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Alibaba has set an internal target for instant retail to account for 30% of the group’s e-commerce GMV, equivalent to nearly 2.25 trillion yuan (approximately $335 billion), approaching the industry’s projected ceiling. Over the past year, Jiang Fan has led Taobao Flash Delivery to capture a 42% market share, creating a two-horse race with Meituan, but at a steep cost—roughly 87 billion yuan (approximately $13.0 billion) in cumulative losses over twelve months. To address its fulfillment network shortfall, Hema is accelerating expansion through a “store-to-warehouse conversion” model, having already opened over 500 fulfillment centers with a year-end target of 1,000. Meanwhile, the acquisition of Pupu Supermarket remains unresolved, though business cooperation has begun on a trial basis. Against the backdrop of an AI-first strategy and an HK$80 billion (approximately $10.2 billion) share placement that triggered a sharp stock decline, Alibaba’s instant retail push faces the dual pressure of tightening capital and aggressive warehouse network expansion. The core test: whether it can leverage greater GMV with less capital.
Key Elements
Alibaba (09988.HK) is placing an unprecedented bet on the instant retail track. According to a report by Zimubang, Alibaba has set an internal target for instant retail to account for 30% of the group’s e-commerce GMV. Based on Alibaba’s previously disclosed overall marketplace figures, this share corresponds to a transaction scale of nearly 2.25 trillion yuan (approximately $335 billion), almost touching the industry ceiling—China’s Ministry of Commerce research institute estimates that the nationwide instant retail industry will not surpass 2 trillion yuan until 2030.
The difficulty of achieving this target is self-evident. Over the past year, Jiang Fan, CEO of Alibaba’s E-commerce Business Group, has led Taobao Flash Delivery to capture a 42% market share. According to Analysys data, in Q4 2025, Taobao Flash Delivery’s instant transaction market share reached 45.2%, nearly on par with Meituan’s 45.0%, shifting the competitive landscape from “one dominant player with multiple strong contenders” to a “two-horse race.”
But the cost has been equally staggering. According to HSBC research estimates, over the twelve months from Q2 2025 to Q1 2026, Alibaba’s instant retail business posted losses of approximately 87 billion yuan (approximately $13.0 billion), a figure approaching half of Alibaba’s adjusted EBITA for fiscal year 2025.
The “Three Carriages” Are in Place, but the Warehouse Network Remains a Weak Link
Alibaba’s instant retail footprint consists of three lines: Taobao Flash Delivery handles traffic conversion and fulfillment; Hema is responsible for non-standardized supply such as fresh produce, leveraging physical stores and fulfillment centers to handle instant fulfillment orders; Tmall Supermarket supplies standardized goods, implementing a “near-field and far-field combination” model through retrofitted and newly added flash-delivery warehouses.
In May this year, Joe Tsai and Eddie Wu jointly released a letter to shareholders, positioning instant retail for the first time as “a core strategic pillar of the comprehensive upgrade of the Taobao and Tmall platforms.” The letter noted that “consumer behavior has undergone profound changes, and the expectation of 30-minute rapid delivery has become the norm.”
But capability mapping does not equal business results. Instant retail has already passed the first half of the game—competing on delivery speed and subsidies—and supply-side contradictions are now surfacing. Many users search for desired branded products on the app, only to find “out of stock at current address” prompts on the order page. Behind this lies a structural supply-side shortcoming in instant retail: goods are scattered across countless independent stores and flash warehouses throughout the city, with no unified citywide inventory pool, and the depth of premium brand supply remains insufficient.
Taobao’s advantage in “goods” remains evident, with two decades of accumulated brand pool, SKU breadth, and supply chain capabilities. Take Taobao Convenience Store as an example: its primary warehouse format carries approximately 10,000 SKUs, with product richness three times that of an ordinary convenience store. But traffic and product assortment are only front-end conditions—all orders ultimately face the practical constraint of warehouse network density.
Hema’s Fulfillment Centers: From “False Proposition” to “Hard Battle”
Hema is undergoing a dramatic structural adjustment. On one hand, some offline stores are closing; on the other, fulfillment centers are expanding rapidly nationwide. According to a Tech Planet report, in Beijing’s Chaoyang District, one Hema fulfillment center has opened directly next door to a Meituan “Happy Monkey” store, with no Hema signage at the entrance.
