China’s leading e-commerce firms are locked in an aggressive price war in the fast-growing instant retail sector, a battle that is weighing heavily on their profits and adding to deflationary pressures in the country’s economy.
Companies including Alibaba, Meituan and JD.com are competing fiercely in the one-hour delivery market by offering heavy discounts and coupons to attract users. While the strategy has boosted customer numbers, it has also drained cash reserves and raised concerns among investors over long-term profitability. Regulators have also stepped in, worried that the steep price cuts could spark a downward spiral in an economy already strained by weak property demand and job insecurity.
Executives at the top firms have openly acknowledged the challenges. JD.com CEO Sandy Xu described the current situation as “excessive competition,” while Meituan chief Wang Xing referred to a “new phase of competition.” Zhao Jiazhen, co-CEO of PDD Holdings, noted that rivalry had “intensified further” during the last quarter.
The battle began earlier this year when JD.com launched a food delivery app to rival Meituan. Alibaba, which owns Ele.me, also stepped up investments in the segment. Analysts estimate that industry-wide losses surpassed 4 billion dollars in the second quarter alone. Reports suggest that the three companies could spend more than 160 billion yuan, or around 22 billion dollars, over the next 12 to 18 months to protect or grow their positions.
Meituan, which relies heavily on food delivery, is expected to feel the greatest pressure, while JD.com’s delivery-related losses nearly erased its second-quarter profit. Alibaba is less exposed as instant retail makes up a smaller share of its business.
Despite the near-term pain, companies believe the sector holds long-term promise. Alibaba projects instant retail could add 1 trillion yuan in annualised sales within three years. Key indicators to watch include whether food delivery users move to broader e-commerce platforms, with both JD.com and Alibaba reporting strong growth in active users recently.
However, there are signs regulators may intervene. Authorities have warned platforms against “race to the bottom” competition, prompting companies to pledge in July that they would reduce destructive pricing tactics. Analysts believe these commitments could gradually ease the intensity of the battle.
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