Over the past weekend, the three major food delivery platforms in China – Meituan, Taobao Flash Sale, and JD.com – once again ignited a “subsidy war.” “0 Yuan Purchase” has become a hot term in the market, with some even seeing “-4 Yuan Purchase.” Following these explosive orders, platform traffic surged, but businesses found themselves caught in a false prosperity, often earning less than a single yuan per order, or even losing money.
According to reports from mainland media like “Yangcheng Evening News” and “Sanxiang Metropolis Daily,” Mr. Xiong from Changsha placed an order on the “Are You Hungry” platform on Monday (14th) morning and received a discount coupon of “Save 22.8 on a purchase of 18.8,” turning a meal originally priced at 30 yuan into just 7.9 yuan by using the coupon.
Upon opening the Meituan app, a prominent banner reading “0 Yuan Takeout Has Arrived” greeted users, offering zero yuan takeout redemption coupons for both delivery and self-pickup. Brands like Luckin Coffee, Migu Ice City, and Gumai frequently appeared in the “0 Yuan Purchase” promotions.
Taobao Flash Sale promoted its “Super Saturday” event, releasing 188 yuan discount packs with slogans like “I got you covered for 5 meals a day.” Many users obtained multiple high-value coupons such as “Save 18.8 on 18.8” and “Save 18.8 on 28.8.”
JD.com distributed 100,000 orders of 16.18 yuan crayfish every night, in addition to billions of subsidies to all users, with a maximum amount of 20 yuan.
In this “subsidy war,” many businesses saw a surge in orders but did not reap the benefits as expected.
A local visit by “Times Financial” on the night of July 12 (last Saturday) revealed a crowded scene at a Chen Wending milk tea shop in Panyu District, Guangzhou, with more than 137 drinks still in production an hour before closing time. Similarly, a nearby store, ChaBaida, had over 200 orders waiting to be prepared.
As per a report by “Inside and Out,” milk tea shop owner Li Bin found a continuous stream of orders as soon as the shop opened on the weekend, even needing six employees to work until past 2 a.m. However, after deducting subsidies, platform service fees, delivery fees, etc., the actual profits were halved. After subtracting various costs such as materials, the profit left was merely 400 yuan. Li expressed disappointment at barely breaking even after rewarding employees with hard-earned bonuses.
Another tea shop owner privately complained, “Orders doubled, but profits didn’t increase much. Platforms demand that we lower prices, keeping us busy until the early hours and only earning loneliness in return.”
“Upstream News” reported on a participating store in Meituan’s “0 Yuan Milk Tea” event called “Auntie from Shanghai,” which had a daily revenue of over ten thousand yuan, but after deducting subsidies, they were left with just over six thousand yuan. After subtracting costs including beverage materials, labor, and rent, the profit margins were slim, with some drinks barely earning a single yuan.
Earning just one yuan per order was not uncommon. Xu Ting, owner of a rice noodle shop, explained that despite customers paying only 9.9 yuan for a 19.8 yuan rice noodle dish, after deducting commission fees, packaging fees, delivery fees, and headquarters’ profit share, she was left with less than a yuan for herself. It was all a false sense of prosperity!
With over two hundred takeout orders in a day, mostly from new customers, Xu Ting, looking at the backend data, struggled to find joy. She understood that these takeout customers were only there to take advantage of discounts and wouldn’t become regulars.
A Guangdong individual catering business owner, known as Will, shared with “Times Financial” the struggle. Despite a 20%-30% increase in restaurant orders since mid-June, actual sales figures did not proportionately increase. Will showed an order dated July 13 at his store – an 18-yuan takeout order that, after deducting customer subsidies of 8.7 yuan (including 3.7 yuan for customer delivery fees and 5 yuan for a takeout voucher), 5.15 yuan for delivery service fees, and 0.90 yuan for platform commission, only resulted in an income of 4.25 yuan for the business.
Making 400 yuan a day was no longer sustainable, with all costs factored in. Li Bin decided to sell the shop by the end of the month: “Although uncertain about other ventures, I just don’t want to keep sinking in the restaurant business anymore.”
The heavy subsidies significantly boosted sales volume for the food delivery platforms. Meituan announced that by midnight on the 12th, their real-time retail orders had exceeded 150 million. On July 14, Taobao Flash Sale and “Are You Hungry” jointly declared an order volume record of over 80 million (excluding self-pickup and 0 yuan purchases).
The subsidy war of the previous week also brought in a surge of traffic for the platforms. By 10 p.m. on July 5, Meituan’s real-time retail orders had surpassed 120 million, with over 100 million food orders. On July 7, Taobao Flash Sale recorded over 80 million orders, with non-food orders exceeding 13 million, and active users surpassing 200 million.
The food delivery war stemmed from the anxiety of the retail industry regarding stagnant market growth. An article in the “Beijing Business Daily” analyzed that instant retail is one of the highest-frequency consumer scenes on the internet, targeting a young, urban, high-spending demographic that can expand into broader consumer markets alongside e-commerce, travel, and more.
A report from Goldman Sachs on July 3 revealed that the fundamental goal of the three major platforms was not profit from food delivery itself but using high-frequency food delivery services to drive user traffic and cross-sell to more profitable e-commerce and travel businesses.
Meituan’s CEO, Wang Xing, pledged to win the competition at all costs, while Alibaba’s CEO, Wu Yongming, stated that this was Alibaba’s strategic upgrade from an e-commerce platform to a major consumer platform.
JD.com aimed to reclaim the “lost five years” through the food delivery battle, Taobao needed a new victory to expand beyond its e-commerce base, and Meituan competed with JD.com and Tmall for e-commerce business.
Instant retail integrates physical stores, e-commerce platforms, and logistics resources to allow consumers to receive goods within a short time frame (usually 30 minutes to 2 hours), delivering an “order online, receive offline” shopping experience.
Goldman Sachs predicted three potential outcomes for this competition. In the first scenario, Meituan successfully defends its position with a market share of 55%, followed by “Are You Hungry” with 35% and JD.com with 10%. In the second scenario, it envisions a duopoly between Alibaba and Meituan, with market shares of 45% for each of them and 10% for JD.com. The third scenario sees a tripartite balance, with Meituan at 50%, “Are You Hungry” at 30%, and JD.com at 20%.