According to multiple Hema fulfillment center riders, the delivery fee is fixed at 4 yuan per order, with overweight orders reaching 4.5 yuan. The site is staffed with 20 riders, capable of handling around 2,000 orders per day at peak, averaging about 100 orders per rider daily. Delivery categories shift noticeably with the seasons—summer is dominated by heavy items like bottled water and watermelons, while winter focuses on pork and napa cabbage.
Hema’s history with fulfillment centers has been tortuous. As early as 2019, Hema experimented with the model, opening over 70 “Hema Mini Stations,” but quickly pulled the plug. At the time, Hema founder Hou Yi’s assessment was blunt: fulfillment centers were “a false proposition aimed at investors” and could never be profitable. In August 2024, Hema restarted the model. According to Wangjingshe, Hema has now opened more than 500 fulfillment centers, with a year-end target of 1,000.
Because of the “store-to-warehouse conversion” model—directly converting closed stores into fulfillment centers—Hema’s warehouse opening pace has been notably aggressive. This year, Hema has closed a total of 21 stores across China, primarily older large-format stores with low operational efficiency and outlet stores with ambiguous positioning. At the same time, Hema is tilting resources toward three new formats: fulfillment centers, Hema Fresh, and “Chaohesuan NB” hard-discount stores.
In terms of floor area, Hema’s fulfillment centers opened this year in locations such as Yancheng, Jiangsu, range from 600 to 800 square meters. In April this year, Hema signed a lease for a 1,200-square-meter fulfillment center in Weifang, Shandong, dubbed the “largest in the urban area,” nearly matching Pupu Supermarket’s scale.
Pupu Acquisition Unresolved, Cooperation Moves First
The rumored acquisition of Pupu Supermarket comes at a critical juncture in Alibaba’s instant retail integration. Pupu’s value lies in its 400-plus self-operated fulfillment centers, 2024 revenue of approximately 30 billion yuan (approximately $4.5 billion), gross margin of about 22.5%, and fulfillment expense ratio compressed to 17.5%, with market penetration exceeding 70% in Fuzhou and Xiamen.
Acquiring Pupu would give Alibaba immediate access to over 400 maturely operated fulfillment centers and a proven South China supply chain system, saving 3 to 5 years of time cost in building from scratch in a battlefield where “fast fish eat slow fish.” But despite multiple rounds of rumors, the acquisition has yet to be finalized.
Business cooperation, however, has already begun. In late July, Pupu began trial integration into Taobao Flash Delivery, with some Fuzhou stores going live for testing, with orders fulfilled by Pupu’s existing nearby fulfillment centers. In the initial testing phase, some stores recorded monthly sales of only dozens to 300-plus orders through the Taobao channel, making it difficult to significantly boost per-warehouse order density in the short term.
Capital Tightening: Resource Competition Under AI-First Strategy
Alibaba holds three cards: two decades of accumulated product assortment capabilities from Taobao, a 42% market share, and the synergy of near-field and far-field integration. But whether it’s restructuring the near-far field system or retrofitting the warehouse network, everything requires capital. The most pressing question facing Alibaba is: where will the money come from?
Alibaba is currently fighting two heavyweight battles simultaneously—AI computing power and large models, and instant retail. Among them, AI is Alibaba’s top-level strategy for the future and will continue to consume massive capital expenditure. Just as instant retail targets keep escalating, Alibaba announced a share placement, with net proceeds of HK$80 billion (approximately $10.2 billion) directed entirely toward AI.
Group resources are a zero-sum game. Core e-commerce profit growth is slowing, group cash flow is limited, AI requires continuous capital infusion, and instant retail no longer has unlimited ammunition.
Even more severe than internal resource tightening is the capital market’s attitude. The day after the announcement, Alibaba’s Hong Kong-listed shares plunged 8.54%, erasing over HK$200 billion (approximately $25.5 billion) in market value in a single day. Even with sovereign funds oversubscribing, the capital market’s anxiety over large-scale capital expenditure was directly reflected in the stock price. If even the AI business—which the group has pinned high hopes on—struggles to convince the market, the pressure facing instant retail is self-evident.
