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Article18 May 2021

China Retail: Doors Open for On-demand Delivery

Post the outbreak of Covid-19, activity is picking up notably in China’s on-demand retail and delivery markets. We summarize an overview of these consumer segments by analyst Alicia Yap.

According to the forecasts of iResearch, a management and consultancy group, the gross merchandise value (GMV) of local on-demand sales for China supermarkets will surge from Rmb46.7bn in 2019 to Rmb388.3bn in 2023, driven by increasing online-to-offline penetration (from 1.4% to 10.7%). Over the same period, daily on-demand orders being delivered on open platforms would jump from an average of 9.5mn items to an estimated 27.7mn.

Supermarkets are the biggest players in China’s overall RMB13.1tn local retail market. While they are expected to remain primarily offline and serve consumers who live or work nearby, on-demand delivery offers them the opportunity to extend their footprint by 3-5km. For consumers, on-demand delivery takes the time and inconvenience out of shopping.

Online sales of China’s top 100 supermarkets were close to Rmb50bn in 2019 (4.7% of their total revenue), reports the China Chain Store & Franchise Association. Of the top 100 supermarkets, about one-third deliver to homes (average order size of roughly of Rmb75), about 60% have a group purchase business (1% of sales), and nearly half have launched an online live streaming business.

Apart from food and fresh produce, on-demand delivery could be an increasingly popular distribution channel in categories such as apparel, small electronics, cosmetics and healthcare. Multiple delivery services are likely to combine to provide comprehensive solutions. Two examples: on-demand delivery + warehouse solutions; cold-chain services + on-demand delivery solutions.

Figure 1. On-Demand Retail GMV in China’s Supermarket Segment

Figure 2. Avg. Daily Orders for China’s On-Demand Delivery Segment

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Source: Citi Research, iResearch

Source: Citi Research, iResearch


China’s local delivery market broadly breaks down into three categories:

  • Open on-demand delivery: delivery services are offered under a platform model to external parties, including local retailers, restaurants, individual customers and logistics players. Typically, orders are delivered directly from supplier to recipient.
  • Captive on-demand delivery: an operator owns its online transaction platform and fulfills orders via its own delivery network. External parties are excluded.
  • Courier services: orders are typically consolidated and processed at sorting centers and are fulfilled on a less urgent basis than for on-demand delivery, being received by a customer later the same day or the next day.

Chinese consumers’ increasing preference for online shopping and continuing improvements to technology platforms and logistics channels suggest an ever-increasing share (and range) of the household shopping basket will be handled by delivery services. Drilling down, iResearch forecasts the open on-demand segment of the local delivery market will grow at an annual compound rate of 30.6% between 2019 and 2023, outpacing the growth of China’s overall local delivery market.

For more information on this subject, please see report Bridging Online/Offline Retail Demand

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.

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