Cheetah Lab, Cheetah Mobile’s mobile internet-focused research institution, is responsible for all content found in this report. If you excerpt, paraphrase or quote the contents of this report in any forum, please remember to appropriately attribute Cheetah Lab.
Key findings of the report:
Mobile internet competition began with light mode operations, raising efficiency to improve our lives, but since the influx of capital and the fierce startup races have changed things, companies that fail to acquire more resources will find it hard to increase their market share.
UberEATS has an opportunity to replicate its global success with Uber. Its next step may be to increase penetration in the delivery and logistics industries. Meanwhile, logistics and delivery companies, such as China’s SF Express and Shansong, may have more opportunities to move into the O2O industry and establish real O2O connections.
US food delivery platforms and food & beverage companies are equally matched, because food delivery platform market penetration is not yet high enough. On the one hand, mature webpages have slowed app development, while on the other hand, this is related to the high labor costs in the United States.
India’s food delivery market has greater development potential due to its large population and low labor costs. If the Chinese market is the future of the Indian market, then India is only one or two years behind China. But at present, India’s food delivery market is very competitive, and as the international giants enter it and logistics companies collaborate, an "Indian model" may emerge.
Author: Cheetah Lab Rosa Rong
The bike share war is heating up, with Chinese industry leaders including Mobike and ofo eager to establish themselves in overseas markets. In October 2016, Facebook announced that users would be able to order food directly from some restaurant’s Facebook pages, as well as learn about nearby activities and buy movie tickets, officially entering the O2O industry. China’s mature O2O market contenders have gradually shifted their focus to overseas markets.
However, the progenitors of O2O in China – group buying and food delivery – have never entered the fray in international markets, where a major power transition is underway. UberEATS has made bold moves into the US and Indian food delivery markets with impressive results and market share. Google has developed Areo, which provides online food ordering services in India. Food delivery giant Delivery Hero received 387 million euro in investment. Major players in India, including Flipkart and cab app Ola, have all tested the waters in food delivery services and ultimately decided it wasn’t for them. Food delivery companies Dazo and Eatlo have even gone bankrupt.
Recently, rumors spread that Ele.me, the leading food delivery app in China was seeking financing, while Yum! Brands Inc.’s China division announced it had acquired a controlling stake in Daojia, an online food delivery platform. China’s market, once divided stably between three companies, is about to change. Cheetah Lab (formerly Cheetah Global Lab) has analyzed US, Indian, and Chinese food delivery markets, using data to paint a clear picture of the industry. Is the Chinese market relatively mature and stable, or is history about to repeat itself?
Overview: China is number one in investment, India in performance. What about the United States?
Cheetah Labs conducted an analysis of investment in Chinese, US, and Indian food delivery apps.
In terms of financing, the three food delivery platforms in the China market are far ahead of the others despite their lack of expansion into foreign markets, which shows the fierceness of the investment battle there. The only other platform to match them is Uber’s, which garnered $3.5 billion in its latest round of financing, topping the charts. However, Uber’s investment has mostly served to finance its ride-hailing business. There is also Delivery Hero, with $431 million USD ($387 euro), which once entered the China market.
In terms of rounds of investment, five of the companies have already reached Series-F investment, and one has become a listed company, which shows that food delivery platforms have already reached a relatively mature stage of development. However, the five companies that have completed Series-F investment all hover on the edge of becoming listed. Grubhub, which merged with Seamless and held its IPO long ago, has also seen its stock fall dramatically. The food delivery business is clearly very difficult.
In terms of investment, two of India’s food delivery app companies received investment the most recently, both in May of 2017, which was precisely when UberEATS officially kicked off its food delivery business in India. This shows that competition is fiercest in the Indian market, and the situation there is the most prime for change and growth.
Finally, in terms of the performance of these food delivery apps, Zomato has the highest weekly active penetration in its country at 0.9431%, while number-two is China’s Ele.me with 0.8284%. Meanwhile, US food delivery apps have the lowest penetration rates. Bastian Lehmann, the founder of food delivery app Postmates, has said that the US food delivery and grocery market is worth $1.4 billion, and at present mobile only accounts for 1.4% of it, so the future industry giant in that sector may not yet have emerged.
China’s food delivery market: stable three-way division, or the quiet before the storm?
