Amid the Chinese Communist Party’s call for “anti-monopoly,” a never-before-seen price war is unfolding in the mainland food delivery market. The two internet giants Alibaba and Meituan have recently engaged in fierce battles in the instant retail and food delivery sectors, escalating subsidies to “zero-cost purchase,” showering the market with red packets, leading to a massive increase in orders, platform paralysis, overwhelmed staff, and delivery riders racing against time. This head-on “red packet war” may continue.
On July 5th, Alibaba’s Taobao Flash Sale and Ele.me suddenly launched a “Flash Sale Day,” offering high-value red packet subsidies, including discounts like “spend 25 get 21 off” and “spend 16 get 16 off,” allowing users to almost “dine for free.” The news caused a sensation online, with many users sharing their food orders like “drinking milk tea for 0 yuan” and “eating burgers for 4 yuan.”
Meituan quickly retaliated by upgrading subsidies to “spend 19 get 19 off,” also offering numerous “zero-cost purchase” deals, with daily orders surpassing 120 million, hitting a record high and even causing the app to temporarily crash.
A Beijing youth interviewed by a Dajiyuan reporter on July 6th shared his thoughts on the “zero-cost purchase.”
“Zero cost is enough. Yesterday evening, Meituan responded, and something interesting happened. They kept talking about anti-monopoly in the industry, and then Li Qiang talked about becoming a super consumer nation. The result is that everything was purchased for 0 yuan.”
“After 6 p.m. yesterday, Meituan suddenly offered subsidies to all Meituan users across China. I went to see it yesterday, at several stores in Beijing, at the store closer to me, there was a line for a tea shop, like an Australian tea shop, and there was also a Miss Snow Ice City. There were around three hundred people crowded around it, getting free meals. Completely free, pure free, and I still have seven or eight cups to pick up today.”
“This zero-cost purchase event, I asked the staff yesterday, and the staff said it started yesterday afternoon and is being held irregularly recently. In these past two days, the food delivery industry’s internal circulation war is even more intense than before.”
“Like Taobao’s flash sale, there was even a 25 yuan off coupon. Yesterday, someone in my circle had three yuan filled with fifteen orders. My goodness, it’s practically no different from free. Indeed, this has become a hot search topic.”
According to a report by Sing Tao Daily, a staff member at a well-known tea shop stated that each employee works an average of 14 hours, with some bosses personally packing orders, “the food delivery orders are five times more than usual, we can’t keep up with the speed of processing orders.” Another milk tea shop employee mentioned, “we sold out half a year’s worth of inventory in one day.” Netizens commented that when they went for self-pickup, “the service staff looks utterly hopeless.”
“The Meituan subsidy was suddenly launched,” delivery rider Lu Shu said, “suddenly, the number of orders was overwhelming, the orders seemed endless.” He admitted, “the competition between platforms allows delivery riders to earn money, so we are happy about it.”
In this wave of subsidy-induced consumption frenzy, not everyone is participating with the intention of finding bargains. A lawyer from mainland China told Dajiyuan, “I won’t participate in these activities. The main issue is the severe internal circulation in the Chinese market. It’s the norm. Squeeze out competitors in the market and monopolize it.”
For a long time, Meituan has held a dominant position in the Chinese food delivery market with a market share of over 70%, while Ele.me only accounts for just over 20%. This Ele.me surprise move is seen as the first practical battle after the reorganization of the Alibaba Group, with significant implications behind it.
At the end of June, Alibaba merged Ele.me and the travel platform Fliggy into the China e-commerce business group, led by Jiang Fan, to achieve centralized decision-making and resource allocation. This subsidy war is the first step under this new structure, reflecting Alibaba’s reconfiguration of its local life services business.
Facing the phenomenon of “zero-cost purchase” in mainland China, Professor Sun Guoxiang from the Department of International Affairs and Business at Nanhua University in Taiwan told Dajiyuan, “In a saturated market with intensified competition in the food delivery sector, after a period of rapid growth, the Chinese food delivery market has entered a mature stage with major players (such as Meituan and Alibaba’s Ele.me/Taobao Flash Sale) competing for limited users and orders.”
“This kind of ‘money-burning’ subsidy is the most direct and fierce way to gain or consolidate market share.”
Commentator Gao Tianyou wrote in Sing Tao Daily that in this subsidy war led by Ele.me and Meituan, the biggest loser may not be the one “burning money,” but potentially JD.com, which just entered the food delivery market this year. JD.com previously launched a billion-yuan subsidy plan to compete in the market but appears weak in the direct confrontation between the two giants, lacking a solid user base and sustainable money-burning capacity.
Currently, JD.com remains inactive in the subsidy war, not directly engaging, facing a difficult choice: “participate” would go against the central government’s “anti-monopoly” policy, while “not participating” could lead to losing everything with the risk of losing the market share gained in the early stage.
Last week, the Economic Committee of the Chinese Communist Party emphasized “governing low-price and disorderly competition by enterprises in accordance with laws and regulations” and “rectifying internal-competitive competition.” While Alibaba and Meituan are launching subsidy wars to seize market share, Sun Guoxiang believes the goal of this round of subsidy war is to grab user traffic through high-frequency services and redirect it to more profitable e-commerce, travel, and other business sectors.
Sun Guoxiang said, “Platform ecosystem strategy, food delivery service is not just about catering services but also an entry point for platforms to attract users and establish high-frequency consumption habits. Particularly for Alibaba, merging Ele.me and Fliggy into its China e-commerce business group demonstrates its aim to leverage the high-frequency service of food delivery to cross-sell low-frequency overall e-commerce or travel services, achieving the strategic goal of ‘low-price traffic attraction, supply chain monetization.'”
According to observations of the Hong Kong stock market performance, before and after July 8th, several tea beverage stocks surged, reflecting the market’s optimism about the spillover effects of this subsidy war.
On July 7th, Cha Baidu (02555) soared by 11%, Guming (01364) rose by over 6%, and Shanghai Auntie (02589) also saw its stock price increase by over 4% in this wave of food delivery price wars.
According to reports from financial institutions, coffee and tea beverage companies are expected to be the biggest beneficiaries of the food delivery platform’s subsidy war.
While the platforms are “burning money to grab orders” for traffic, these brands are leveraging customer psychology and essential products to achieve revenue and market value growth at zero cost.
There’s no such thing as a “free lunch,” someone will always foot the bill. Industry insiders estimate that Ele.me and Meituan in this “battle of subsidies” are each “burning money” to the tune of tens of billions of yuan.
Sun Guoxiang stated, “To seize the instant retail market, apart from food delivery, this subsidy war has extended to the instant retail sector, including fresh produce, pharmaceuticals, 3C electronics, and more. Platforms hope to rapidly expand their market share in the instant retail market through subsidies.”
Sun Guoxiang also believes, “This model is exchanging money for markets, placing significant pressure on the platform’s financial chain and profitability. No company can endure massive losses indefinitely. Once the platform cannot sustain high subsidies or once the market landscape is mostly settled, this model will tend to ease or even disappear.”
Market observers estimate that this round of subsidy wars will continue to burn until September to reach its investment peak, and after that, depending on policy directions and financial pressures, there may be a turning point. Ultimately, the food delivery market may return to a “duopoly” situation, with JD.com potentially being squeezed out of the main battlefield.