfillment. The second model, adopted by operators such as Daojia.com.cn, is actually a home delivery service, with operators managing their own dispatch teams and charging customers a delivery fee for each completed order. The latter model requires operators to have a higher level of resource, but is believed to offer a better overall customer experience. The competition in the sector, however, has resulted in a degree of blurring between the two models, with those apps lacking a dedicated delivery channel 'piggybacking' on the services of other operators.

This high level of competition has also seen many apps offering consumers a variety of incentives in order to enhance their user base. Common tactics here include new user discount coupons, mobile payment discount coupons, delivery charge waivers and special promotional combined order options.

As with Uber, the taxi-hailing app, many of these food-ordering services have the backing of major investors, notably Alibaba, Tencent and Baidu – all of whom have the necessary financial clout to nurture a dedicated user base. It is assumed that those lacking such support will eventually fade from the marketplace.

It is thought that, ultimately, the business model of takeaway apps will evolve along similar lines to that of other e-commerce platforms, with revenue derived from sales commissions, software license fees and a marketing levy. As in the taxi-hailing sector, intense competition has emerged between the mobile payment operators, slashing already narrow profit margins. In terms of the currently non-aligned apps, if they demonstrate an ability to generate substantial online-to-offline (O2O) business, it is thought likely they will be ultimately acquired by one the three mainland e-commerce giants – Baidu, Alibaba or Tencent (collectively known as "BAT").

Along with the dramatic uptake in the use of such food-ordering apps, a number of concerns about the services have also emerged. Most obviously, there have been some worries that hygiene standards are not being adhered to by some of the operators. Given that the sector involves a high number of relatively small food preparation providers, this is already proving something of challenge for the regulatory authorities.

An additional concern has been ensuring a more seamless collaboration between the ordering platforms and the fulfillment services. This is seen as vital to ensure better distribution, greater menu accuracy and improved delivery time.

Lelia Liu, Beijing Office

Content provided by Picture: HKTDC Research
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