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Internet giants in China scramble for food dilivery market

food delivery in china, internet giants, western food

China's rapidly diversifying Internet giants are taking on Western food chains at their own game—door-to-door delivery—and finding a huge appetite among urban consumers.


The growing fleet of motorbike couriers on Chinese roads is the latest challenge to long-established but struggling Western companies such as McDonald's Corp. and Yum Brands Inc.. For years, the fast-food chains got a leg up over rivals by speeding hamburgers and fried chicken to buyers' homes and offices.


The Western chains became popular in China for two main reasons: "Because they were foreign and they delivered," said Nathan Snyder, a research analyst at brokerage CLSA. "That's no longer an advantage," he said, referring to the delivery.


Startup companies Ele.me and Meituan Waimai, which operate via mobile applications and are backed respectively by Tencent and Alibaba, are getting economy of scale by teaming up with tens of thousands of food outlets across China. Their apps display menus of smaller local shops as well as big chains, and online customers are more likely to download a delivery app that gives them access to multiple menus than one for a single restaurant.


The services are attracting investment. Food sales running through the startups reached 97.5 billion yuan last year, up 54% from 2013, according to research firm iResearch.

这种服务吸引了投资,据艾瑞咨询集团说,去年餐饮O2O (即将线下商务的机会与互联网结合)市场规模达975亿元,比2013年增长54%。

The surge in delivery firms is evident from the proliferation of uniformed couriers zipping around major cities on motorbikes with insulated bags. Yan Shihui, who works for Ele.me, says he can deliver to five customers per hour on his motorbike in Beijing. Mr. Yan, 19, who has been on the job for only a few months, hits the streets as early as 9:30 a.m. until as late as 11:30 p.m..


The trend for food delivery is boosting sales for smaller regional chains too. Beijing Weizhiwei Catering Ltd. has 50 outlets in Beijing and the nearby city of Tianjin. Employees in a Beijing branch of the chain say the shop pulls in an extra 1,000 yuan, a day from three different delivery firms, according to a manager at a branch in northeastern Beijing. The noodle shop also offers up to 20% off on some dishes ordered through apps, a key attraction for consumers. The noodle shop covers the discount, but in some cases the startups have absorbed discounts to build up their user-bases.


The startups themselves are using investment money to try to become the dominant player in a so-far fragmented market. Tencent-backed Ele.me said it secured $350 million investment in January. Alibaba recently announced that it would plow nearly $1 billion into building up another food-delivery service called Koubei.


Industry experts say increased competition is hurting fast-food chains already fighting to regain business that they have lost to rivals as the cachet of their brand has waned and rival fast-food chains have spread.



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