Recently, Daojia, a company controlled by the China division of Yum! Brands, Inc., has sent ripples out through the previously dead-still waters of the Chinese food delivery market. According to publically available information, the China division of Yum! Brands, Inc. has more than 5,000 KFC branches, 1,600 Pizza Huts, 350 Pizza Hut Express stores, and 250 Xiao Fei Yang Hotpot branches. Although at present Daojia’s Android market penetration is almost nil, Cheetah Lab’s analysis shows that the three-way divide is not absolutely set, and the next market shakeup may be an opportunity for them.
In Cheetah Lab’s quarterly reports, Ele.me, Meituan Waimai, and Baidu Waimai have not gone up or down much in the rankings in relation to each other. However, their development trends tell a different story.
Ele.me: rising despite fluctuations, with support from Alibaba
Ele.me is the most successful of the three food delivery apps. As of May 22 2017, its daily activity rate had grown to 22.77%. Ele.me’s activity rate has fluctuated the most of the three apps, but at present, it still maintains a sizeable lead over its two competitors. The three platforms vary little in terms of functions: their major difference lies in how detail-oriented they are at the operational level.
Meituan Waimai: stable business is backed by its other business in hotel, car rental, and finance sectors
Meituan Waimai belongs to Meituan.com, China’s largest group-buying app. In the rankings from Cheetah Lab’s first quarter 2017 report, it came in at number 46, sufficient to be considered one of the new giants.
Meituan.com has tried its hand in a variety of business sectors. In terms of O2O, aside from Maoyan Movies and Meituan Hotels (competing with Ctrip), it has also entered the ride-hailing and car rental business, where Didi reigns supreme and Yidao’s survival is uncertain.
According to Cheetah Lab’s 2017 first quarter rankings, Didi has the most market share in the ride hailing market by a large margin. Meituan Dianping’s weekly activity rate for the same period was 2.497%, higher than that of Didi, and most of its users have mobile payment capability. However, at present, a lot of money in the online car-reserving business goes towards license plates, which are very expensive in China, as well as offsetting user rates in order to gain more market share. In the future, these financial drains will be burdensome for Meituan.
Meituan has also made moves into the financial sector. Compared to other internet companies, Meituan’s advantage in the financial sector is that its current small business users are potential small loan customers. Furthermore, users are very familiar with mobile payment methods and know a certain amount about mobile finance. Through the acquisition of Qiandaibao, it acquired a license for small loans. In May of 2017, Jilin Yilian Bank officially opened, and Meituan acquired a 28.5% stake, making it the second largest shareholder.
All of Meituan’s experiments have been seen as efforts to maintain its valuation. However, the latest data released by Meituan Dianping showed that daily completed orders exceeded 18 million, with cash reserves of over $3 billion USD. The company has already broken even, and year on year income has achieved over 100% growth. Official data shows that Meituan Waimai had over 11 million daily completed orders. According to Cheetah Lab’s data, Meituan Waimai’s daily activity rate grew by 4.09% over the past six months: slow growth, but stable.
Meituan Dianping’s CEO Wang Xing has publically addressed the possibility of going global in the past, but has not proposed a concrete plan for doing so.
Baidu Waimai: battered by the storm
Although it ranks third, Baidu Waimai is controversial. Rumors surrounding Baidu Waimai have swirled ever since Baidu removed O2O from its strategy, and it may be acquired by Ele.me, Meituan, or SF Express, a Chinese delivery services giant down the line. Despite several statements to the contrary, rumors have continued to circulate that SF Express might be the one to do so. The latest rumors hold that Baidu and SF Express may pool investment to form a new company.
The changes in the daily activity rates of Ele.me, Meituan Waimai and Baidu Waimai show that Baidu Waimai’s Android market penetration rate has gradually dropped, falling 36.85% from September 22 of last year.
If Baidu Waimai’s daily activity is graphed together with that of Baidu Nuomi, which can embed the former, the results are even more startling.
The graph above shows that Baidu Nuomi’s activity has dropped dramatically, and its Android market penetration has virtually converged with that of Baidu Waimai. Baidu Nuomi’s daily activity levels have dropped 65.73% compared with daily activity levels from six months ago, to approximately a third of its former glory.
Cheetah Lab’s take:
The data shows that the three main food delivery apps in the Chinese market are in very different states: Ele.me has experienced significant fluctuation, but also significant growth; Meituan Waimai has basically remained steady; and Baidu Waimai has fallen continuously. Meituan Waimai has stood its ground by seeking avenues to success in Meituan’s other businesses, such as finance and ride hailing. Meanwhile, being acquired may be Baidu Waimai’s inevitable fate.
