In China, eating habits are changing. As a result of a highly competitive home delivery industry that is constantly being peppered with more and more players, many consumers are electing to eat at home rather than go out.
Offerings now range from complete meals to meal packs, meaning that the restaurant industry isn’t the only sector to be hit. Grocery chains are also complaining that they are experiencing a lack of revenues due to the growth of at-home delivery services.
But why? The answer is simple – it’s not only more convenient to have your food delivered to your home address, but it’s also – at the moment – cheaper.
Major competitors such as Alibaba have forced medium-sized players to get competitive with their service offering. Additionally, the industry as a whole competes with the grocery and restaurant industries but also – of course – each business competes with the next big thing to enter the market. Businesses are forced to compete with new entrants who often offer free or heavily discounted packs as an incentive for users to try them out. This means that existing business lose clients and the opportunity to attract sustainable investment. So, costs are reduced to keep customers loyal and as financial pressures increase, many businesses are selling food at – or below – cost. There are numerous examples of meals delivered to the door that cost less than their equivalent at the supermarket.
This is not a sustainable model – in that businesses are not making money, and it’s inevitable that, once enough businesses are forced out of the market, prices will find their natural level. But with tier one businesses, who are prepared to take losses for years on end in order to shape the market, very active in the sector, it’s likely that for the foreseeable future, Chinese consumers will be spoilt for choice when it comes to eating at home.