Alibaba And JD.com Are Literally Paying The Price As China Delivery Wars Heat Up – Alibaba Gr Hldgs (NYSE:BABA), JD.com (NASDAQ:JD)
Alibaba Group Holding BABA and JD.com JD are now competing fiercely in instant retail, where items are supposedly delivered within 30 to 60 minutes.
What Happened: Facing slowing growth and squeezed consumer budgets, Alibaba’s Ele.me and JD.com’s JD Takeaway each pledged ¥10 billion ($1.38 billion) in subsidies to lure customers with ultra-fast deliveries last month, reported Reuters.
On JD Takeaway, daily discounts of up to ¥20 ($2.77) on restaurant orders have become common. The report cited a 24-year-old entrepreneur in Tianjin, who happily paid only ¥5.90 for a coconut latte.
“I asked the deliveryman and he said he makes ¥4 per delivery, so essentially, JD.com bought me a cup of coffee and delivered it to my door,” Liu Qi said.
See Also: Andy Jassy Predicts Pandemic-Like Consumer Shifts, Says Amazon Is ‘Maniacally Focused’ On Keeping Prices Low
A few days later, Liu purchased a bubble tea via Alibaba-owned Taobao’s instant portal for just ¥3.90, ¥2 cheaper than JD.com’s offer.
“The competition is so intense, there’s not a lot of incremental growth opportunities, so everybody is moving into everybody else’s territories and instant retail is the latest example of that,” said Jason Yu, general manager at CTR Market Research.
China’s leading food delivery company, Meituan MPNGY, has taken steps to expand its operations by scaling up its instant shopping service, which offers delivery of non-food items in under 30 minutes. JD.com made its debut in the food delivery sector in February.
Why It’s Important: As per the report, China’s e-commerce giants can double down on instant retail despite their low profit margins, thanks to their deep cash reserves and existing delivery networks.
As of Dec. 31, Alibaba, JD.com, and Meituan held net cash positions of ¥400 billion, ¥144 billion, and ¥110 billion, respectively, the report noted, citing Morningstar analysts.
These companies are also strategically using high-frequency purchases like food and drinks to drive sales of higher-margin goods such as electronics and clothing.
The U.S. and China on Monday agreed to dramatically reduce retaliatory tariffs, marking a pause in the escalating trade war that had posed serious risks to global economic growth.
Price Action: On Monday, shares of JD.com rose by 6.47%, while Alibaba gained 5.76%. In after-hours trading, JD.com saw an additional increase of 1.14%, and Alibaba edged up by 0.68%, according to Benzinga Pro data.
Photo Courtesy: Tada Images On Shutterstock.com
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
