Taobao vs. Meituan: Another “Crazy Saturday” Showdown?

Get Ready for Another Round of Deals, Folks!

Free juice, ¥0.6 cola, ¥4 milk tea – this past weekend’s delivery wars had me practically bathing in milk tea myself. The competition was fierce, with platforms seemingly giving away the farm.

This latest skirmish between Meituan Delivery and Taobao Instant Delivery, while perhaps appearing to sneak up on some, was nothing short of an all-out bombardment. Over the weekend, both platforms ignited a spending spree, as if by prearranged pact.

Taobao Instant Delivery unleashed a torrent of substantial ¥18.8 red envelopes, while Meituan Delivery countered with an onslaught of milk tea vouchers seemingly flung directly at consumers’ heads. The question on everyone’s mind: how much longer can this lavish spending continue?

Enthusiastic users, having successfully “farmed” these deals, took to various platforms and chat groups, eagerly sharing the joy of what felt like freebies, ensuring no friend missed out on the windfall.

We witnessed the resulting consumer frenzy firsthand. Reports flooded in of individuals securing their “milk tea and coffee freedom” for the entire week. One has to wonder about the practicality of such stockpiling – are these drinks really built to last? The pursuit of savings shouldn’t lead to overconsumption.

Then there were the more strategically minded individuals, like a family of four who managed to acquire 350 eggs for just ¥25, or another consumer who transformed their home into a virtual convenience store with a ¥30 haul. Some even opted to stock up on frozen dumplings, effectively planning their meals for the month ahead.

Beyond the delighted consumers, this delivery showdown proved to be a significant boon for both merchants and delivery personnel. For merchants, the challenge was keeping up with overwhelming demand. For riders, the surge in orders translated directly into increased earnings, creating a powerful incentive to deliver more.

Staff at popular beverage chains like Cha Bai Dao and Gu Ming reported their ordering systems crashing under the deluge of activity. The chaos was such that distinguishing orders became a manual process, with staff having to question customers to confirm their choices.

Meanwhile, delivery riders braved sweltering Hangzhou heat, navigating streets at breakneck speed – their numbers multiplying several times over their usual weekend presence. Reports from Pengpai News indicated that weekend order volumes were “immeasurably deep,” with some riders earning over ¥100 per hour during peak periods. The per-delivery payout, which typically hovered around ¥6-7, doubled to over ¥10, potentially pushing monthly incomes well past the ¥10,000 mark.

Delivery rider gear also received an upgrade amidst this surge.

This intense competition brought back the familiar buzz of past delivery wars. Under this aggressive stimulus, both Meituan and Taobao saw their order volumes soar. Meituan’s internal network reported over 120 million orders by 10:54 PM on July 5th, with food delivery orders exceeding 100 million. Taobao Instant Delivery and Ele.me jointly announced that July 5th saw over 80 million orders, with non-food deliveries surpassing 13 million, and Taobao Instant Delivery’s daily active users exceeding 200 million.

Ironically, following this weekend’s fierce exchange, the stock prices of the major players in the delivery arena – Alibaba, Meituan, and JD.com – all experienced varying degrees of decline. A closer look reveals that their stock performance has been lackluster in the recent past.

However, this trend is understandable. Intense market battles require significant capital expenditure, naturally impacting short-term profitability and consequently, stock valuations. A minor dip is to be expected.

More amusingly, this morning saw a surge across the board for milk tea-related stocks. Even some food and beverage sectors in the A-share market benefited from the ripple effect.

As the saying goes, “He who eats short holds his tongue.” Upon further investigation, it appears Taobao initiated this weekend’s confrontation. On July 2nd, Taobao Instant Delivery launched its “anti-involution promotion,” pledging ¥50 billion in subsidies for users and merchants.

Furthermore, according to “Lao Zhang Talks Retail,” Alibaba invited key merchants to Hangzhou for discussions as early as July 1st. During these meetings, July 5th was designated as a “peak order day,” with the ambitious target of surpassing Meituan’s order volume, aiming for 90 to 100 million orders. The broader objective was to achieve market parity with Meituan within two to three months, supported by the ¥50 billion investment.

