Over the past weekend, platforms such as Meituan, Taobao Flash Sale, and JD.com Takeaway have sparked a new round of real-time retail “subsidy wars” through large discounts like “0 yuan milk tea voucher” and “spend 18.8 to get 18.8 off”, aiming to seize market share. This unprecedented “takeaway madness war” quickly ignited a surge in order volume: as of the evening of July 12, Meituan’s real-time retail daily order volume hit a record high of 150 million, while “new player” Taobao Flash Sale exceeded the 80 million mark. However, behind this seemingly prosperous “subsidy war” is the plight of countless small businesses.
For businesses, this “takeaway war” has brought unprecedented customer flow. Li Bin (a pseudonym), a milk tea shop owner in the midst of the battlefield, saw a continuous stream of orders coming out of the printer as soon as he opened on the weekend morning. With 6 employees working in the shop, they had to work non-stop until after 2 a.m. despite being exhausted. After deducting business subsidies, platform service fees, delivery fees, etc., Li Bin ended up with only half of the revenue. After subtracting various costs such as materials, the profit was left with only 400 yuan. “After giving out hard-earned bonuses to employees, there is nothing left,” Li Bin said tearfully.
The restaurant industry as a whole is in a downturn, forcing more and more physical businesses to turn to takeaway to survive. Baozi (a pseudonym) runs a small chicken hotpot restaurant near a university. Her shop is empty, with minimal customer flow, and the store’s revenue has been decreasing year after year – from 400,000 two years ago to 200,000 last year, and even worse in the first half of this year. Baozi had to consider doing some takeaway orders: “Earning less is still good if there are orders to fulfill.” She was coaxed by the platform area manager to participate in subsidy activities.
However, some platform area managers, in pursuit of performance, may even sign up for large discount activities without the consent of the businesses. Tangtang, who had just opened his store, was shocked by an order that actually cost 3 yuan, for a double-layer milk pudding originally priced at 13 yuan, which had been included in a “spend 12 to get 10 off” promotion at some point. The situation resulted in pure loss after costs, leaving Tangtang no choice but to bear the losses.
Xu Ting’s rice noodle shop also symbolizes the “false prosperity”. Customers could pay 9.9 yuan for a bowl of rice noodles originally priced at 19.8 yuan, but Xu Ting actually made less than 1 yuan, with most of the revenue being deducted as platform commission and headquarters share. Her complaints were in vain, and she even vaguely felt that the brand was trying to “clear inventory” using franchisees as an excuse.
“Everyone subsidizing equals no subsidy at all, but whoever stops first will die first.” Li Bin, who owns a milk tea shop, sighed that living in the “hell-level difficulty” racetrack means that only by embracing more traffic platforms and leveraging more orders can one survive.
This subsidy war has indeed attracted a large number of “wool party” participants who typically do not order takeout. Blogger Jincheng found that many people who usually eat at home were lured into the “pit” of takeout by low-price discounts. However, as users flooded in, this nationwide “wool harvesting” movement became increasingly frenzied.
What’s disheartening is that Li Bin’s shop even had a situation where many users claimed “0 yuan milk tea vouchers” but did not pick up their orders, resulting in cups of valuable drinks ultimately being thrown into the trash, which shattered Li Bin’s confidence. His shop has yet to break even, but the cash-burning game has intensified, leading to increased losses.
The surge in order volume did not translate into real profit growth. Xu Ting was unable to smile as she received nearly 200 takeaway orders a day, most of which were from “new customers.” She knew that these “takeout customers are just here for the 9.9 yuan discount and will not become repeat customers.” Low-price activities make it difficult to build customer loyalty and convert online traffic into offline diners.
To make matters worse, many dine-in restaurants that were previously their main focus have “changed flavor” after the war. After the takeaway battle, Elsa’s store saw a shift in the ratio of dine-in to takeaway from the original 3:1 to an alarming 1:7, completely disrupting the focus.
The side effects of this subsidy war quickly became apparent. When promotional expenses are depleted, orders plummet. After the takeaway war, the 100 yuan promotion budget that used to last a day was now exhausted by six or seven in the evening.
Where will this escalating “takeaway war” ultimately lead? According to Zhai Wei, the executive director of the Competition Law Research Center at East China University of Political Science and Law, in the short term, the surge in delivery orders, consumers receiving numerous coupons and enjoying benefits like purchasing at 0 yuan have indeed created a win-win or even multi-win situation. However, in the long run, this round of subsidy wars is unsustainable because both new and old takeaway platforms, as well as businesses within the platforms, cannot sustain immense subsidy costs.