While the fierce subsidy competition in China’s meal-delivery sector appears to have diminished, its most significant impact may lie in the evolving expectations of consumers.
Nowadays, a plethora of products can be delivered within just an hour of placing an order. Alibaba retails a wide range of lifestyle goods.
After a tumultuous year filled with extravagant expenditures on coupons, complimentary delivery, and merchant incentives from Meituan, Alibaba, and JD.com, the rise of “instant retail” has transformed the landscape of online shopping.
While these companies diverted billions to cater to budget-conscious consumers, analysts opine that the real wager focuses on ingraining new shopping behaviors—especially in major metropolitan areas—where patrons increasingly anticipate an array of products, from groceries to cosmetics, to arrive at their doorstep in a mere 60 minutes.
Though drink and meal deliveries may foster frequent engagement with apps, the broader potential lies in converting these interactions into sales of higher-margin non-food products.
“Quick commerce has fundamentally reshaped consumer expectations around convenience and reliability. It is an irreversible lifestyle shift,” stated Meituan’s Chief Financial Officer, Shaohui Chen, during a recent earnings conference.
According to research from the Ministry of Commerce, the instant retail market is projected to achieve a valuation of 1.2 trillion yuan ($178 billion) by year-end, with an anticipated annual growth rate of 12.6% extending until 2030.
For instance, Beijing resident Jiang Yanxin recently ordered a “Niu Lai” doll, inspired by a character from a trending animated film, while on her way to meet friends for lunch. By the time she sat down at her table, a courier had already arrived with her purchase.
“I’ve grown accustomed to shopping this way,” Jiang remarked. “When I think of something, I get it immediately.”
Analysts are noting that consumers in urban centers have become well-acquainted with instant retail services.
“This is the reason platforms are intensely focused on capturing the instant retail market—it’s poised to disrupt traditional avenues,” remarked Ed Sander from the China Digital Retail Report.
Last year, the market regulator admonished Meituan, JD.com, Alibaba, and others multiple times regarding their competitive practices and urged improvements in consumer, merchant, and courier protections. In April, it levied fines amounting to 3.6 billion yuan due to safety violations in meal delivery services.
“The intense competition among these platforms has subsided following stringent government intervention,” posited food industry analyst Zhu Danpeng. “While consumers benefited, small restaurant operators still face enduring repercussions.”
For the second quarter of the year, Luckin Coffee, a significant beneficiary of e-commerce discounts, reported a 5.3% decline in same-store sales at self-operated locations compared to an upsurge of 13.8% during the corresponding period last year.
The decrease was primarily attributed to an inflated comparison base influenced by escalating meal delivery platform subsidies.
On a company level, last year, Meituan reported a financial loss, Alibaba witnessed diminishing profitability, and JD.com’s profits nearly vanished. “It was utterly unsustainable,” remarked Sander.
The subsidy race has reconfigured the competitive arena, yet the long-term victor remains uncertain. As of April, Goldman Sachs reported a decrease in Meituan’s meal-delivery market share, which had previously ranged from 75% to 80%.
This sector is now encapsulated under the umbrella of instant retail, where Meituan commanded a 45.3% share in the second quarter, according to Analysys.
Meanwhile, Alibaba’s Taobao Instant Commerce led with a 45.7% share, while JD.com held a mere 7.7%. Analysts predict potential shifts in this dynamic if platforms fail to maintain user engagement post-subsidy reductions.
Recent earnings reports indicate that these platforms are pivoting their strategy from achieving user growth through discounts in meal delivery to enhancing profitability via broader instant retail initiatives. Notably, Alibaba’s instant-retail revenue surged by 45% year-over-year, reaching 53.3 billion yuan.
JD.com revealed a significant narrowing of losses in this segment, aided by improved performance in meal delivery. Meituan, possessing the largest network of merchants and riders, transitioned to profitability for the first time in nearly a year as subsidy expenditures diminished.
“The sector has evolved from the initial phase of attracting users through subsidies to a phase focused on user retention, supply expansion, and a meticulous assessment of order-level economics,” remarked Liu Xingliang, the director of the Beijing-based Data Centre of China Internet. Companies are competing through enhanced logistics infrastructure rather than sheer fiscal incentives.
Meituan is establishing supermarkets to broaden its grocery horizon, while Alibaba and JD.com are launching “dark stores”—exclusive retail outlets for online orders—as well as rapid-response “lightning warehouses” in densely populated areas to ensure swift order fulfillment, according to Sander. “They are now genuinely constructing a foundation rather than merely expending extensive marketing budgets.”
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