Will There be Winner in China’s “Fast and Furious” Delivery War?丨CBN Perspective

Hello! Welcome to this edition of CBN Perspective. I’m Stephanie Li.

After a long era of peace, smoke now rose across the country, and a “war” mostly affecting the cities had broken out, again. In a scramble to capture and retain both customers and delivery riders, the country’s three biggest delivery platforms have gone into “war mode.”

China’s leading delivery platforms—Meituan, Taobao Flash Sale, and JD Delivery—have reignited a fierce price war, with aggressive discounts and giveaways making headlines.

A quick scroll through these platforms reveals shockingly low prices. On Taobao, once-premium offerings from brands like Nayuki are now available for CNY7 a cup which originally priced at CNY20 or above.

These steep discounts have proven irresistible. This morning, I had a 15oz iced cold-brew coffee in sparkling water for CNY2.6, delivered to my office in downtown Shenzhen, in less than 30 minutes after I placed the order, which, ironically, costs even less than the minimum fare for the Shenzhen Metro (CNY3).

Over the past weekend on China’s social media, the hashtag “free milk tea” topped trending charts. JD offered 100,000 discounted crayfish sets nightly, while Meituan and Taobao continued their “Super Saturday” campaigns to attract users.

The numbers are simply staggering. Meituan's subsidy amount last Saturday (July 12) was CNY300 million to CNY400 million, while that of Taobao Flash Sale exceeded CNY1.2 billion. In the past two weeks, the daily subsidy amount of Taobao Flash Sale on weekdays has been around CNY400 million.

The delivery war, ignited by JD’s entry into the food delivery sector, has triggered unprecedented user traffic. Daily order volumes reportedly exceeded 100 million, and many consumers took to social media to describe scenes at tea shops—some waiting over 30 minutes for a drink, with crowds of delivery riders gathering outside stores late into the night.

Meituan’s instant retail daily orders hit record 150 million at 11.36 p.m. on July 12. Taobao Flash Sale and Ele.me platforms processed over 40 million orders in a single day on May 26, with tea and coffee accounting for a quarter of that volume—about 10 million orders.

JD.com and Alibaba have reportedly poured over 80 billion yuan into subsidies since April, accounting for roughly 20 percent of China’s total outbound direct investment in the first half of the year.

While platforms are footing most of the bill, caterers are also affected, with many of them having to accept razor-thin profits, break-even sales and even losses on some orders.

The surge in orders is coinciding with shrinking profits and a lot of businesses are starting to worry about what happens when the subsidies end as customers are now used to rock-bottom prices.

For instance, a drink normally priced at CNY19 had a CNY6.40 subsidy from the caterer and a CNY9.60 discount from the platform. The platform’s CNY9.60 subsidy goes to the food provider together with the CNY3 paid by the customer, but after the delivery fee and platform commissions are deducted, the caterer is left with just CNY5.99.

That’s barely enough to cover the cost of the cup, lid and thermal sleeve, which comes to around CNY1.10 and CNY1.30 per serving. “After joining the subsidy war, it is clear that the profit per cup is shrinking. We are probably losing some money on around one or two out of every 10 orders,” said a franchise manager.

Although subsidies can drive up the number of orders, the profit per drink per store has tumbled from previous levels, a coffee chain executive said. Although customers benefit, some brands are seeing their revenue squeezed. Most consumers are price-driven, so firms worry that once the discounts end, sales will slump.

For most brands, a prolonged price war brings no long-term benefits, said a consumer industry analyst. A short-term surge in orders masks the danger of shrinking profits, and smaller businesses will feel the pain first.

Consumers, for now, cheer the windfalls. Who wouldn’t love a cheap meal delivered to their door? But history repeats itself: every subsidy spree in China’s tech sector has been followed by inevitable price hikes once the dust settles. There’s no such thing as a free lunch, and the bill will eventually come due.​

The price war has clearly spirals into a self-destructive rat race. The focus on boosting milk tea orders over proper meals, the erosion of profit margins across the board, and the strain on riders and merchants all point to a system teetering on the edge.

A commentary on The People's Daily pointed out that this kind of low-level competition is not a sustainable development model for the industry. It may bring short-term prosperity, but in the long run, it will undermine the innovation ability of enterprises and the healthy development of the entire ecosystem.​

When customers lured by rock bottom prices leaves restaurants bleeding cash, staff exhausted, and dine-in services crippled, it’s time to pivot: true progress lies in competing on innovation, not subsidies. The world is watching, and what it sees now is a sector trapped in a race to the bottom.

Editor: LI Yanxia

Host: Stephanie LI

Writer: Stephanie LI

Sound Editor: Stephanie LI

Graphic Designer: ZHENG Wenjing, LIAO Yuanni

Produced by 21st Century Business Herald Dept. of Overseas News.

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