Hyper-local storage delivers instant retail success

How soon do Chinese consumers now expect their online orders to arrive at their doorstep? A day or two? A burgeoning sector in China known as instant retail is now delivering a new answer: 30 minutes or less.

Driven by the model of "online order, local supply, instant delivery", major e-commerce platforms are expanding their instant retail services. This pivot directly addresses consumer's escalating demand for "ultimate convenience and speed".

According to an instant retail industry development report released last October by the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce, the scale of China's instant retail market is projected to surpass 2 trillion yuan ($281.2 billion) by 2030.

When a small indicator light fell off an appliance in his home, Zheng Lei, a 32-year-old resident of Chaoyang district in Beijing, needed a miniature soldering iron to fix it but had no idea where to find such a specialized tool in his neighborhood right away.

On a whim, he opened a food delivery app. To his surprise, search results showed six or seven nearby convenience stores, all within a three-kilometer radius, had the item in stock. He placed an order. In just over 20 minutes, a courier delivered the soldering iron to his door.

The experience left him both satisfied and curious. "I've never seen the store signs for these shops around my home," Zheng said. "Where did they come from? And how is their inventory so comprehensive, stocking even less common items like a soldering iron?"

These "stores" are compact, online-only fulfillment centers scattered across urban areas, designed exclusively for instant retail services. They are the logistical secret to sub-30-minute delivery windows.

"We can understand these warehouses as relatively small, online-only supermarkets. Many can carry stock-keeping units comparable to traditional hypermarkets, reaching up to 15,000 units," said Hu Qiugen, director of Alibaba's Taobao Instant Commerce.

The core of the model is proximity and precision. By analyzing local purchasing patterns, these warehouses stock their shelves to serve the specific needs of their immediate surroundings. A warehouse near a hospital will stock more wheelchairs and gauze; and one close to a tourist site will be ready with hiking boots and trekking poles, Hu said.

"Their advantage is a data-driven approach to inventory that caters to hyper-local and niche demands," Hu added.

China's instant retail sector is shifting into a higher gear, marked by a strategic push from the nation's major e-commerce platforms such as JD.com, Meituan and Alibaba seeking to capture dominance in the hyper-competitive on-demand delivery market.

"The goal of a 30-minute delivery of everything to a consumers' home is inextricably linked to the increasing density of our warehouses," said Wang Kai, an instant retail researcher at the Meituan Research Institute.

By the second quarter of this year, Meituan had already established over 50,000 of these facilities across the country, Wang said.

According to the aforementioned report, the product category structure of the instant retail industry in China has continued to optimize, gradually expanding into a full range of categories.

The report highlighted that the main categories include snacks, alcoholic and non-alcoholic beverages, fresh produce, meat, eggs, poultry, dairy, grains and oils.

In terms of growth rates, the report indicated that digital home appliances, maternal and infant products, beauty and personal care, healthcare, pet supplies and apparel and footwear are the categories experiencing rapid expansion.

In recent years, Meituan has been making progress in enriching its product supply, Wang said, noting that the platform's efforts in attracting major brands like Huawei, Xiaomi, Midea, Decathlon and Miniso have directly driven sales growth in electronics, home appliances and daily necessities.

During the recent National Day and Mid-Autumn Festival holiday, sales of traditional gift items such as liquor, computers and digital products, and tea saw significant increases via Meituan's instant sales services. Over 500 retail brands more than doubled their sales during the period, Wang said.