The era of frenzied expansion (marked by rampant capital influx) has come to an end. The three major platforms have come to terms with the unsustainability of money-burning strategies and are now pivoting towards algorithm-driven models.

As Alibaba, Meituan, and JD.com unveiled their financial reports amidst the instant retail war, Singapore-based tech and e-commerce research firm Momentum Works also released its this month, dubbing it the most significant money-burning war in the e-commerce sector so far.

In 2011, during the first "Group Buying War," the industry burned through 7 billion yuan in subsidies, with Meituan emerging as the victor. In 2020, the second "Community Group Buying War" saw industry subsidies soar to approximately 14 billion yuan, with Pinduoduo claiming the top spot. By 2025, the "Instant Retail War" had burned over 77 billion yuan, with subsidies continuing to rise. In contrast, the previous bike-sharing war burned around 28 billion yuan.

The spark for this food delivery war was ignited when JD.com launched its food delivery service in February this year. Subsequently, Meituan unveiled its instant retail brand, 'Meituan Shangu,' officially igniting the "JD-Meituan War." In April, Alibaba joined the fray, with Ele.me launching over 10 billion yuan in subsidies and Taobao announcing the upgrade of its instant retail business to 'Taobao Shangu,' resulting in a three-way standoff.

After months of frenzied capital expansion, all three platforms have acknowledged that "burning money for scale is unsustainable," shifting their focus from capital-driven to algorithm-driven models.

01

'Cash King' Changes Hands: ByteDance, Pinduoduo, and Tencent Come Out on Top

According to third-quarter financial reports, Meituan's core local commerce segment (including food delivery and Shangu) reported an operating loss of 14.1 billion yuan, compared to a profit of 14.6 billion yuan in the same period last year.

While Alibaba did not directly disclose its instant retail losses, its financial report explicitly stated that the massive investment in instant retail directly caused the group's billion-yuan profit to evaporate, with operating profit declining by 85%.

JD.com's new business segment, which includes food delivery, reported an operating loss of 15.736 billion yuan, a significant increase from the 615 million yuan loss in the same period last year.

During the instant retail war, the performance of other uninvolved internet companies was as follows: Tencent reported a net profit attributable to shareholders of 63.133 billion yuan, up 19% year-on-year; Pinduoduo reported a net profit attributable to shareholders of 29.328 billion yuan, up 17% year-on-year; NetEase reported a net profit attributable to shareholders of 8.6 billion yuan, up 32.3% year-on-year. Unlisted ByteDance is estimated by the market to have a net profit of approximately $17.1 billion at an 18% growth rate.

The ranking of China's internet "Cash Kings" (including core cash and short-term investments) has shifted, with Pinduoduo replacing Alibaba to rise from second to first place:

Additionally, unlisted ByteDance is estimated by the market to have a cash flow of around 500 billion yuan, placing it among the top three.

However, despite the profitability of some Chinese internet companies, the instant retail war has had a significant impact on China's internet sector. According to Goldman Sachs, the war may lead to a second consecutive quarter of profit decline in the Chinese internet sector in the third quarter, with the year-on-year decline widening from -9% in the second quarter to -31% in the third quarter.

02

Why Fight a Losing Battle?

Why burn so much money in this war? On one hand, these platforms' core businesses are under pressure. According to Oliver Wyman's survey, compared to emerging platforms like Pinduoduo and Douyin, traditional e-commerce platforms like Tmall and JD.com have experienced significantly slower growth, with some platforms ceasing to disclose GMV data after 2023.

Oliver Wyman's statistics on the evolution of gross merchandise volume (GMV) by major channels show that since 2020, Taobao Tmall and JD.com's growth has slowed or even turned negative, while Douyin E-commerce and Pinduoduo have grown by 30%. If this trend continues, some projections suggest that Douyin E-commerce may surpass Alibaba by 2027.

Meanwhile, food delivery, instant retail, and local lifestyle services have emerged as a massive, "trillion-yuan" new sector. Some analysts believe that a comprehensive consumption platform covering all categories and scenarios will emerge, while consumers' online shopping habits for near and far-field, goods and services, will undergo significant changes.

After months of fierce competition in the instant retail war, different institutions have provided data on market share changes before and after the war. Bank of Communications International's research report shows that before the war in 2024, Meituan Food Delivery held a 65% market share, Ele.me 33%, and other small platforms combined just 2%. Another industry analysis mentions that Meituan's share remained stable at around 70%, while Ele.me's was about 30%.

After the war, Meituan's market share decreased by about 15%-25%, Alibaba's grew by about 10%-15%, and JD.com's was around 8%. Data discrepancies include the impact of sales channels like brand WeChat mini-programs.

