By Casey Hall and Sophie Yu
SHANGHAI/BEIJING(Reuters) -China’s largest e-commerce platforms show no signs of halting an “instant retail” price war unusual in its resilience to state criticism, indicating the almost existential importance placed on instant retail as the future of e-commerce.
Their fight in instant retail, where delivery can be as quick as half an hour, risks the wrath of authorities not averse to crackdowns and wary that aggressive price-cutting could entrench deflationary pressure in an economy already under fire from U.S. tariffs and restrictions on tech exports to China.
Alibaba, JD.com and Meituan have pledged almost 200 billion yuan ($28 billion) combined to subsidise one-hour delivery in recent months, leading to customers who order beverages, for instance, effectively receiving them for free.
So extreme is the strategy that the trio was summoned for the second time last week to the State Administration of Market Regulation which called for “rational competition” aligned with the government agenda, said a person familiar with the matter.
“It’s really a battle that takes place now but is much more related to the expectations for five to 10 years down the road. (The platforms believe this is) life or death, it might mean the future or the lack of a future for their company,” said Ed Sander, tech analyst at Tech Buzz China.
The adoption of artificial intelligence and automated warehouses will make instant retail increasingly profitable to the extent it will cannibalise conventional e-commerce, he said.
Examples of instant retail and attendant price war include coupons from Alibaba covering the cost of breakfast delivered within 60 minutes, or from Meituan offering free tea. JD Takeaway offers 10 yuan coupons for orders as little as 11 yuan.
Alibaba, JD.com and Meituan did not respond to requests for comment.
TOXIC COMPETITION
Authorities in China typically take a sustained and firm-handed approach toward practices they deem unfavourable to healthy and rational market development, making dissent rare.
State media agency Xinhua was unequivocal in a Wednesday editorial about the negative impact of “zero yuan purchases”.
“On the surface, platform companies engage in ‘price wars’ to compete for the instant retail market, but their essence is to use subsidies to give birth to a ‘bubble market’,” the editorial read. “To put it bluntly, there is no winner.”
China’s $19 trillion economy grew 5.3% in the first half of 2025. Hinting at what may be to come, however, retail sales growth slowed to 4.8% in June from 6.4% in May.
Moreover, ANZ economists estimated a 0.1% decline this year in the consumer price index and 3% decline in the producer price index, for what would be the first annual deflation since 2009.
“A price war is never in the interest of businesses. Consumers gain of course, but from a macroeconomic point of view (it leads) price expectations to keep decreasing,” said economics professor Bala Ramasamy at the China Europe International Business School in Shanghai.
“The level of competition we have in China has become unrealistic and at times toxic. Government intervention has become necessary for the sake of the greater good,” he said.
INSTANT APPEAL
The regulatory attention is different to that given to the electric vehicle sector, where price wars stemmed in part from overcapacity. One issued raised by the regulator at the Friday meeting was food waste from unconsumed zero-yuan orders, said the person familiar with the matter, who was not authorised to speak with media and so declined to be identified.
“Everything points in the direction that they (regulators) are not happy with this, definitely not happy with a lot of tech companies just burning money by handing out all of those consumer discounts that will have no long-term effect,” Sander said.
The appeal of instant retail battle is difficult to ignore for e-commerce firms that have struggled to unlock growth in the consumer spending slowdown since the COVID-19 pandemic.
The instant retail sector is growing around 2.5 times faster than conventional e-commerce and is set to surpass 2 trillion yuan in sales by 2030, showed data from the Chinese Academy of International Trade and Economic Cooperation.
While consumers may enjoy the low prices, merchants complain on social media that price wars all but eliminate profit margins and restaurateurs bemoan a fall in profitable in-person custom.
“From a regulatory perspective, authorities are generally in favour of competition, what they oppose most is monopoly,” said catering industry analyst Wang Hongdong, founder of catering data research institute NCBD. “So, a complete halt to the delivery war is unlikely … (though) they are likely to address some current issues, such as the impact on dine-in restaurants.”
($1 = 7.1533 Chinese yuan renminbi)
(Reporting by Casey Hall and Sophie Yu; Editing by Christopher Cushing)
Comments