Credit: Visual China

BEIJING, September 18 (TMTPost) – Every time Apple releases a new version of iPhone, there are always mixed reviews.

Looking at the social media feeds regarding the recently released iPhone 15 in China, it seems that the negative comments outweigh the positive ones. However, this doesn't seem to deter retail channels from flexing their muscles with the launch of the iPhone 15. Moreover, when we talk about marketing "channels" today, it's no longer the same as in the past. For example, the primary battleground for the sale of consumer electronics products was often the "specialty stores" channel, such as Suning Electronics. But this year, 600 stores of Suning Electronics began to work with platforms like Ele.me and Meituan, two leading local services and on-demand delivery platforms in China.  

Therefore, this year's iPhone 15 release will see many new players entering the market. Last Wednesday, Ele.me announced a joint effort with nearly 3000 Apple authorized retail stores, making the new iPhone available for sale on the same day through the Ele.me platform, with delivery in as fast as half an hour.

This leads us to a question: Are Ele.me and Meituan now considered new retail channels? Has their identity and nature changed as they expanded from traditional food delivery to selling fresh produce, food items, and non-food products like stationery, cosmetics, and wine, culminating in today's iPhone 15 launch?

In the past, the answer was uncertain. Food delivery platforms were primarily referred to as "instant delivery" platforms. Just by observing interactions within the industry, it was evident that executives of these platforms were more involved in logistics industry meetings, as they shared a common language with the logistics sector. Besides, they were eager to network with restaurant owners because only with their strong support could food delivery businesses thrive.

Now, the situation has changed. Consumers can actually buy an iPhone on these platforms. The industry has already coined a new term to explain this phenomenon. In the tech industry, it is referred to as "instant e-commerce," while from the perspective of offline retail, it is more commonly known as "instant retail," with a strong emphasis on online-to-offline (O2O) implications. Regardless of the name, "being instant" is the core, contrasting with the centralized nature of traditional e-commerce. A transformative change with far-reaching consequences is underway.

From Commerce to Logistics

The change from instant delivery to instant e-commerce may seem like an incremental change in already existing business models. However, it is indeed a disruptive transformation. What makes it disruptive is that the power of the internet has shifted from being primarily an auxiliary tool and service provider to becoming the driving force behind relevant platforms.

From the perspective of offline retail, when instant retail was in its infancy, there was a simple, easy-to-understand term used to describe it: "supermarket to your doorstep." At that time, the delivery times were not as fast as half an hour. Rather, a two-hour delivery window was acceptable. At the commodity level, it is more about value-added services that deliver existing goods to the home.

Therefore, at that time, instant retail was more of an upgraded version of O2O, and whether to do it and how to do it were still primarily determined by the retailers. In other words, those with goods on hand had the final say.

According to data from the Ministry of Commerce of China, instant retail has maintained an average annual growth rate of over 50% in recent years, with the market size reaching 504.29 billion yuan in 2022.

Changes are happening. On the surface, it's a shift in the goods themselves. More and more products are appearing on the platforms that were originally food delivery ones. For example, back-to-school stationery, which would traditionally be purchased from stationary chain stores, is now being bought through food delivery platforms by many new parents. Similarly, popular convenience store products such as "fruit slices" are increasingly available on platforms like Meituan and Ele.me. While fruits were originally a strong category for B2C e-commerce platforms, instant e-commerce platforms have also found their entry point.

The two examples mentioned above—fruit slices as an extension of food and stationery as a completely new category—result in significant incremental growth due to the expansion of instant retail into these areas. When Ele.me held its merchant conference in June this year, it had six different industry sessions, including one dedicated to beverages. Similar categories include pet products and cosmetics, with some of the franchisees of Meituan Flash Sale also focusing on these two categories.

While category expansion represents the breadth of instant retail, the selling of iPhone 15 on platforms that used to sell food only represents the ceiling on both average transaction value and merchandise value. After all, we can't expect instant e-commerce platforms to start selling cars one day. In this sense, products like the iPhone 15 within the 3C category can be seen as the ceiling.

What do all these seemingly niche changes really mean? The significance lies in the fact that many clear-cut boundaries from the past are being shattered by instant e-commerce, especially during the reign of B2C e-commerce. The biggest obstacle that logistics platforms faced when trying to break into e-commerce seems to be disappearing. The baton is silently passing from a market once dominated by commerce to internet platforms with instant fulfillment capabilities.

In the past, commerce drove logistics, but now logistics generates commerce, at least in the same-city market.

