(Yicai Global) June 14 -- Chinese ride hailing giant Didi Chuxing is leveraging its huge customer network to launch a same-city fast delivery service in over 200 municipalities, even though the segment is still struggling to turn a profit.

Didi Fast Delivery will allow customers to have small items delivered in the same city quickly. All they need to do is log onto the Didi Chuxing mobile app and choose the delivery service provider they wish to use depending on the prices offered and their own needs. So far there are three service providers on the platform.

In order to attract new users, the platform will launch discounts and promotions that can be used together with ones that the suppliers also offer, Beijing-based Didi Chuxing said.

China’s ‘errand-running’ business is likely to grow at a compound annual rate of 75.4 percent from 2018 to 2025 and be worth CNY66.4 billion (USD9.3 billion) by 2025, according to market research firm iiMedia Research.

Due to this promising outlook, many new players such as Didi Chuxing are tapping into the segment despite there already being a huge number of competitors.

Didi Chuxing has chosen to enter this new sector as, thanks to its large ride-hailing network and online popularity, it does not require a lot of investment, Chen Liteng, an analyst at e-commerce research center 100EC, told Yicai Global.

There are two main types of providers of these errand-running services in China. One are life-service platforms, such as takeout giants Meituan and Ele.me, and the other are logistics firms with well-established transport networks, such as courier company SF Holding.

Life-service platforms hold the biggest share of the market. Meituan’s intra-city delivery services are the most popular, commanding 60.1 percent market share, followed by Ele.me with 29.8 percent and Shansong with 27.8 percent.

Despite the fast growth, the entire segment still struggles to make money as overheads outstrip revenue. SF Cityrush, which is SF Holding’s intra-city delivery arm, logged a 57.3 percent jump in revenue last year from the year before to CNY1.9 billion (USD265.3 million), but it racked up losses of CNY287 million (USD40.1 million). And rival Dada reported a 20.2 percent surge in revenue in the first quarter from a year earlier to CNY749 million (USD104.6 million), but it still posted losses of CNY350 million.

Editors: Tang Shihua, Kim Taylor