Food delivery has become an important way to dine in China and we estimate the food delivery market to reach Rmb913 bn in 2018. Driven by improvement in urbanisation and disposable income, and proactive investment from major internet players, China?s O2O food delivery market grew at 182% annually from 2010 to 2014, and is worth Rmb9.5 bn in 2014. We expect it to continue to grow
rapidly at 158% CAGR and reach ~Rmb420 bn by 2018, accounting for 46% of the total food delivery market.
Baidu operates one of the top 3 food delivery platforms in China. It differentiates from other players by (1) focussing on white collar and home delivery, (2) an early move into a self-operated delivery team, and (3) strong back-end technology support.
We estimate Baidu's daily delivery volume is around 2 mn, below that of Ele.me and Meituan's ~3.5-4 mn. Part of the reason for the smaller volume is the exposure by number of cities. Baidu Takeout currently covers 120 cities, while the other two players cover around 300. But the key difference that leads to Baidu's smaller volume is due to Baidu's focus on the white-collar office and home delivery markets, rather than the campus market. We estimate Baidu has less than 10% of its orders coming from college campuses, while other competitors have around 40% of their orders coming from there.
Baidu Beats Competitors - Ele.me and Meituan in Technology
Ele.me and Meituan delivery staff are still not using data-driven routing (once a delivery staff member receives an order, he/she can choose the route they pick to deliver the order). For example, in the case when the delivery person needs to deliver two orders from the restaurant?one order to the east side and the other to the west?only Baidu's system would suggest the optimal route to the delivery person. Given leadership in Baidu Map and the high quality of traffic and location information, we believe there is a meaningful gap in delivery technology between Baidu and other players.
