In the past two quarters, China’s three major internet giants have invested nearly 100 billion yuan (approx. 13.7 billion USD) in the battlefield of instant retail, staging what could be considered the fiercest business street battle in internet history. Behind this money-burning war lies each company’s strategic layout for the future retail ecosystem and an intense battle for dominance over consumer mindshare. Consumers enjoyed 2-yuan (approx. 0.27 USD) cups of milk tea, merchants saw a mountain of orders, and delivery riders were overwhelmed. But behind the prosperity loomed significant profit declines for all three companies and growing concerns from the capital market. This war has gone far beyond ordinary business competition — it will determine not only these companies’ future performance but also the eventual shape of China’s instant retail market.
01. War Consumption and Results: Massive Investment with Limited Returns
Financial data most vividly quantifies the brutality of this business war. In Q2 2025, JD.com’s new business segment (mainly takeout) saw its operating loss balloon from 700 million yuan (approx. 96 million USD) last year to 14.8 billion yuan (approx. 2.03 billion USD), dragging down overall quarterly profit by 51%.
Alibaba’s burn showed up in its free cash flow: in Q2, net outflow reached 18.815 billion yuan (approx. 2.58 billion USD), compared to a 17.372 billion yuan (approx. 2.38 billion USD) inflow last year — a staggering difference of 36.187 billion yuan (approx. 4.96 billion USD).
Meituan’s Q2 sales and marketing expenses rose 51.8% year-over-year, from 14.8 billion yuan (approx. 2.03 billion USD) to 22.5 billion yuan (approx. 3.09 billion USD) — an increase of 7.7 billion yuan (approx. 1.06 billion USD).
While Meituan invested relatively less in its two major businesses and remained profitable, increased subsidies severely eroded its profit, with its core local commerce segment’s operating profit plunging by 76%.
That said, the massive investment did result in a short-term surge in order volume. With funding support, the daily order volume in the entire instant retail market swelled to over 200 million orders, up from the previous 80–90 million level.
Alibaba’s Taobao Flash Sale and Ele.me jointly announced that daily orders rose from 60 million to 80 million, and a peak of 100 million orders was achieved during the “First Cup of Autumn Milk Tea” campaign.
However, according to UBS and other institutions, the market structure has not fundamentally changed:
- Meituan remains the dominant player with around 65% market share
- Ele.me holds 28%
- JD trails at 7%
02. Strategic Intentions: Three Giants, Three Different Logics
On the surface, this war was triggered by JD’s sudden entry into the takeout business, but deeper analysis reveals three completely different strategic motivations.
JD.com is essentially on the defensive. Liu Qiangdong belatedly realized that Meituan’s Flash Sale service — both in business model and category expansion — directly threatened JD’s advantages in logistics and its core categories like electronics and home appliances.
Alibaba, on the other hand, sees instant retail as a way to strengthen its commercial ecosystem and compete for user mindshare, using “ecosystem synergy” to channel traffic from Taobao and Tmall into real-time scenarios. Jack Ma recognized that instant retail could help Alibaba scale up its ecosystem from the entry point.
Meituan appears to be the defending party, but it is actually the most proactive attacker. For Meituan, takeout is the company’s engine, and instant retail is a natural extension of its battlefield. Meituan wants not just a larger share of takeout but a greater proportion of consumer spending in instant scenarios.
All three players are betting big because they recognize the same thing: high-frequency, short-path, real-time delivery services are becoming the critical link between consumers and merchants. This explains why Alibaba and JD want to seize the “takeout” space — using high-frequency orders to drive traffic to their relatively lower-frequency e-commerce platforms.
03. Unit Economics: Unsustainable Logic Behind Subsidies
In the short term, all players have seen their unit profit eroded by subsidies:
- Higher fulfillment costs (including rider guarantees and labor expenses)
- Increased marketing and subsidy spending
- Depreciation and operating costs of “lightning warehouses” hitting the P&L
This means that even if order volume rises, profit has not increased proportionally — in fact, margins have sharply compressed.
However, platforms differ in marginal efficiency:
- Meituan, with its long-established rider pool and dispatch algorithms, has seen less increase in unit fulfillment cost.
- Alibaba can lower customer acquisition costs using its traffic ecosystem, but it still lacks end-point delivery efficiency.
- JD.com has comparative advantages in large-item delivery and supply chain efficiency, but applying that to real-time retail (with minute-level delivery expectations) requires a complete overhaul of its offline logistics and capacity systems.
Meituan’s Local Commerce CEO Wang Puzhong nailed it in an interview:
“An order is just a number. They forget — order volume and meaningful GTV (Gross Transaction Value) are two different things.”
The performance boost from subsidies is clearly a short-term frenzy, not a viable long-term competitive strategy. Looking forward, all three companies are too large to easily kill one another. Any business model must eventually be profitable to be sustainable.
04. Future Trajectory: From Subsidy War to Capability Contest
How long will this commercial war last, and can it truly change the market structure? That depends on who can first achieve both border expansion and unit economic closure.
The next stage of competition will shift from pure subsidy battles to a three-pronged contest of subsidies, fulfillment, and operational density:
- Meituan uses density and operations to defend and counterattack
- Alibaba uses capital and traffic to encircle
- JD seeks a middle ground leveraging supply chain logic
Over the past 1–2 quarters, this war has entered a “burnout and structural differentiation” phase. The effects of spent subsidies and traffic spikes are significant but fragile, unlikely to be sustainable. Structural advantages will determine ultimate competitiveness.
The speed and direction of boundary expansion now decide how far along we are in this war, and likely how much longer it will continue.
Meituan wants to extend takeout to more retail categories. Meanwhile, Alibaba and JD are trying to grab “takeout” territory to drive frequency for their e-commerce. JD may be the least willing to fight a long war. Liu Qiangdong adopted a high-cost, aggressive approach to quickly trade losses for users — a strategy that now appears to have been misguided. Thankfully, he also seems uninterested in staying in this business long term; JD has seemingly abandoned this approach over the past month or two.
05. Future Outlook: Transition from Price War to Value War
Regulation may change the rules of the game. On July 18, the State Administration for Market Regulation (SAMR) summoned the three platforms. On July 23, three ministries jointly released a draft of the Internet Platform Pricing Behavior Rules for public comment — regulating commissions, algorithmic price discrimination, and subsidies.
This could completely reshape the competitive dynamic of the takeout sector.
On August 1, all three giants simultaneously issued statements resisting unfair competition, yet the crude subsidy wars are far from over.
- Meituan still has 170 billion yuan (approx. 23.4 billion USD) in cash reserves, enough for a prolonged battle
- JD and Alibaba are adjusting strategies
- Meituan management expects Q3 takeout to post a loss but says they will focus more on growth quality, not just quantity
Meituan’s stock price has already halved from last year’s peak, with hundreds of billions of HKD in market cap evaporated.
The market will eventually return to rationality, but this burning-cash era has permanently reshaped the industry. Former kings were forced into battle, newcomers stormed the gates at a loss, and consumers — after enjoying short-lived subsidy perks — will ultimately face a more consolidated but potentially higher-quality takeout market.
[Disclaimer]: The above content reflects analysis of publicly available information, expert insights, and BCC research. It does not constitute investment advice. BCC is not responsible for any losses resulting from reliance on the views expressed herein. Investors should exercise caution.