How China’s retail market is evolving amid Alibaba and Meituan’s instant commerce war
Since April, mainland Chinese consumers have been spoiled for choice, as instant commerce competition brought dazzling promotional subsidies and speedy deliveries right to their doorsteps.
Instant commerce – a turbocharged combination of online shopping and swift dispatch – had already made a typical lunchbox order cost around US$1 or US$2, which covered the food and the delivery fee.
On-demand delivery giant Meituan’s “Grouping for Good Meals” campaign, for example, offered a four-dish set meal – with a portion of rice and a drink – for 6.9 yuan (US$0.97) and delivery in just 27 minutes. A delayed delivery of more than 15 minutes would entitle the buyer to 4 yuan in compensation.
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According to 30-year-old office worker Bo Wen from Guangzhou, capital of southern Guangdong province, the cheapest order he made online was a cup of coffee that cost 0.01 yuan on Taobao Shangou – the instant commerce service of Alibaba Group Holding, owner of the South China Morning Post.
This week, all three instant commerce platform operators – Meituan, Alibaba and JD.com – started accepting pre-orders for Apple’s recently launched iPhone 17 models. Buyers are expected to receive their new iPhones in as fast as 30 minutes as soon as delivery starts next week.
That reflected how instant commerce and its main providers have evolved over a short period of time, as they expanded the on-demand delivery coverage beyond food. It marked another step towards the transformation of retailing in China across online platforms and bricks-and-mortar stores.
Unlike past high-profile competition between Coca-Cola and Pepsi, Boeing and Airbus, and Apple and Samsung Electronics, China’s instant commerce service providers have relied on subsidies and a sharpened focus on becoming more efficient to fulfil orders across the country.
The size and scope of instant commerce also appear unparalleled in China’s economic landscape, as the segment covers hundreds of millions of consumers who have grown accustomed to ordering a wide range of products and services online, with expedited on-demand deliveries.
JD.com, which entered the food delivery market in February, and Meituan have taken their instant commerce rivalry to another level, as they started building thousands of central kitchens in strategic locations to speed up fulfilment of online food orders.
In July, Meituan said it would build 1,200 so-called Raccoon Restaurants over the next three years. These facilities are designed as hubs for multiple restaurant chains that operate their kitchens only for takeaways. These sites are expected to help drive down costs and boost efficiency for Meituan’s restaurant chain partners, according to a company statement.
By contrast, JD.com announced a plan to invest 1 billion yuan to recruit “cuisine partners”, as part of the firm’s roll-out of 10,000 self-operated 7Fresh kitchens over the next three years. This infrastructure would enable the company to promote 1,000 different menus to a nationwide audience.
It described 7Fresh kitchens as “the largest supply chain innovation over the 15-year course of the local food delivery industry”.
This marked a transformation of the mainland catering industry, as large internet platform companies became closely involved in the back-end operations of partner restaurants.
Alibaba on Wednesday launched an artificial intelligence-powered ranking of destinations – including restaurants, hotels and tourist attractions – on its online mapping service Amap. This feature will initially cover more than 300 cities and make recommendations for 1.6 million local businesses, with the algorithm synthesising data sources that include navigation patterns and user reviews.
That followed a campaign that has brought hundreds of merchants from its Tmall business-to-consumer shopping platform onto its Taobao Shangou site. In June, Alibaba’s food delivery platform Ele.me and online travel agency Fliggy were folded into its core e-commerce business.
Those initiatives were in line with Alibaba’s efforts to bring together its ecosystem’s various resources to push forward its transformation into a comprehensive consumer platform.
“Cross-selling is the main goal,” said Jay Lau, analyst at S&P Global Ratings. He described Meituan as being in a more defensive position, while rivals JD.com and Alibaba, with their own retail platforms, would appear to benefit more from the expanded coverage of instant commerce.
The cost of China’s instant commerce war – including discounts, vouchers and other promotional expenses – is measured in hundreds of millions of yuan every day, while the number of daily transactions has reached hundreds of millions.
What is at stake is the future of retailing, as instant commerce focuses on the immediate satisfaction of consumer demand. Each order made, whether it is for a bowl of noodles or a pair of swimming trunks, can be delivered within half an hour.
Alibaba saw its daily orders hit an all-time high of 120 million in August. While that figure was behind Meituan’s peak daily orders of 150 million in July, it showed that Alibaba was quickly catching up to the country’s perennial on-demand delivery market leader.
Meanwhile, JD.com’s quarterly active customers rose more than 40 per cent year on year in the June quarter, as more food delivery users became fresh buyers on its retail platform.
Data from QuestMobile showed that from January to July daily active users on Taobao, Meituan and JD.com grew 16 per cent, 21 per cent and 24 per cent, respectively.
Still, competition between the three instant commerce service providers has cooled recently after they publicly announced a truce in the price war that had offered consumers free lunchboxes and cups of milk tea, as well as hefty discounts, to seize consumers’ attention.