Can Hema Replicate the Path Sam’s Club Has Proven?
Fulfillment centers have returned to the center of internet company competition this year, driven by the fact that pioneers like Dingdong Maicai and Pupu Supermarket have already proven profitable models. Sam’s Club’s fulfillment centers have become a significant revenuein this track
Walmart’s fiscal Q1 2027 earnings report showed that Walmart China’s e-commerce sales accounted for 50% of total sales, with approximately 75% of online orders delivered within one hour. Sam’s Club’s current online fulfillment system is centered on “store-warehouse integration plus cloud warehouses,” with 8 to 10 cloud warehouses deployed around each store, ranging from 200 to 500 square meters, carrying approximately 800 to 1,000 SKUs, and covering a service radius of 3 to 6 kilometers. As of May 2026, Sam’s Club’s cloud warehouse count has surpassed 500.
Sam’s Club’s core advantage in fulfillment centers lies in high average order value, which offsets the most critical profitability issue—the fulfillment cost ratio. A Guolian Securities research report on fulfillment centers pointed out that when order volume is not high, average order value must reach a certain threshold to achieve profitability, as in the case of Sam’s Club cloud warehouses; when average order value is not high, order volume must reach a certain scale to achieve profitability, as in the case of Dingdong Maicai.
But the challenges Sam’s Club faces are equally applicable to Hema. On social media, under topics like “Sam’s Club avoid-list” and “Express Delivery near-expiry items,” short-shelf-life products such as fresh milk, baked goods, and salads are frequently mentioned. Similar quality control and experience issues are beginning to surface among Hema members as fulfillment centers expand, with some members reporting that new products are slow to appear at fulfillment centers and category selection is narrower than at offline stores.
Competitive Landscape: Not Just Meituan
Currently, Meituan holds a leading edge in the fulfillment center space, with Xiaoxiang Supermarket’s fulfillment center count exceeding 2,000. In February 2026, Meituan acquired Dingdong Maicai’s China business for approximately $717 million, bringing roughly 1,000 fulfillment centers into its fold to shore up gaps in the East China region, followed by an aggressive push into the South China market.
Fulfillment Center / Cloud Warehouse Layout Comparison of Major Players
| Brand | Parent Group | Fulfillment Center / Cloud Warehouse Count | Per-Warehouse Area | Other Data |
|---|---|---|---|---|
| Hema | Alibaba | 500+ (year-end target: 1,000) | 600–1,200 sqm | “Store-to-warehouse conversion” model, restarted August 2024 |
| Xiaoxiang Supermarket | Meituan | 2,000+ | — | Includes ~1,000 fulfillment centers from Dingdong Maicai China acquisition |
| Pupu Supermarket | Independent (Alibaba in acquisition talks) | 400+ self-operated | — | 2024 revenue ~30 billion yuan, gross margin ~22.5%, fulfillment expense ratio 17.5% |
| Sam’s Club | Walmart | 500+ cloud warehouses (as of May 2026) | 200–500 sqm | 8–10 cloud warehouses per store, 3–6 km service radius |
Beyond internet giants, traditional hypermarkets represented by RT-Mart are also joining the fray, simultaneously deploying fulfillment centers in four cities—Tianjin, Shanghai, Wuxi, and Tongliao—in August. Hefei, the capital of Anhui Province, is a microcosm of this melee: the provincial capital has rapidly assembled brands including Sam’s Club, Aldi, Hema, and Xiaoxiang Supermarket, with instant retail, hard discount, store-warehouse integration, and warehouse membership formats all competing on the same stage.
Alibaba’s real test is to deliver on its “military pledge” while finding the right rhythm between spending and returns amid a capital market that is tightening its purse strings and a zero-sum competition for capital expenditure between AI and instant retail—improving the efficiency of every yuan spent and leveraging higher-quality GMV growth with less capital. The bottom line: instant retail cannot become a bleeding wound that drags down the group’s stock price.
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