According to publically available data, Uber has previously offered food delivery services in Foshan, China, but after Uber China was acquired by Didi Chuxing, this fell off the radar. Going forward, will UberEATS’ strong expansion in the US and Indian markets inspire Meituan to move into the ride hailing business? Will Meituan be able to achieve new success by applying its food delivery experience to running an app for providing rides?
The United States: UberEATS sets out to conquer, Dominos retains its throne
The overall rankings of food delivery apps show that in the US market, food delivery apps can be broken down into food & drink as well as food delivery, and these two categories perform more or less equally well in the rankings.
Type 1: Food & Drink apps
Examples: Dominos, Pizza Hut, and Burger King
The number-one app is Domino’s Pizza’s official app, while number three is Pizza Hut, and number five is Papa Johns – all pizza. This not only shows how much Americans love pizza, but also the advantage that pizza purveyors have in the US market. In contrast with stereotypes about traditional restaurant chains, Dominos is very good at marketing. In November of last year, it even generated attention by delivering pizza by drone.
Dominos uses a drone to deliver pizza
Type 2: Food Delivery Platform Apps
Example 1: Grubhub, eat24 – apps a background in the food & beverage industry
Number-four Grubhub is a traditional food delivery player, and a major one. It merged with number-15 Seamless in 2014, and with their powers combined, they were able to IPO the following year. Before UberEATS entered the market, Grubhub was the undisputed champion of food delivery apps. Although its stock fell by 61% from April 2015 to January 2016, its revenues and profits have continued to grow.
Grubhub’s development echoes that of Meituan.
Example 2: Postmates, Amazon Prime Now, and UberEATS – apps with logistics capabilities
In the rankings, Postmates had the highest number of openings of any food delivery app, as well as the highest user stickiness. Postmates began as a same-city delivery company. Its membership policy is similar to Amazon’s: if you are a Postmates Plus member, you pay $9.99 per month to enjoy low cost delivery rates. If you purchase Plus Unlimited, any order over $25 is delivered free of charge. Postmates has also rolled out its new Pop service, which provides faster delivery and free lunchtime delivery.
UberEATS has been operating in the United States for over a year, and has already climbed to the number-two spot in the US food delivery rankings.
UberEATS has maintained steady growth between September of last year and May of this year. Graphing the daily activity of its top competitors, Dominos and Grubhub, alongside that of UberEATS, and you can see that UberEATS broke past Grubhub at the end of 2016 to become the number one food delivery platform app. In terms of daily fluctuation, Dominos fluctuates more than Grubhub, which in turn fluctuates more than UberEATS. This shows that US users are used to using food delivery apps more on the weekends.
As a latecomer to the food delivery industry, UberEATS’ advantage is in its more stable pricing and relatively low fees. In the US, most food delivery apps are not limited to certain times or regions, so as to satisfy user demand to the greatest extent possible. However, this leads to high delivery and service fees. Furthermore, food delivery apps only provide an estimated amount – the final amount may be even higher, which leads to dissatisfaction among users. Aside from a $5 delivery fee, UberEATS does not have any other hidden fees. Additionally, UberEATS uses Uber’s mapping algorithm, as well as the company’s technology and data operational capabilities to improve delivery effectiveness.
According to Libra data, UberEATS’ second-largest market is in Latin America, while Singapore and Europe are also sizeable markets. UberEATS has also recently entered the Indian market bloodbath.
Cheetah Lab’s take:
According to the above comparison of food delivery platforms in China, India, and the United States, US food delivery platforms and food & beverage companies are equally matched, because food delivery platform market penetration is not yet high enough. On the one hand, mature webpages have slowed app development, while on the other hand, this is related to the high labor costs in the United States.
UberEATS has claimed a high market share in a short period of time, which has generated new thinking about moving forward in the wide-open market: Uber’s logistics model and algorithms may make it the logistics platform with the most potential.
India: Google and Uber continue to move into the food delivery market, while the competition may have only just begun
It seems like only yesterday that people were making fun of India’s poor internet speeds, but today, India’s mobile internet market is more developed than ever before. India’s food delivery market is more similar than ever before to China’s food delivery market landscape as it existed before, and in some ways it is even better. In the Indian market, Cheetah Labs has found over 30 food delivery apps, and more than ten fresh grocery delivery apps, and has ranked them in two different categories.
Among India’s food & beverage apps, top US performer Domino’s Pizza comes in at number four, close behind the third-ranked app. Pizza Hut, Kentucky Fried Chicken, and McDonalds all offer food delivery services in India.