China’s State Administration for Market Regulation summoned Alibaba, Meituan and JD.com in late July, urging them to regulate promotional behaviour and engage in “rational” competition.
For now, S&P analyst Lau viewed Meituan as the most exposed among the three instant commerce players because food delivery contributed most of its revenue. While JD.com saw food delivery losses nearly wipe out its second-quarter profit, Alibaba faced the least risk because delivery remains a small component of its overall business.
The Hong Kong-listed shares of Meituan and JD.com were down 35 per cent and 1 per cent, respectively, since the beginning of the year, while Alibaba saw its shares jump more than 85 per cent.
Jiang Fan, head of Alibaba’s E-commerce Business Group, said during the company’s earnings call last month that the instant commerce business contributed to a 25 per cent growth in Taobao’s monthly active consumers and a 20 per cent increase in daily active users during the first three weeks of August.
That marked a sharp contrast to what Meituan’s management said during the company’s second-quarter earnings call last month.
Meituan chief financial officer Chen Shaohui said the company expected to “incur substantial loss” in the third quarter owing to “strategic investments” that included high incentives and marketing fees.
According to S&P analyst Lau, the margins of all three instant commerce providers “will not recover over the next 12 to 24 months”. He estimated that these platforms would spend at least 160 billion yuan within the next 12 to 18 months to grab or defend market share in food delivery and instant commerce.
In that regard, Alibaba’s financial war chest appeared bigger than that of Meituan. According to the two firms’ latest quarterly financial reports, Alibaba’s cash and investments were worth 585.7 billion yuan, while Meituan had 171.1 billion yuan.
“Alibaba has a thicker cushion, but it also has its own Achilles’ heel,” said Tang Ya, founder of the XS Institute of China Economy, in a recent WeChat post. “The other main driver behind [Alibaba’s] soaring valuation, its AI and cloud business, is a massive cash-guzzling beast.”
Beyond a price war, instant commerce involved computing capacity, AI algorithms and supply chain management.
From the moment a consumer placed an order online to its delivery, a complicated set of tasks was required to allocate the order to the nearest rider and shorten delivery time.
Tang said Meituan’s strength resided in its operational capabilities, the ability to digitalise stores and navigate delivery crews. Alibaba’s advantage came from the synergy between its e-commerce, cloud services and AI models.
Jiang Fan (left), CEO of Alibaba’s E-commerce Business Group, and Meituan CEO Wang Xing. Photos: Handout, Xinhua alt=Jiang Fan (left), CEO of Alibaba’s E-commerce Business Group, and Meituan CEO Wang Xing. Photos: Handout, Xinhua>
Meanwhile, a 2019 social media post by Meituan CEO Wang Xing recently resurfaced to show how some captains of China’s e-commerce industry eventually found themselves in 2025.
“In the coming years, it will be exciting to see how Colin Huang Zheng of Pinduoduo and Tmall’s Jiang Fan, two extremely smart people, will face off [in e-commerce],” Wang wrote.
It turned out that Meituan’s Wang was the one facing off against Alibaba’s Jiang, while Pinduoduo’s Huang remained on the sidelines.
Jiang’s role in Alibaba makes him one of the most powerful senior executives in China’s retailing sector. He was briefly sidelined in 2020 after an investigation into an alleged extramarital affair, which became a major public relations crisis. He was reinstated three years later.
At present, Jiang forms part of Alibaba’s five-member “partnership committee” – a core management group – with founder Jack Ma, chairman Joe Tsai, group CEO Eddie Wu Yongming and Jeff Zhang, head of the Damo Academy on fundamental research.
Jiang tasked his team to boost Alibaba’s market share in food delivery to 40 per cent by the end of August, according to the Chinese magazine Economic Weekly, which cited an unnamed source.
Pre-instant commerce in 2024, Meituan dominated the food delivery market with a 65 per cent market share, while Alibaba’s Ele.me was a distant second with a 33 per cent share, data from Bocom International showed.
According to Morgan Stanley, Meituan would continue to dominate China’s food delivery market with a 75 per cent share in terms of gross transaction value by 2030. In the instant commerce segment, however, Meituan’s share may fall to 48 per cent, nearly the same as the 47 per cent share Alibaba is expected to record in the same period.
S&P analyst Lau, meanwhile, forecast that instant commerce order growth would pull back from the peak in July once promotions fade, although volumes would still jump 40 per cent this year from 2024.
On a warm summer evening last month, Guangzhou office worker Wen said he arrived home to find his air conditioning remote control was broken. So he searched for and bought a replacement on Meituan, which delivered the new unit within 40 minutes.
“If I bought through a traditional e-commerce platform, it would be a few yuan cheaper,” he said. “But on a sweltering day, I’d rather spend the extra money to get a replacement unit immediately.”
