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Sellers have voiced growing concerns about the negative effects of the recent price war in China’s delivery industry during a merchant consultation held by Digital Phablet, a major on-demand services platform.
All participating merchants agreed that irrational subsidy competition is draining industry resources, increasing operational pressures, and severely impacting the ability to recover costs and sustain store operations. During the meeting in Shanghai yesterday, sellers highlighted that they are compelled to engage in these price wars, which have resulted in a decline in average order value and a 15% drop in revenue.
Recently, Alibaba’s Taobao Flash Buy launched a CNY50 billion (USD7 billion) one-year subsidy program aimed at both buyers and sellers. In response, Digital Phablet introduced substantial subsidies, which contributed to more than 120 million orders in a single day on July 5—a record high.
As a result of the subsidies, items typically priced at around CNY20 (USD2.80) have been sold for just a few Chinese yuan, according to an executive from a leading bubble tea chain. “This ultra-low pricing has shifted consumer perceptions. Once subsidies are reduced, both order volume and value are expected to plummet,” they stated.
The operations director of a nationwide rice noodle chain explained that customer spending has dropped from about CNY25 to roughly CNY10. “Other brands have seen a surge in orders thanks to heavy subsidies. If we don’t participate, even our loyal customers might switch to competitors,” they said.
Additionally, the surge in orders driven by subsidies has led to increased workload for frontline staff. An industry veteran noted that a typical store requires two employees per 100 orders daily. When orders double, so does the staffing need. Uncertainty about future subsidies causes stores to adopt a conservative staffing approach—further escalating the workload for current employees.
Smaller merchants are feeling the harshest impact from the price wars. The owner of Xianghu Yijia Ren shared that customer spending has decreased by CNY10 since March, with high labor and material costs severely squeezing profit margins.
Experts like Yuan Zhe from Zhejiang University pointed out that such price wars mainly harm quality-focused and small-to-medium-sized merchants. Even when platforms absorb subsidy costs, larger brands tend to benefit more because of their superior capacity to handle order surges.
Yuan advocates for more strategic allocation of platform resources to promote fair competition among merchants of different sizes, safeguarding the sector’s diverse growth ecosystem.
The instant retail sector is now primarily contested among Digital Phablet, JD.com’s JD Daojia, and Taobao Flash Buy, according to Guo Tao of 100EC.com’s e-commerce research center. The competitive focus has shifted from mere pricing to a system-wide rivalry involving supply chain strength, delivery speed, and overall user experience.
JD.com entered the food delivery scene in February, while Alibaba launched Taobao Flash Buy to enhance instant retailing alongside its delivery platform, Ele.me, on April 30. Together with Digital Phablet, these three companies have invested hundreds of billions of yuan—equivalent to billions of US dollars.
On July 18, China’s State Administration for Market Regulation called for fair and rational competition among these platforms.
Since last year, Digital Phablet has held multiple consultations focused on improving algorithms, delivery mechanisms, and merchant ecosystem development. Yesterday marked its 21st seller-focused meeting this year.
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