The top three food delivery platform app giants are Zomato, Swiggy, and Foodpanda.
Number-one Zomato is a light business model in which restaurants deliver the food, and Zomato takes a very small commission from them. However, rumors have circulated recently that Zomato and Uber both want to acquire logistics startup Runnr. Runnr previously acquired a food delivery app called TinyOwl.
Number-two app Swiggy has assembled its own delivery team. With the aid of data-based algorithms and route tracking technology, its delivery times are the lowest of India’s food delivery apps. Another advantage is that Swiggy does not have a minimum for delivery. However, Swiggy takes a higher commission from restaurants. Last year, Swiggy received $15 million USD in Series-D financing, and it is valued at $200 million USD. It’s rumored that Swiggy plans to undertake another $50 million USD round of financing.
Number-three Foodpanda was acquired by Delivery Hero in December of last year. Compared to Zomato and Swiggy, Foodpanda has a more international business model. It has gained solid market share in Asian countries such as Singapore and Pakistan.
The daily activity of all three of these food delivery apps fluctuate greatly, with Zomato and Swiggy growing gradually and Foodpanda falling slightly.
Unlike China, where only a few players are left, the Indian fresh grocery market has many competitors.
However, the change in activity over time for the top three fresh grocery competitors shows a stable, set playing field.
Cheetah Lab’s take:
India’s food delivery market has greater development potential due to its large population and low labor costs. This is also the reason that India’s number-one ranked app at present has already exceeded China’s Ele.me in terms of weekly active penetration.
If the Chinese market is the future of the Indian market, then India is only one or two years behind China. But at present, India’s food delivery market is very competitive, and as the international giants enter it and logistics companies collaborate, an "Indian model" may emerge.
The future of the food delivery industry
In the end, the food delivery battle will come down to heavy modes of operation, in which the platforms take on every stage of the delivery process. Mobile internet competition began with light mode operations, raising efficiency to improve our lives, but since the influx of capital and the fierce startup races have changed things, companies that fail to acquire more resources will find it hard to increase their market share. China’s three food delivery apps have delivery teams – they have the capital, but are unwilling to risk it on international markets. UberEATS has been able to quickly establish itself in India and the United States due to its control over the delivery process. Aside from SF Express, with its uncertain stance toward Baidu Waimai, logistics and delivery companies have all gotten into the food delivery fray in the international market.
Therefore, in terms of future trends, UberEATS has an opportunity to replicate its global success with Uber. Its next step may be to increase penetration in the delivery and logistics industries. Meanwhile, logistics and delivery companies, such as China’s SF Express and Shansong, may have more opportunities to move into the O2O industry and establish real O2O connections.
Rumors about SF Express and Baidu show that neither Baidu’s desire to sell, nor SF Express’s desire to get into the food delivery business are unfounded. If SF Express really enters the food delivery sector, can it become the first Chinese company from the sector to go global by leveraging its international strength and the operational capabilities of China’s food delivery apps?
On the other hand, food & beverage apps have limited potential for development in the Chinese market. At present, the best performer is Domino’s Pizza, which has relatively high market share in both the United States and India. However, Domino’s has chosen to work through a food delivery platform in China. Although the conditions of the US market show that restaurants and platforms are equally matched, China’s market is another matter entirely. China has a vast variety of food, with one thousand different preferences for every one hundred people. In China, restaurant-centered food delivery apps will claim some market share, but there is no chance they can really compete with platforms head-on. Therefore, the acquisition of Daojia mentioned in the beginning of this article is unlikely to change the overall layout of the industry in China.
That being the case, in what ways will the Chinese food delivery market change? This depends on two issues. First, what will happen to Baidu Waimai? And second, are Didi, Mobike, and ofo prepared to enter the fray?
In the Chinese market, three food delivery platforms have split the market between them – do restaurants really have no say in this? Not entirely. There are very few restaurants near Cheetah Lab, and we rely mostly on food delivery. Many entrepreneurial restaurant owners have already moved in on us, handling our orders through WeChat and taking away market share from the major platforms. It may be that apps will ultimately lose, not to other apps, or programs, but WeChat groups!
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About Cheetah Lab:
Cheetah Lab is Cheetah Mobile’s mobile internet-focused research institution, which conducts research into the mobile internet and big data based on Cheetah Mobile’s data resources and products, and releases its findings through comprehensive reports and industry summits. To date, Cheetah Lab has released nearly 100 research reports, covering different industry segments, countries and regions, publishers and case studies, providing internet practitioners with trends and insights into global markets.
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