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Business

Food-delivery apps cater to a hungry market

An Ele.me delivery vehicle

SHANGHAI -- In a shopping mall in the Suzhou Industrial Park, tucked among the facilities of many foreign manufacturers, we spotted a man picking up three coffees at a Starbucks outlet. He snapped a picture of the receipt with his smartphone then busily tapped the screen. From the badge on his light-blue hat, we knew him to be a delivery driver for Ele.me.

     The spreading use of smartphones is bringing unique services to China via mobile apps. In particular, the food-delivery market segment saw substantial growth in the first half of 2015, rising to over 12 billion yuan ($1.88 billion) in transaction value. Roughly 80% of that was from business catering to younger customers. The dominant market players are Ele.me and Meituan.com, each holding shares of about 40%.

     Starting in April 2009 as a food-delivery service for students on the Minhang campus of Shanghai Jiao Tong University, the Ele.me service spread to university campuses in Shanghai and other major cities, then beyond campus walls. It currently claims about 200,000 member food-service operators in some 200 cities, handling over a million orders daily.

     Food-delivery services via smartphone apps fall into roughly two categories: those that take delivery fees from customers, and those that charge commissions to the food-service operators. Ele.me also offers an IT-based management service to help restaurants and other clients take orders and make deliveries, charging annual fees of 5,000 yuan to 6,000 yuan. For customers whose top priority is speedy delivery, the company started its own delivery operation in 2014. Now it has 130 outlets in 21 cities -- including Beijing, Shanghai and Guangzhou -- making home deliveries to 20,000 customers.

     The service is easy to use. When a customer opens the app, the display shows nearby restaurants, as well as menus and price lists. Payment options include online settlements and payment on delivery. Orders are generally delivered within an hour by well-trained, professional staff. During lunch hours and other peak demand times, delivery staff will often phone the customer to apologize for any delays.

     The growing online economy and shifts in distribution networks are transforming the Chinese service industry, taking it into uncharted territory. We will be watching closely to see what changes lie ahead.

Kosuke Okame is a Shanghai-based business and market research consultant.

 

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