The Escalating Food Delivery War in China
JD.com Expands Into Food Delivery to Counter Meituan’s Threat to Its Retail Base
While the world focuses on Trump's tariffs and their impact on international trade, within China, two internet giants—JD.com and Meituan—have initiated a new round of competition in the food delivery sector. On April 22nd, JD.com announced that its daily food delivery orders surpassed 10 million, a remarkable achievement considering this figure was only 5 million just one week prior. According to a report from BOCOM International, Meituan's food delivery service processed approximately 60 million orders daily last year, while Alibaba's Ele.me handled between 20 to 30 million. The escalating food delivery war has taken a toll on the stock prices of JD.com and Meituan, which have fallen by 20% to 30% from their March highs, erasing a combined $70 billion in market capitalization.
Quick Recap
JD.com's latest food delivery initiative began in February when the company announced it would provide full social security benefits (known as "wu xian yi jin" in China) for full-time delivery riders starting March 1st, along with accident and health insurance for part-time riders. On February 24th, JD.com further committed to covering the entire cost of these benefits for newly contracted full-time riders, including the portion typically paid by employees.
This strategic move has effectively allowed JD.com to claim the moral high ground in public opinion and triggered a social security benefits race across the food delivery industry. Following JD.com's announcement, both Meituan and Ele.me declared they would also provide social security coverage for their delivery riders.
JD.com has also waived commission fees for the entire year for merchants who joined the platform prior to May of this year.
On April 21st, JD.com publicly accused other platforms (implicitly targeting Meituan) of forcing riders to choose between companies, preventing them from accepting JD.com's "second delivery" orders and threatening to suspend accounts of those who violated this rule. Meituan denied these allegations later that evening.
Following the sexual assault case in Minnesota, JD.com founder Richard Liu rarely made public appearances. However, this JD.com food delivery promotion has received significant support from Liu. Last week, Liu himself donned JD.com's iconic red uniform and rode an electric motorcycle to deliver food. In the evening, he joined delivery riders for hotpot and drinks.
As discussions about JD.com's food delivery service gained traction on social media, the company began offering various types of discount coupons to consumers. Order volume gradually increased, occasionally causing server crashes. In the past two weeks, JD.com has also intensified its recruitment of delivery riders.
Context Check
Chinese business insiders generally view JD.com's entry into the food delivery market as a defensive move. China's major internet retail companies each have distinct advantages: Alibaba's Taobao and Tmall offer a wide variety of brands and products; PDD (parent company of Temu) is known for low prices; while JD.com's strength lies in its self-built logistics network, providing faster delivery times and better guarantees, particularly for electronic products.
Meituan has expanded its platform beyond restaurants to include various retailers of daily necessities and digital products, delivering goods to consumers within 30 minutes through its food delivery network. Meituan's flash shopping service has undermined JD.com's foundation of superior logistics speed. Even JD.com's fastest delivery options typically offer next-day delivery or same-day delivery for morning orders.
The public frequently criticizes Meituan for using algorithms to exploit delivery workers, encouraging riders to violate traffic rules for faster deliveries, and squeezing restaurants' profit margins. Despite these criticisms, Meituan maintains its dominant position in China's food delivery sector, boasting the most extensive restaurant network and the fastest delivery system. ByteDance, the last internet giant to challenge Meituan, ultimately failed.
Rumors suggest that Meituan's current market share of approximately 60% to 70% still has room for growth, but the company has deliberately slowed its expansion to avoid anti-monopoly scrutiny.
A Meituan delivery rider collects a package from a Lenovo retail store.
Let's Dig In
This isn't JD.com's first attempt at food delivery; they conducted a simple trial two or three years ago. However, this time JD.com founder Richard Liu has made multiple public statements and remained active on social networks, demonstrating JD.com's commitment to the food delivery sector. From the perspective of some JD.com insiders, the current results of JD.com's food delivery service have exceeded their expectations.
The current head of JD.com's food delivery service, Guo Qing, was previously a member of Meituan's S-Team (the highest decision-making team surrounding Wang Xing). At Meituan, he primarily managed the hotel business. After leaving Meituan, he briefly pursued entrepreneurship before joining JD.com.
On Our Radar
JD.com's food delivery initiative aims to prevent Meituan from further encroaching on its business, though food delivery itself is not a particularly profitable venture. JD.com's future positioning of food delivery remains uncertain. The service might simply be a means for JD.com to increase the frequency with which users open its app. If JD.com intends to challenge Meituan's dominant position, it will inevitably need to invest more capital to onboard merchants, recruit riders, and subsidize consumers. This would significantly impact JD.com's future profits.
Beyond JD.com and Meituan, Alibaba's Ele.me has also been forced to join the food delivery war, recently increasing consumer subsidies. It remains unclear whether JD.com's gained market share has come more from Meituan or from squeezing Ele.me's space. If the dispute between JD.com and Meituan continues, Ele.me, currently ranked second, may experience the greatest impact.