Price wars have never been about low prices alone; they must be coupled with quality and service guarantees. Price wars are not just about subtraction; they are also about addition. What is subtracted is price inflation, and what is added is quality and service assurance.

Surprisingly, this year's Double 11 shopping festival saw price wars erupting in the instant retail sector.

Compared to the fiercely competitive traditional e-commerce market, the instant retail market is still a high-growth blue ocean with promising prospects. There seemed to be no reason for a price war.

Yet, JD SevenFresh chose to be the disruptive force that shook up the status quo.

It cannot be denied that price wars are incredibly effective.

After several rounds of aggressive pricing, JD SevenFresh's performance stood out: within the first 72 hours of Double 11, both online order volume and transaction user numbers achieved triple-digit year-on-year growth, with bestsellers in categories like fruits, vegetables, aquatic products, and meat, poultry, and eggs selling out. Faced with JD SevenFresh's targeted low-price strategy, competitors couldn't sit idle. Meituan Xiaoxiang quickly adjusted prices for hundreds of products, and Hema also intensified its promotional efforts. The price war in the instant retail market had begun.

While there has been much analysis, we will approach the upcoming price war from a different angle today.

Didi outcompeted Uber in China, Luckin Coffee toppled Starbucks, and domestic new energy vehicles are fiercely competing with joint venture brands. Price has consistently proven to be a powerful weapon. The instant retail market is no exception.

The development of instant retail over the past decade has been tumultuous. When it first started, despite higher prices than traditional e-commerce, it enjoyed a wave of growth driven by consumers' pursuit of novel shopping experiences.

However, the subsequent lull in instant retail indicated that a high-price, high-cost, high-margin business model is unsustainable. Once the novelty wears off, this model becomes unsustainable. Hema's development seems to mirror the evolution of instant retail over the past few years. As a benchmark for new retail, Hema initially focused on mid-to-high-end selections and standardized fresh produce, closely associated with "middle-class high-quality consumption." Initially seen as a byproduct of consumption upgrades, it gained significant attention.

But today, the winds have changed. Consumer de-enchantment has replaced consumption upgrades, and a rational consumption mindset focused on value for money has become mainstream. "New middle class" is no longer a focus, and markets beyond the Fifth Ring Road, lower-tier cities, and county-level markets have become hotspots. These trends clash with Hema's development strategy.

The reason for Hema's setbacks in recent years is straightforward: During the upswing, a high-price, high-cost, high-margin model was not glaring under the support of consumption upgrade ideals. Only when the tide recedes do we discover who has been swimming naked.

A price war with Sam's Club allowed Hema to taste the sweetness of price competition. Starting from the end of last year, Hema has comprehensively initiated a discount revolution, reducing prices for over 5,000 products in offline stores across categories like dairy products, biscuits, instant food, beverages, personal care products, frozen meat and poultry, and frozen aquatic products. Prices in stores have generally decreased by 20%. If time could be turned back a few years, it would be hard to imagine Hema actively labeling itself as low-priced. However, circumstances forced their hand. Yet, reversing years of high-price perception is not easy.

On social platforms like Xiaohongshu, complaints about Hema's high prices abound.

In the current round of competition in the instant retail market, compared to Meituan Xiaoxiang and JD SevenFresh, Hema remains the most expensive instant retail platform. "Expensive prices" may be Hema's primary dilemma.

If price wars were solely about low prices, things would be simpler. Either cut costs and prices to the bone or reduce product quality and service quality along with price reductions.

It wouldn't be favored by so many business tycoons and become the ultimate weapon in "high-end commercial wars."

Let's see how JD.com, which established its position in e-commerce through price wars in multiple fields like home appliances, 3C, and books, interprets this – low prices based on quality and service guarantees have been JD's most critical weapon for success.

Price wars have never been about low prices alone; they must always be coupled with quality and service guarantees. Price wars are not just about subtraction; they are also about addition. What is subtracted is price inflation, and what is added is quality and service assurance.

However, in the field of instant retail, what should be reduced has not been sufficiently reduced, and what should be added has not been added. This might be one of the reasons why JD SevenFresh initiated a price war at this time: although the instant retail market has a promising future, there is a significant hidden concern beneath the surface harmony – consumer satisfaction with quality and service is continuously declining.

