The battle for China’s on-demand food delivery moves to Nanjing

May 25, 2018

Didi announced via their official WeChat account on May 24 that their food delivery service, Didi Foodie, will formally land in its second city, Nanjing, on June 1. On April 9, Didi launched its first foodie service in Wuxi.

According to the company, the service in Nanjing will follow strict food safety and delivery standards. Didi also hopes to cooperate with municipal administrative parties including traffic management department to improve service.

The company solicited ideas for their next city after Wuxi and Nanjing got the most votes (86,455). Meanwhile, Nanjing is the capital of China’s wealthy Jiangsu province – the province where Wuxi is located. Didi will leverage the marketing, channel, and administrative advantages it acquired in Wuxi. Nanjing is the first city where delivery service leader Meituan landed its ride-hailing business last year.

However, the announcement cannot guarantee business success. At the moment, expanding national landscape and pushing competitors to corners mean high commercial and even political cost. In April, with Didi entering Wuxi, a business war occurred as players sought to grab or consolidate market shares.

According to a local report, in Wuxi, Didi offered on average RMB 10 million financial support per day to sustain discount and cash deals. Meituan and Ele.me were forced to respond to Didi. The two strived to guard their market shares and resources including both consumers and delivery staff.

As a result, prices of ordered food declined dramatically. RMB 2.6 (average price before discount was around RMB 20) for a regular size bubble milk tea and RMB 5.8 for a meal (average price before discount was around RMB 15) triggered food delivery mania in the city. A Wuxi resident said to a local reporter (in Chinese): “Take our community as an example, I did a rough research: in the first few days, around 80% of people ordered delivery services for regular meals.”

Delivery staff, on the other hand, earned money like “picking cash from the ground” (in Chinese: 捡钱). In the first few days, delivery staff earned around RMB 2,000 per day, around one-third of non-war monthly wage. Meanwhile, restaurants had to choose a side to take. Meituan and Ele.me both hold exclusive restaurant resources, creating steep barriers for any new entrant.

On April 11, the local market watchdog, the Administration of Industry and Commerce (AIC) of Wuxi, held talks with the 3 food delivery companies. The government urged the players to immediately suspend all activities that may result in unfair competition and monopolistic practices. AIC also required the 3 to cooperate with legal departments.

This doesn’t seem to be slowing Didi down. Already, there are rumors that Foodie is recruiting delivery staff in Chengdu.