As a direct competitor, Meituan was well-informed and prepared for this onslaught. According to LatePost, Meituan initiated a comprehensive internal mobilization, sounding the charge on the afternoon of the 5th to counter the formidable Taobao Instant Delivery. Ultimately, Meituan achieved its highest order volume to date, with insiders hinting that this was not their full capacity.

Despite Meituan’s robust defense, Taobao Instant Delivery managed to meet its objectives. This suggests that while Taobao might be experiencing a temporary setback, the battle is far from over.

Furthermore, the differing public statements from both platforms offer a glimpse into their strategic priorities. While both Taobao Instant Delivery and Meituan Delivery reported aggregate order volumes around 100 million, with non-food orders at approximately 20 million, Meituan’s messaging emphasizes its dominance in food delivery with free meal vouchers. Taobao Instant Delivery, on the other hand, highlights its non-food order performance.

This strategic positioning reveals their respective roles in this escalating conflict.

As the defender, Meituan is keen to reinforce its position as the top player in the delivery industry, hence its focus on food delivery orders and the distribution of meal vouchers. Taobao Instant Delivery, while still trailing Meituan in food delivery, is entering this arena with a broader objective than just capturing orders for daily meals and beverages. Their ambition is to fully integrate online shopping with instant retail, creating a unified consumer ecosystem.

This is why they are offering broad discounts across various merchants and product categories, and why their announcements emphasize non-food order growth.

Intriguingly, Alibaba internally codenamed this initiative the “Huaihai Campaign,” a nod to a pivotal battle in Chinese history. The famous line from the classic film “The Great Decisive Battle” regarding the Huaihai Campaign is: “600,000 against 800,000, this is an undercooked meal. Undercooked or not, we must eat it.”

This historical reference suggests that Alibaba was fully aware of the immense challenges ahead in this delivery war. The close-quarters combat between these two giants is likely to continue for some time.

However, some users have expressed disappointment with JD.com’s comparatively subdued presence in this weekend’s central confrontation, leading to speculation that JD.com may have acted as a vanguard, with Taobao carrying the main offensive.

While this assessment holds some merit, it’s premature to declare JD.com’s efforts waning. Perhaps they are simply observing the battlefield, and might “teleport” into the fray next week.

Regarding the projected outcomes of this delivery war and when a clear winner might emerge, Goldman Sachs recently presented an insightful analysis outlining three potential scenarios:

If Meituan successfully maintains its market share above 60%, as it has in previous years, preserving its leading position, it will mark a victory for Meituan.

Should Alibaba successfully disrupt the market and equalize or even surpass Meituan in order volume, then Alibaba will claim victory.

For JD.com, Goldman Sachs’ projection aligns with its current standing: securing over 20% of the order volume would be considered a win.

In the current landscape, Taobao Instant Delivery and Meituan Delivery are locked in a fierce, head-to-head battle, demanding a decisive outcome.

Finally, it’s worth noting that in recent years, many industries have felt consolidated, with established players possessing deep moats, making it difficult for newcomers to disrupt the market. The delivery sector was perceived as such, with Meituan Delivery seemingly dominant and Ele.me in a distant second, suggesting a stable duopoly.

However, the recent delivery wars have demonstrated the contrary. JD.com has emerged from a standing start to capture over 20 million orders, while Taobao Instant Delivery has tripled its order volume, forcing Meituan to mobilize its entire force. This clearly shows that new entrants can indeed make waves in this industry.

It’s akin to a lion pride: once the king’s dominance is challenged, a cascade of challengers emerges. This brings to mind players like Douyin, Didi, and Baidu. If these platforms can compete, why not others?

Similarly, in the ride-hailing sector, if Didi and Gaode can compete in ride-hailing and carpooling, why not Meituan and Douyin?

Consider the broader landscape of local services, community group buying, express delivery, and online travel – all share this dynamic.

If another battle ignites, consumers will undoubtedly be eager participants. Let the games begin!