A deliveryman for online food delivery service ele.me (meaning "Hungry Now?" in Chinese), checks his phone on June 22 in Beijing. Photo: CFP

While two customers enjoyed their noodles in a restaurant in Chaoyang district in Beijing, the restaurant's owner, surnamed Zhao, continuously checked her smartphone to see how many new orders she was getting.

"I just signed a partnership agreement with the online food delivery service ele.me," she told the Global Times Monday. "We are trying to figure out how to increase sales through this platform."

Because the country's online-to-offline (O2O) food delivery service market has been growing rapidly, Shanghai-based ele.me, along with its rivals backed by the country's major Internet giants such as Alibaba Group Holdings and Baidu Inc, all want a slice of the pie.

Since ele.me received $350 million in investment from Internet giants such as Tencent Holdings and JD.com Inc in January, it has expanded to more than 260 cities with 20 million users, Wang Xuguang, the company's PR representative, told the Global Times Tuesday.

In June, Alibaba, a major competitor of Tencent - and its financial arm Ant Financial Services Group, jointly invested about 6 billion yuan to revive Hangzhou-based online platform koubei.com, which used to run a local classified advertisement service. The new koubei.com will be in the food delivery business, Alibaba's PR representative, who asked to remain anonymous, told the Global Times Monday.

With companies coming up with new strategies to expand their networks, the country's O2O food delivery market still has potential to grow, analysts said, noting that those O2O food services companies have to fully explore the market in the near future.

A divided market

In 2014, ele.me, the industry's leader, handles about 31 percent of the orders in the country's O2O food delivery market, according to an annual O2O food services report published by Beijing-based market research firm Analysys International in April.

Ele.me's major rivals, waimai.meituan.com, an O2O food delivery platform owned by China's leading group-purchasing site meituan.com, and koubei.com, got into the business later, but now account for 28 percent and 11 percent, respectively, of the market.

"Compared to its major competitors, ele.me is more focused on the food order and delivery business. However, waimai.meituan.com evolved from a discount website, and Alibaba has invested a lot in its online marketplace," a person close to the matter who refused to be named told the Global Times Monday. The person helped O2O food services companies build data-processing and analytics platforms. 

A delivery person surnamed Jiang said he always carries a branded meal pack to keep the food warm and wears a blue uniform, both of which are provided by ele.me.

"If you register as a member online, the company will give you three free deliveries," he said, noting that delivery people sometimes also need to do a little marketing. 

"We've been solely focused on the O2O food delivery services since 2009," said Wang from ele.me. "Now, we intend to improve our logistics system, which is seen as a crucial part of ensuring a positive experience for end consumers."

Meanwhile, waimai.meituan.com is also trying to improve its logistics system. "We are going to hire more skilled employees to ensure the quality of our delivery service," the company's PR representative said Tuesday. 

Meituan.com, backed by Alibaba, completed a round of fundraising worth $700 million in January, which increased the site's value to $7 billion. 

"Rising competition among O2O food delivery websites could be seen as a continuous war between the country's three Internet giants: Baidu, Alibaba and Tencent," said the person who helped build the data platforms. "None of those three would be willing to give up the O2O market, which have been growing rapidly in recent years."

Baidu entered into the O2O market later than ele.me and meituan.com. "[Baidu], however, has advantages in data processing and analytics," Liu Xuwei, an analyst from Analysys International told the Global Times Tuesday.

Well-known fast-food chains are also aware of the booming O2O food order and delivery services, Yao Qingwei, the PR representative of Kentucky Fried Chicken (KFC), told the Global Times Tuesday.

"While maintaining our own food order and delivery services, we have teamed up with O2O companies such as ele.me and meituan.com to expand our business channels," she said.

Discounts dueling

Almost every O2O food delivery company has been spending huge sums on promotions to win over as many customers and restaurant owners as possible.

"People who order 20 yuan worth of food on ele.me can get a discount of 8 yuan, with about 6 yuan subsidized by the company," said the restaurant owner surnamed Zhao.

In addition, people who order an hour and half before the typical lunch hour can receive a 2 yuan discount, as they help restaurant owners better manage their orders at peak hours, Wang said.

Like ele.me, meituan.com and Baidu also offer discounts to win customers.

For example, customers who order from meituan.com on mobile devices can usually get a 40 percent to 50 percent discount, according to the company's website.

Still, offering subsidies is not a long-term strategy, said Liu, the analyst.

"Internet start-ups first need to build up their customer base, then they have to focus on their service quality because customers always prefer innovative and rapid delivery options," he said.

A report issued by Beijing-based market research consultancy iResearch in February said that the transaction volumes generated by China's O2O industry increased 42.8 percent in 2014 year-on-year, accounting for 1.4 percent of the country's 12.3 trillion yuan in e-commerce transactions.

"Investing in the O2O food delivery sector is only the first step for Internet companies in developing its O2O service system as they're already aware of the market potential," Liu Xiaoyu, an iResearch analyst, told the Global Times Tuesday.

Liu said that as local O2O services are provided in business districts, schools and communities, only food delivery sector covers all those places. 

"For example, Baidu and Alibaba both use O2O food delivery services to explore other local O2O services," he said.

In addition to its O2O food services arm, Baidu recently announced it will invest 20 billion yuan into its group-buying unit Nuomi over the next three years, aiming to strengthen its O2O businesses.

Liu has not seen any sign of merger and acquisition deals among O2O food delivery services.

"Companies have a lot of room to grow - for example - by diversifying their delivery services and finding better logistics solutions," Liu said.

A 28-year-old white-collar worker in Beijing said he just ordered a bento on ele.me during lunchtime.

"It's really convenient, as the food was delivered fast and it was still hot when it arrived," he said.

Although he received a 10 yuan discount on the 28 yuan meal, he had to pay through an online platform instead of directly in cash, he said.