03

Daily Orders: Meituan Stable, Alibaba Doubles, JD.com Declines

According to Meituan's financial report and industry agency disclosures, before the war, Meituan's daily orders averaged around 68 million in 2024, with a peak of over 150 million daily orders in July for instant retail, and about 71 million daily orders in November.

Multiple institutions estimate that Alibaba's daily orders averaged 20-30 million in Q1; grew rapidly with subsidies in Q2 to 35-40 million daily orders; peaked at 120 million daily orders in August after sustained growth in Q3; and averaged about 59 million daily orders in November.

JD.com, just entering the fray in Q1, saw its daily orders double from 5 million to 10 million in just seven days; grew rapidly in Q2, with subsequent daily orders stabilizing at 25 million; and saw a significant decline in orders in Q3 after strategically reducing food delivery subsidies, with institutions estimating its overall daily orders in November to be between 11-15 million.

04

Merchants Bear Up to 70% of Subsidies

In the food delivery war, the subsidy allocation between platforms and merchants has evolved over time. According to reports, merchants initially bore 30% of the subsidies, but platforms gradually adjusted policies, with some merchants now bearing around 70%.

Tea beverages are the main battleground in this food delivery war. We analyze merchant conditions during the war based on the Q3 financial reports of listed companies Luckin Coffee and Overlord Tea Princess (Chagee).

Luckin Coffee participated in food delivery subsidies, with Q3 revenue of 15.287 billion yuan, up 50.2% year-on-year, but net profit of 1.278 billion yuan, down 2%, showing revenue growth without corresponding profit growth.

Chagee, positioned as a high-end tea beverage with an average price of around 18 yuan, did not participate in this war to maintain its brand image. As a result, it was sidelined in this "wool-pulling" war, with Q3 revenue and profit both declining year-on-year. Revenue was 3.208 billion yuan, down 9.4%, and adjusted net profit was 503 million yuan, down 22.2%.

There are currently two views in the market on whether the subsidy war will change the tea beverage market landscape: Q3 was the peak subsidy period, and with winter approaching, tea beverage subsidies will significantly decline. Once marketing activities stop, one view is that the new landscape and new members absorbed will persist, while another view is that some consumers will return to their original consumption habits. How the market evolves remains to be seen.

Additionally, some analysts believe that catering industry enterprises with self-developed raw materials, cost control capabilities, and digital systems have slightly more room to maneuver in this instant retail war led by internet giants.

For example, Mixue Ice Cream & Tea has a high proportion of self-produced raw materials, coupled with the purchasing volume of tens of thousands of stores, enabling it to reduce the cost of raw materials per cup to 3-4 yuan. Even with stacked food delivery subsidies, it still maintains profit margins. Additionally, Mixue has the "Snow King Manager" digital system, which can monitor platform subsidies in real-time and dynamically adjust full-reduction strategies, "using AI to counter AI." However, Mixue only publishes semi-annual reports, lacking Q3 financial data for comparison, and further financial report data is needed for observation.

05

The War Shifts Tracks: From Capital to Algorithm-Driven

After months of intense competition, the three giants have reached a rational consensus: all acknowledge that "burning money for scale is unsustainable." On the merchant side, pain points remain unresolved, with profits squeezed. While delivery riders have earned hard-earned money, they face immense delivery pressure behind their high incomes, and platform delivery mechanisms directly impact rider earnings. As a result, the war has now entered a new phase, shifting from capital expansion to refined operations.

All three platforms have adjusted their goals. Alibaba stated that it would no longer focus on order growth but instead on user retention and merchant ecosystem health, with high-value orders accounting for over 75%. Meituan said that its Q3 losses had peaked and that it would focus on high-value orders in the future. JD.com gradually reduced subsidies in September-October.

According to reports, JPMorgan believes that high subsidies will ease by the first quarter of 2026, citing reasons such as potential regulatory concerns over irrational low prices and the difficulty for any platform to sustain high subsidies given the enormous order volume.

Additionally, JPMorgan predicts that Meituan is expected to achieve break-even by mid-2026, with a profit of 0.4-0.5 yuan per order in the second half of the year, while Alibaba may not approach break-even until the end of 2026. This implies that Meituan's profitability will recover earlier than expected, while Alibaba's food delivery business will remain under pressure in the short term.

According to Goldman Sachs' estimates, Meituan's long-term market share will decline from 75% to 50%, and its long-term profit per order will also decrease from 1.5 yuan to 0.8 yuan.

Algorithms will become the new battleground. Meituan said it would enhance rider experience and efficiency by optimizing algorithms and improving rules. Alibaba will integrate large models into supply chain forecasting to strengthen intelligent supply chain predictions. JD.com emphasized its scale investment in supply chain and intelligent warehousing to further improve efficiency.