August 10, 2022
BEIJING – New model seen as a promising niche in O2O biz; attracting many platform players
The fast-growing on-demand retail sector is expected to become an important component of the online-to-offline, or O2O, business landscape in which online marketing and online purchases drive offline operations and consumption, and play a bigger role in empowering offline retailers’ digital transformation, industry experts said.
On-demand retail refers to a retail model where shoppers place orders on online trading platforms, followed by retailers from brick-and-mortar stores executing door-to-door delivery themselves or through a third-party delivery platform. An on-demand delivery order usually needs 30 to 60 minutes to be completed.
Traditional retailers seeking digital transformation now embrace the O2O model, as it provides a path of development that links online and offline channels to improve retailers’ operational efficiency, according to a white paper released by leading on-demand delivery and retail platform Dada Group, the China Chain Store &Franchise Association and e-commerce giant JD’s Consumption and Industry Development Research Institute.
In recent years, the scale of the O2O market has continued to expand, exceeding 3.3 trillion yuan ($487.98 billion) in 2021. In the meantime, the on-demand retail sector has grown significantly and become a strong driving force for the growth of the O2O segment, with its compound annual growth rate reaching 81 percent in the past five years, said the white paper.
The market scale of on-demand retail open platforms will exceed 1 trillion yuan in 2025, it added.
Dada Group is speeding up its layout in the on-demand retail segment, as part of its broader drive to empower the omnichannel development and digital transformation of offline retailers.
As of now, JD Daojia, the on-demand retail platform of Dada, and Shop Now－a one-hour delivery service jointly launched by JD and Dada－have a nationwide presence in over 1,700 counties and cities with a service coverage of more than 150,000 physical stores across all product categories.
Dada said that during the June 18 online shopping carnival, its total sales rose 77 percent year-on-year, while the number of users placing orders through Shop Now, a one-hour delivery service, soared 400 percent compared with the same period last year.
E-commerce giant Alibaba Group Holding Ltd has also jumped onto the bandwagon of on-demand retail through investing in food delivery platform Ele.me, grocery retail chain Freshippo and Taoxianda, an online grocery ordering platform.
“For offline stores, the on-demand retail has greatly broadened the scope of their businesses, while for brand owners, on-demand retail has built a digital marketing and operating ecosystem that connects online and offline channels,” said Philip Kuai, founder, chairman and CEO of Dada Group.
He Huijian, vice-president of JD and Dada Group, said that the core of retail lies in efficiency and experience, and on-demand retail is expected to grow into a trillion-dollar market in three to five years.
He said the company will continue to open capabilities in the industry to help partners realize digital upgrading, optimize operations and improve efficiency. “Instant retail has become the most important growth engine for brick-and-mortar retailers and brands, and will effectively drive the growth of the retail industry as a whole,” he added.
“As the contactless economy boomed amid the COVID-19 pandemic, Chinese consumers are increasingly embracing on-demand consumption and switching to online purchasing,” said Mo Daiqing, a senior analyst at the Internet Economy Institute, a domestic consultancy, adding that on-demand retail, which connects offline retailers, brand owners, logistics and distribution to consumers, has penetrated all aspects of people’s daily lives.
“China is one of the largest, fastest-growing and most competitive consumer markets in the world. We expect on-demand retail to remain hugely popular in the foreseeable future because it enhances the shopping experience of consumers and fits their modern lifestyles,” said Zhu Xiaojing, president and CEO of Walmart China.
“Thanks to on-demand retail, the penetration rate and sales share in categories such as healthcare, maternal and infant, continued growth,” said Katy Chen, managing director of Kimberly-Clark China, a personal care product company, adding on-demand retail has become a key channel for the company.