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Food Delivery Market Gaining Traction in China

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Alibaba and JD.com to tap online-to-offline

The O2O (online-to-offline) market is growing at a rapid rate in China. According to a report from iResearch Consulting Group, online shopping and O2O will be the fastest-growing segments of China’s (FXI) e-commerce market. Overall, the market grew by 21.3% year-over-year in 2014.

This growth is expected to remain healthy, as the chart above shows. China’s e-commerce market allows companies to leverage the growing trend of mobile phone ownership, combining e-commerce with the traditional way of selling products.

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This practice, O2O service, includes services ranging from taxi booking to clothing to meals, for which consumers use smartphone apps. Alibaba Group (BABA) and Tencent Holdings (TCEHY) merged their mobile taxi apps a few months ago, and they now completely dominate this industry. This growth signifies the growing concept of the O2O model.

Alibaba increases investments in food delivery

Alibaba most recently increased its investments in the food delivery space, as the food and non-alcoholic beverages market is the biggest in China (MCHI). Its objective was to take on Tencent, which also has investments in the food-delivery service Ele.me, restaurant review site Dianping.com, and e-commerce player JD.com (JD). JD.com released a proprietary application called JD Daojia, an online food delivery service that competes against Dianping.com and Baidu (BIDU).

Alibaba also made investments in several O2O platforms, including the established Meituan.com and Koubei. Meituan.com is a group discount website, and Koubei is a smartphone app for ordering food.

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