Asia Pacific Equity Research August 2025 China Quick Commerce Deep Dive Alex Yao AC (86 21) 6106 6505 alex.yao@jpmorgan.com J.P. Morgan Securities (China) Company Limited Source: CAITEC (Quick commerce industry development report, Oct 2024). China quick commerce market size forecast (Rmb bn) 650 4,046 5,000 4,000 3,000 2,000 - 1,000 2023 2030E Source: CAITEC (Quick commerce industry development report, Oct 2024), J.P. Morgan estimates. 2 Andre Chang (86 21) 6106 6362 andre.ch.chang@jpmorgan.com J.P. Morgan ...

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **China Internet** industry, particularly the **e-commerce** sector, with a specific emphasis on **food delivery (FD)** and **quick commerce (QC)** dynamics among major players like **Alibaba**, **JD**, and **Meituan** [2][3][4]. Core Insights and Arguments 1. **E-commerce Growth Plateau**: China's e-commerce growth has plateaued, leading to intensified competition among Alibaba and JD in the food delivery and quick commerce sectors. The market is transitioning from a near-monopoly (Meituan) to a near-duopoly [2][3][4]. 2. **User Engagement Strategies**: Both Alibaba and JD are heavily subsidizing food delivery orders to capture user time and sessions, particularly focusing on high-frequency beverage orders. This strategy has shown effectiveness in increasing user engagement [3][4]. 3. **Incremental Demand from Quick Commerce**: Quick commerce is expected to grow rapidly, projected to represent **12%** of total e-commerce sales by **2030**. It is unlocking new spending and replacing offline consumption with limited cannibalization of existing e-commerce sales [3][4][9]. 4. **Market Share Dynamics**: The current order share for food delivery and quick commerce is **57%** for Meituan, **33%** for Alibaba, and **9%** for JD. This represents a significant shift from previous shares, indicating a competitive landscape [4][10]. 5. **Long-term Margin Expectations**: The long-term gross transaction value (GTV) margin for food delivery is expected to decline from **3.2%** to **2.0%**, and for quick commerce from **2.0%** to **1.2%** due to increased competition and user adoption [4][5]. Competitive Landscape 1. **Meituan's Position**: Meituan is expected to maintain its dominance in food delivery with a projected **66%** order share and **75%** GTV share by **2030**. However, its share in quick commerce is expected to decrease to **58%** [4][46]. 2. **Alibaba's Challenges and Opportunities**: Alibaba's strengths include a large user base and significant financial resources, but it faces challenges in rider capacity and user mindshare. It is projected to capture **38%** of the quick commerce order share by **2030** [5][47]. 3. **JD's Struggles**: JD is anticipated to remain a minor player in the food delivery and quick commerce markets, with a forecasted order share of **4-6%** and continued losses [5][48]. Financial Projections - The total daily order volume for food delivery is projected to reach **141 million** by **2030**, with Meituan leading at **93 million**, Alibaba at **40 million**, and JD at **7 million** [53]. - The overall market share for food delivery is expected to stabilize with Meituan at **75%**, Alibaba at **21%**, and JD at **4%** by **2030** [53]. Additional Insights 1. **Consumer Behavior**: Quick commerce is creating new demand, with **41%** of orders being entirely new and **51%** substituting offline spending, indicating a shift in consumer purchasing behavior [9][30]. 2. **Investment Trends**: Both Alibaba and JD are expected to continue investing heavily in food delivery and quick commerce, with projected incremental investments of **Rmb30 billion** and **Rmb50 billion** in the upcoming quarters [43][44]. 3. **AI Capabilities**: The companies are leveraging AI capabilities differently, with Alibaba focusing on cloud services, Meituan on local operations, and JD on supply chain management [49]. This summary encapsulates the key points discussed in the conference call, highlighting the competitive dynamics, market projections, and strategic insights within the China Internet e-commerce landscape.

Summary of Key Findings from the Survey on Chinese On-Demand Delivery Behavior Industry Overview - **Industry**: Chinese On-Demand Delivery Services - **Survey Conducted By**: Citi's Innovation Lab - **Sample Size**: 1,800 users in China - **Survey Period**: June-July 2025 Core Findings 1. **Increased Order Frequency**: - 47% of daily users reported an increase in order frequency over the past three months, primarily due to more discounts and promotions [1][3][18] 2. **Leading Platforms**: - **Meituan**: Dominates the market with 68% of users for food delivery and 72% for non-food categories, attributed to the variety of restaurant choices [1][4][75] - **Taobao Shangou**: Captures a higher percentage of female users and younger demographics, achieving the highest Net Promoter Score (NPS) at 70 [1][5][49] - **JD Takeaway**: Despite being available for less than six months, it was used by 61% of respondents [1][75] - **Ele.me**: Holds a smaller market share with 13% for food delivery [4][41] 3. **User Demographics**: - 56% of respondents order food for themselves, while 36% order for two people [35] - The age distribution shows Taobao Shangou attracting younger users (37% aged 18-29), while Meituan is favored by older users (45-59 and 60+) [49][54] 4. **Spending Patterns**: - Average spending per order: - Food delivery: Rmb30-49 for 46% of users, Rmb10-29 for 33% [2][32] - Non-food delivery: Average spending at Rmb180, with 43% spending Rmb50-149 [62][63] 5. **Order Timing**: - Most common ordering times: 72% for lunch, 56% for dinner, and notable percentages for afternoon tea (35%) and supper (27%) [34][75] 6. **Reasons for Choosing Delivery Services**: - Availability of restaurants is the most important factor (43%), followed by delivery speed (21%) and price (19%) [33][41] 7. **Expectations for Future Ordering**: - 39% of users expect to order somewhat more this year, while 42% plan to maintain their current frequency [22][25] Additional Insights - **Concerns Affecting Order Frequency**: - Users ordering less frequently cited food safety (42%) and decreased food quality (32%) as primary concerns [19][24] - **Market Dynamics**: - The total addressable market (TAM) and higher penetration rates are expected to sustain despite normalizing subsidies, indicating a positive trend for profitability across platforms [74] - **Competitive Landscape**: - Meituan's strength lies in its extensive restaurant options, while JD is recognized for faster delivery and customer service [43][54] Conclusion - The survey indicates a robust growth trajectory for the on-demand delivery market in China, with Meituan and Taobao Shangou leading in user preference and satisfaction. The findings suggest a competitive landscape where user behavior is influenced by promotions, service quality, and product availability, with expectations for continued growth in order frequency and market penetration.