JD.com Joins the Meituan-Eleme Duopoly
Escalating Subsidies with Cash Coupons and More
As competition among Chinese delivery apps intensifies, there are now cases of "zero yuan delivery," where both delivery fees and food prices are completely waived.
According to Yonhap News on July 14, citing Chinese media such as The Paper, major Chinese delivery platforms?including Alibaba Group’s Taobao-Ele.me and Tencent-affiliated Meituan?have been distributing large-scale coupons every weekend since the beginning of this month. These platforms have set price tiers, and for orders below a certain amount, they do not charge any food or delivery fees at all.
On July 2, Taobao announced a subsidy plan worth 50 billion yuan (about 9.6 trillion won), stating that it would directly provide subsidies in the form of cash coupons and free order vouchers to consumers and stores over the next 12 months. With this move, Taobao was the first to ignite the fierce price war.
On Saturday, July 5, Taobao and Ele.me distributed coupons intensively, resulting in over 80 million orders placed in a single day. This represents an eightfold surge in order volume within just two months, as daily orders had surpassed 10 million in early May. The competition became even fiercer a week later, on July 12. Taobao and Ele.me, which had launched the initial offensive, continued their free promotions on July 12, and Meituan?the largest delivery app in China?joined the fray. Meituan responded by prominently displaying a "zero yuan delivery" coupon banner on its main page. Brands that frequently appeared in the free purchase menus included Luckin Coffee, known as the "Starbucks of China," ice cream chain Mixuebingcheng, and tea franchise Guming. Additionally, dumpling chain Babi Mantou and instant porridge company Manlingzhou were also included in the discounted delivery offerings. JD.com, an e-commerce platform that is a latecomer to the delivery app market, also entered the price war, investing 10 billion yuan (about 1.9 trillion won) to join the competition.
As this "chicken game" among delivery apps continues, the prices of delivered beverages have dropped significantly. On social networking services (SNS), photos and videos have been posted showing store counters stacked with over 100 cups of milk tea due to a surge in orders, and stores packed with delivery drivers and customers waiting for their drinks. At some beverage shops, waiting numbers exceeded 1,000, resulting in wait times of over an hour after placing an order.
According to Chinese economic data analysis firm Wind, the size of the Chinese delivery market has continued to grow, surpassing 1 trillion yuan (about 190 trillion won). As of the end of last year, there were about 592 million users of Chinese delivery apps. For several years, Meituan and Ele.me dominated the Chinese delivery app market, but with JD.com leveraging its capital strength to enter the market this year, fierce competition has erupted among the three major companies?not only in lowering product prices but also in recruiting delivery drivers.
Global investment bank Goldman Sachs predicts that this "delivery war" will continue for a long time, and that in the second quarter of this year alone, the three major companies, which collectively invested 25 billion yuan (about 4.8 trillion won), will incur significant losses. Goldman Sachs forecasts that from July this year to June next year, Ele.me will record an operating loss of 41 billion yuan (about 7.9 trillion won), JD.com 26 billion yuan (about 5 trillion won), and Meituan’s operating profit will decrease by 25 billion yuan (about 4.8 trillion won).
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
