1. China’s food delivery industry saw a boom-and-bust cycle beginning in summer 2025, when e-commerce giants launched an unprecedented subsidy war. Li Ling’s milk tea shop sold its 11-yuan pudding sago drink for just 1 yuan after platform discounts via JD.com. [para. 1] The bonanza ended by the fourth quarter as subsidies dried up and platforms pressured merchants to shoulder promotional costs. [para. 2]
2. Market leader Meituan swung to a net loss of about 23.4 billion yuan in 2025, while JD.com and Alibaba’s Taobao Instant Commerce racked up steep operating losses. [para. 3] By 2026, a sweeping regulatory crackdown on excessive competition effectively ended the subsidy war. [para. 4]
3. For merchants, the legacy proved double-edged. Discounts boosted online orders but weakened pricing power and conditioned consumers to expect rock-bottom prices. [para. 5] In early 2026, Li’s net revenue per online order fell below 60% of the list price, so she raised the free-delivery threshold from 18 to 20 yuan. [para. 8] Nearly 70% of merchants suffered year-on-year revenue declines in 2025, and 80% reported shrinking net profits, according to BDO Consulting. [para. 9] Average online order values fell 3–5 yuan in many cities in 2026; orders under 15 yuan accounted for nearly 30% of the total in major cities. [para. 10]
4. For high-frequency, low-ticket categories like bubble tea and coffee — key subsidy battlegrounds — the aftermath prompted a strategic shift. [para. 7] Mixue Group, the largest freshly made beverage chain, saw net profit fall 14.7% in H1 2026 despite 2.3% revenue growth. [para. 12] It launched a three-year plan to use fresh fruit, milk and coffee beans by 2028. [para. 13] Guming scaled back online promotions to protect physical store pricing [para. 14] and renovated or relocated about 2,000 stores, targeting 4,000 by year-end. [para. 15] Guming derives over 20% of sales from coffee, aiming for 30%; Chagee added gelato. [para. 16] Analyst Sun Ting says tea shops are evolving into neighborhood convenience stores. [para. 17]
5. Traditional restaurants face more complex pressures. Luo Feng’s company adopted a defensive stance against platform demands for further price cuts. [para. 20] Landlords factor delivery-generated foot traffic into rents, compounding commission pressures. [para. 21] Meituan requires merchants in major promotions to price items below the average diners paid over the previous three months. [para. 22] Algorithm-driven red packets erode pricing control; Wang Chao calls it a prisoner’s dilemma where fear of losing visibility compels restaurants to play a rigged game. [para. 23][para. 24]
6. Many restaurateurs are betting on dine-in. Nanchengxiang, a Beijing chain with nearly 200 outlets, limits delivery to about 20% of sales. [para. 27] Yuangu maintained 85% of revenue from offline sales. [para. 28] Some independent restaurants severed ties with platforms entirely, redirecting funds from digital marketing to better ingredients and service. [para. 29][para. 30]
7. Government intervention drove the realignment. In January, regulators barred platforms from forcing merchants into promotions or selling below cost. [para. 33] Five months later, new guidelines prohibited long-term massive subsidies, requiring promotional funds to come from legitimate operating profits. [para. 34] By mid-2026, major platforms’ combined subsidy spending had fallen 60–70% year-on-year. [para. 35]
8. With less money on incentives, focus shifted to operating efficiency. Meituan reported a 490% year-on-year net profit increase in Q2 2026. [para. 37] By June, Meituan held about 52% of the delivery market, Taobao Instant Commerce 41%, and JD.com 7%. [para. 38] Taobao substantially narrowed losses; Alibaba’s domestic instant retail reported 53.3 billion yuan quarterly revenue, up 45%. [para. 39] JD.com narrowed delivery losses by over 50% by cutting investment. [para. 40]
AI generated, for reference only
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