Recently, some well-known food delivery platforms in mainland China have ignited a “subsidy war,” offering “zero yuan purchase” vouchers and even “spend 18.8 to get 22.8 off” discount coupons. As a result, platform orders skyrocketed, and traffic surged. However, businesses are struggling to make much profit as they are overwhelmed with orders. Experts analyze that the food and beverage industry in mainland China is also facing severe internal cannibalization, which is terrifying. The impressive data resembles a “last burst of light,” indicating that China’s economy and the Communist Party system are in a state of “running towards doomsday.”
China’s food delivery industry has recently joined in a price war, following the price war in the electric vehicle sector, with some well-known food delivery platforms leading the charge.
On July 12, Meituan, JD.com, and Alibaba’s Taobao Flash Sale triggered a new round of the “subsidy war,” offering promotions such as “zero yuan for food,” “zero yuan for drinks” red packets, “spend 18.8 to get 18.8 off,” “spend 28.8 to get 18.8 off” vouchers, and even “spend 18.8 to get 22.8 off” coupons.
Meituan introduced “zero yuan purchase” drink vouchers where users could pick up drinks from the store. JD.com distributed 100,000 16.18 yuan small lobsters every night. Taobao Flash Sale launched “spend 38 yuan to get 18.8 off” and “18.8 yuan free single card” promotions covering breakfast, lunch, afternoon tea, dinner, and late-night snacks, claiming “I’ve got all 5 meals in a day covered.”
The incredible price war attracted a large number of customers looking to take advantage of the promotions. By the early hours of the 13th, Meituan announced that its daily order volume exceeded 150 million. In a joint report on July 14, Taobao Flash Sale and another food delivery platform under Alibaba, “Eleme,” stated that their daily order volume surpassed 80 million once again.
However, it seems that businesses are not reaping much profit from this. According to reports from mainland China, a tea shop owner mentioned that the subsidy war from food delivery platforms required them to lower prices, doubling order volume but not significantly increasing profits, leaving them working until the early hours of the morning with little to show for.
A noodle shop owner said that a bowl of noodles originally priced at 19.8 yuan was paid only 9.9 yuan by customers, but after deducting platform commissions, packaging fees, delivery fees, and headquarters’ shares, less than 1 yuan actually ended up in her hands.
Some businesses even experienced losses. Many milk tea shops and beverage outlets had “zero yuan purchase” drinks ordered but not picked up, ultimately leading to wastage.
However, according to a research report by Goldman Sachs on July 3, the fundamental goal of platforms like Meituan, JD.com, and Alibaba is not to profit from food delivery itself but to gain traffic through price wars and cross-selling to more profitable e-commerce and travel businesses.
Jay Jiang, CEO of an American financial expansion company, expressed to media that the Chinese people have less high consumption of travel, high-end products, high-end clothing, with the main spending now shifting towards food. However, even in the realm of “eating to survive,” internal cannibalization is prevalent, and it’s too horrifying.
He noted that although it may seem prosperous on the surface with an influx of orders, those customers are not buying based on the services provided by the businesses but rather on whether they can “take advantage” and profit for themselves. As people find it increasingly difficult to earn money and their wealth diminishes, this leads to a mentality of trying to “take advantage” wherever possible.
He warned that this situation is also terrifying for businesses because when customers can no longer find profits, they will leave. Consequently, when businesses can no longer sustain operating at a loss, they will inevitably close down. Once businesses start closing, a wave of closures will also hit the platforms. Subsidies and loss-making businesses are both short-term strategies and cannot be sustained in the long run.
He emphasized that the consequences of such irrational promotional activities would further deteriorate the Chinese economy and people’s livelihoods.
The seriousness of the issues in the Chinese food and beverage industry has also been recognized. It is reported that the Red Flower Ridge District Catering Industry Association in Zunyi City of Guizhou Province issued a proposal on July 15, calling for an end to “internal cannibalization” subsidies and unfair competition, and an immediate stop to irrational promotions such as “zero yuan purchase” to prevent businesses from being forced into operating at a loss.
Both Alibaba and JD.com, known as e-commerce platforms, have now joined the food delivery price war and are competing with Meituan. Jay Jiang believes that this inter-industry “cannibalization” also reflects a “severely deflationary state” within the Chinese economy.
“China is now cannibalizing not only among businesses within the same sector but also across different industries, including this kind of cross-industry cannibalization, because they may have reached a plateau in their own industry and turned to other sectors for growth.”
Currently, the cross-industry “cannibalization” trend in China is intensifying, with not only Alibaba competing with Meituan in food delivery but also five-star hotels in Zhengzhou competing in street stall businesses.
According to a trending news on July 6, a five-star hotel in Zhengzhou, Henan Province, set up a street stall on July 5, where the hotel chef presented five-star delicacies at “affordable prices,” causing a frenzy of business, selling out in less than an hour with daily earnings reaching 30,000 yuan. The hotel’s General Manager, even in chef attire, was interviewed on-site, expressing, “I don’t care if setting up a street stall and lowering prices is perceived negatively,” and asked, “How much is reputation worth?”
Jay Jiang commented, “This is a battle of ‘survival of the fittest,’ ultimately whoever can endure until the end will be the winner, but the so-called winner will end up being a ‘skeleton,’ with all the flesh eaten, barely surviving in that industry.”
Financial analyst Adam Lu explained that while food delivery platforms are breaking the billion-order mark, the truth behind the media hype of “consumption revival” and “hot economy” in China is that it is an illusion supported by burning money, a last burst of light due to the end-stage of the system.
He said, “This is a ‘three-losing game’ of platform subsidies, bleeding businesses, and short-term gains for users.”
Adam Lu believes that consumers who come to “take advantage” are merely being “guided” by algorithms and subsidy mechanisms to consume; they are just a “traffic symbol” used by the platform to drive data growth.
He further stated that in today’s China, platforms are also a “stability maintenance tool” where, even though the economy is struggling, the government needs “confidence,” so platforms are burning money to create a sense of vibrancy—even if it’s just numerically.
According to Adam Lu, platforms will not burn through money without a purpose; they are also vying to capture the market and ultimately cash out in the capital market or make money in other areas, such as e-commerce, travel, or advertising, which have higher profit margins.
He pointed out that this subsidy price war is detrimental to the economy and does not have any winners. It is simply a “performance economy” staged by the platform, businesses, consumers, and the system together, where platforms momentarily bolster their numbers, businesses hemorrhage losses, consumers grab a small advantage, but ultimately, everyone is consuming their own future.
“This is not a business competition; this is the system creating illusions in its final collapse. It’s having a last burst of light and running towards doomsday.”