According to data from the Consumer Protection Platform under the China Electronics Chamber of Commerce, as of the first half of 2024, there have been a total of 12,592 complaints related to instant retail platforms. Among them, there were 4,127 complaints in 2023, accounting for 32.77% of the total complaints, with an overall complaint resolution rate of only 27.38%, a decrease of 9.64 percentage points from 2022. The major complaint issues include poor product quality, inadequate after-sales service, and untimely delivery. The platforms with the most complaints are, in order: Xiaoxiang Supermarket (formerly Meituan Maicai), Duoduo Maicai, and Hema Supermarket.

It is not surprising that Meituan Xiaoxiang has the most complaints, aligning with my experience as an ordinary instant retail consumer. Many of my colleagues and friends live or work near Xiaoxiang Supermarkets, which indeed offers the convenience of timely delivery. However, the quality of their products leaves much to be desired. Especially for fresh food, there are frequent issues such as expired or spoiled products, lack of freshness within the shelf life, and damaged packaging.

In this round of instant retail market competition, compared to JD SevenFresh and Hema, Meituan Xiaoxiang's label of "poor quality" may become a hidden concern. At the same time, Xiaoxiang Supermarket's prices are neither high nor low, stuck in the middle. Previously, Meituan Xiaoxiang also launched the "Tug-of-War Price" to join the fray, but due to a lack of sincerity in pricing, the effect was minimal.

Of course, the issues exposed in Meituan Xiaoxiang's product quality stem from shortcomings in supply chain management, procurement and sales expertise, product quality control, inventory management, and other aspects. In these areas, Meituan obviously cannot compete with platforms like JD.com, which has a strong supply chain capability built on its self-operated e-commerce origins.

Although JD SevenFresh initiated the price war during Double 11, this round of price wars in instant retail is likely to continue until the market reshuffles.

In response to whether it was engaging in a price war, JD SevenFresh previously stated that low prices have always been a long-term strategy and were not deliberately targeted at anyone. This response, when carefully interpreted, is thought-provoking. You can interpret it as "diplomatic language" to avoid escalating industry conflicts, or as a declaration of war from JD SevenFresh to fight the price war to the end.

If JD SevenFresh intends to fight the price war to the end, it has a notable disadvantage compared to Meituan Xiaoxiang and Hema: its scale is small. JD SevenFresh has a limited number of offline stores, mainly covering regions like Beijing-Tianjin-Hebei, Shanghai, and the Greater Bay Area, which directly affects its market coverage and influence. In terms of delivery, it cannot provide efficient delivery services like Meituan Xiaoxiang. However, JD SevenFresh is clearly aware of this and completed the integration with its dark store business before initiating this price war, a crucial move to "compensate for its shortcomings."

After all, the omnichannel "store + warehouse" model based on dark store integration lays the foundation for JD SevenFresh to expand its regional coverage and increase outlet density. After completing the integration with dark stores, JD SevenFresh's delivery radius and timeliness have undergone a qualitative leap, which is why JD SevenFresh's war report specifically emphasizes an average delivery time of 27 minutes.

Although the integration with dark stores has been completed, there is still a significant gap between JD SevenFresh and Meituan Xiaoxiang and Hema in terms of regional coverage in the short term. However, JD SevenFresh has a more pronounced advantage in product quality and price.

On the one hand, supply chain management is JD's strength, with a rich variety of self-operated and directly sourced products, and guaranteed product quality. On the other hand, JD SevenFresh's "price-breaking" strategy aims to undercut industry bottom prices, based on supply chain cost reduction and efficiency, squeezing out excess moisture in the supply chain. This is the confidence behind JD SevenFresh's low prices.

However, for JD SevenFresh to win the price war it initiated, the current integration with dark stores is still insufficient. Perhaps in the next phase, JD SevenFresh will accelerate its regional coverage. Adhering to the path of "good, fast, and cheap" is destined to be a challenging road and places higher demands on JD SevenFresh's supply chain capabilities.

The new round of price wars ignited by JD SevenFresh will inevitably lead to a profound reshuffle in the instant retail industry. The outcome of the war is still uncertain, but it is believed that only by addressing all shortcomings in product quality, pricing, and service can one ultimately shake up the market landscape and emerge victorious.