Food delivery apps have become a big hit in China. But do they create any true value to keep the business sustainable?
China’s leading on-demand delivery service platforms like Meituan Dianping (03690.HK) and ele.me together hire around 8 million delivery staff. In my opinion, they have definitely created value for customers and restaurants.
By using food delivery apps, customers save time needed to get to restaurants, and there are far more choices.
Most office workers used to have lunch at nearby restaurants. But now they can just use their phone to order food from a restaurant much farther away. It is said that mainlanders may even order delicacies from another city, which, of course, is going cost quite a bit more.
But the fact is that customers are now less restricted by geography.
At the same time, these platforms can help eateries expand their customer reach considerably.
In the past, eateries have to hire their own delivery staff, and it’s difficult to achieve economies of scale.
Restaurants also used to rely heavily on good locations, but nowadays even remote restaurants can attract customers as long as they offer tasty food.
Food delivery platforms have certainly created value, although it takes time to find out if there is enough profitability to sustain this business model over the long run.
To bring in more income, these platforms are beginning to offer other services, including running errands for clients. You can get them to buy tickets, do shopping, or even walk your dog. These additional services are said to be getting quite popular.
The job of a delivery man is very demanding, so why are so many people willing to take it?
While the basic salary is low, one can earn more than 10,000 yuan (US1,424.48) a month including bonus. For those with limited education, the job offers a way to save up money so they can start their own small business. No wonder lots of young migrant workers have joined the trade.
It’s not easy to become a top delivery man. One has to make sure orders are fulfilled on time and customer reviews are positive.
The job may call for occasional speed driving and a very high emotional quotient when dealing with both eatery staff and customers.
This article appeared in the Hong Kong Economic Journal on Nov 15
Translation by Julie Zhu
[Chinese version 中文版]
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