It was incredibly challenging for logistics service providers and delivery platforms to enter the realm of branded commerce. This was because the underlying logic of product selection remained unchanged, whether it was in offline retail or centralized e-commerce platforms. In offline retail, businesses selected and offered products based on their own supply chain capabilities, channel coverage, and consumer positioning, thus forming specific business formats.

For example, a convenience store might sell wine, but it typically focuses on entry-level wines, with its primary products being fresh food and beverages. Convenience stores assume that those with a taste for fine wines will visit specialty wine shops. Online, it may seem that e-commerce platforms have broken the limitations of categories and price ranges with infinite virtual shelves. However, these e-commerce platforms still have their strengths and weaknesses. This is because consumers have their own mental positioning of different channels, and these perceptions persist.

The deeply entrenched logic of product selection in the retail industry is difficult for logistics professionals to comprehend. In today's logistics industry, it seems that they can deliver anything, even giant pandas. Therefore, they find it hard to understand why there are so many different types of businesses and why the same product appears in numerous channels in offline retail. Even within the category of supermarkets, for example, there can be further divisions. Moreover, new retail formats continue to emerge in the offline retail landscape, such as snack discount stores. Perhaps logistics professionals also find it puzzling why e-commerce is so developed in China while the online retail share of total retail sales has not yet surpassed the critical 25% threshold.

Their questioning can be both wrong and right. Because the underlying logic of the retail industry's assortment is based on supply chain capabilities, from the perspective of the supply chain, no retail company can dominate the entire business world. Even e-commerce relies on a platform for comprehensive product coverage, rather than relying solely on its own logistics capabilities. However, looking at it from a different perspective, why can't high-end red wine be sold alongside sandwiches, or why can't take-out meals be offered alongside the iPhone 15? What if consumers actually have such a demand?

Thus, today, this logic is starting to reverse. Based on the fast and agile delivery system organized by food delivery platforms, internet companies no longer need to understand the logic of traditional retailers. They just need to find ways to meet user demands.

Rebalancing Supply and Demand

When we approach the problem from the perspective of an ordinary consumer, we find different answers. In simple terms, the logic of how retailers stock their shelves is based on industry logic. But when consumers make purchases, they don't care about the industry logic or format.

Consumer logic is essentially about the logic of consumption scenarios, which sometimes breaks the boundaries of inherent industrial logic and business formats. However, it is precisely this scenario logic that provides instant e-commerce with a greater scope for imagination. Undoubtedly, instant e-commerce has rapidly developed due to consumer demand. With the expectation of delivery in 30 minutes, consumers have gone from ordering takeout online to fruits, daily necessities, and finally to accepting more products being delivered – and this trend is irreversible. Industry insiders generally believe that instant e-commerce will ultimately become a trillion-dollar market.

The key is whether the original food delivery platforms have simply connected to more delivery demands, and whether they can do more in this trend. This is what we mentioned earlier: from instant delivery to instant retail and now to instant e-commerce, this market is re-balancing supply and demand on both ends.

Practices like Ele.me selling the iPhone 15 are essentially explorations, with a certain specialty.

Undeniably, it's consumer demand that has set the stage for the rise of instant e-commerce. However, for the transformation to go deeper, it still depends on the push from the supply side – the new retail platforms.

Pei Liang, the president of the China Chain Store & Franchise Association, holds this view. Speaking at Meituan's recent Instant Retail Industry Conference, he said, "We often say consumers are king and that we should innovate business models based on consumer demand. But when we observe this process, sometimes we overlook the impact of changes on the supply side. For example, the new model of instant retail is a supply-side change in retail content."

Pei used the example of "fruit slice," which is frequently mentioned, to illustrate his point. He said, "We discussed whether fruit slices could also be introduced in Australia, but later concluded that it's not possible because Australia lacks the supply capability for instant retail. Without this capability, some demands may not emerge or develop. I think it's very meaningful for our business innovation to look at opportunities created by the supply side in driving and generating demand."

To meet consumers' scenario logic instantaneously from the supply side, the biggest challenge lies in breaking the traditional constraints and reorganizing products according to consumer demands. Therefore, the emergence of new platforms is necessary. The fact that Ele.me, originally positioned as a food delivery platform, is now moving into high-value, low-frequency consumption categories sends a signal. While platforms like Ele.me and Meituan may not yet rival traditional retailers in terms of supply chain capabilities, the change in the logic of product selection and delivery efficiency may eventually lead to a transformation of the entire retail industry chain.