The Food Delivery War That’s Shaking China

Alright, so yesterday I saw a video about the big competition between three major Chinese platforms: Taobao, Meituan, and Jingdong. It was interesting, so I’ll explain it simply.

If you’re in China, you probably know that food delivery apps are really competitive. A while back, there were two main players: Meituan, which was leading, and Eleme, which was struggling a bit. Then, around April, Meituan introduced a new feature called “Flash Purchase” to challenge Jingdong. Jingdong responded by saying, “Food delivery looks appealing, and Meituan has it all. Let’s get involved!”
Jingdong, mainly an e-commerce platform, launched its own food delivery feature called “Instant Delivery” and included a lot of discount vouchers. I remember getting milk teas for just 1 yuan- crazy, right? Meituan was relaxed, thinking, “Our customers are loyal. Let’s see how long Jingdong can keep losing money.”

Then, Taobao decided to join in. In July, Alibaba, Taobao’s parent company, announced it would invest 50 billion yuan in the competition. The guy in the video mentioned that Taobao’s move was partly because Jack Ma wanted revenge on Meituan. I’m not sure if that’s true, but here’s the background: about 15 years ago, when Meituan was starting out, no one wanted to invest in them. Jack Ma stepped in with a lot of money and even sent some of Alibaba’s best people to help Meituan grow. That’s how Meituan became the giant it is today.

Fast forward to New Year’s Eve 2014. WeChat launched its red envelope feature and rapidly became a major player alongside Alibaba. At that time, everyone at Alibaba knew not to cross Tencent, WeChat’s parent company. But Meituan’s boss quietly got closer to Tencent and suggested merging Meituan with Dazhongdianping, an app for reviewing services. They only gave Alibaba a 12-hour notice about the merger, which caused Alibaba's stock to drop by 7%. That cost Alibaba a lot, and Jack Ma was not pleased, no one messes with him like that. So, he bought all of Meituan’s shares, but Meituan’s boss accused him of breaking trust.

After that, Alibaba acquired Eleme and continued to compete with Meituan in food delivery, but they couldn’t quite win. Jack Ma never gave up on the food delivery market, though. So when Jingdong joined the fight this year, Taobao saw its opportunity and jumped in too. When Jingdong reached 25 million orders, it was a wake-up call for Jack Ma. He likely thought, “If a newcomer like Jingdong can do this, why can’t Taobao, the original player?” So, Taobao launched its own food delivery service, prominently featured it on their app, and started spending 50 billion yuan without hesitation. They even partnered with Ele.me and Feizhu, a hotel and ticket booking app, to fully commit.

Three months later, Meituan’s profits dropped dramatically, down 97% from last year, falling from over 10 billion to just 300 million. Jingdong spent 14.7 billion, while Alibaba’s profits actually increased, and they’ve only spent around 10 billion so far. They have enough cash to keep this battle going for three more quarters, while Meituan is struggling to keep up.

Just the other day, Jiang Fan, a key figure at Alibaba, said they’re not stopping. He even joked, “It’s getting cold, let’s let Meituan go bankrupt.” Why is he so intense? Perhaps to settle the score for Jack Ma. Right now, Taobao’s food delivery is handling about 80 million orders a day, and Meituan is really panicking.

Another reason Taobao is involved? This food delivery service is attracting a lot of new users to their app and increasing Taobao’s user base. They’re even taking users from Pinduoduo, the discount shopping app. So, even if food delivery loses money, Taobao will keep going.

Who will win this battle? No idea, but it’s exciting to watch!