E-Commerce Giants Reignite Price War After Food Delivery Battles

Following their bruising battles in the food delivery arena, Alibaba, JD.com, and Meituan are now squaring off in a new battleground: the hard discount retail sector.

Just days ago, Meituan launched its own self-operated supermarket, “Happy Monkey,” with its flagship store opening in Hangzhou. The grand opening was a bustling affair, drawing crowds of early birds and after-work shoppers alike.

Eye-catching promotional pricing included 24 bottles of mineral water for $9.9, an entire roasted chicken for $16.9, four egg tarts for $5.9, and 30 fresh, antibiotic-free eggs for only $11.9. The store boasts a wide array of goods, from staple foods and snacks to fresh produce, baked goods, and toiletries, all emphasizing affordability.

The name “Happy Monkey” and its down-to-earth approach suggests a focus on appealing to average consumers. This strategy aligns with how hard discount retailers operate.

The “hard discount” model differs significantly from traditional retail and even “soft discount” approaches that focus on selling near-expiry items or clearance goods. Hard discount supermarkets consistently offer high-quality products at significantly lower prices.

Beyond Meituan’s Happy Monkey, Alibaba and JD.com have also been strategically positioning themselves to capture a significant share of the hard discount market.

As new players aggressively enter the scene, established contenders are refreshing their brands. Coinciding with Happy Monkey’s launch, Alibaba’s Hema NB underwent a rebranding, emerging as “Super Hema Suan NB” (meaning “Super Hema is very cost-effective”).

In August, JD.com quietly launched its own discount supermarkets in Zhuozhou, Hebei, and Suqian, Jiangsu.

The convergence of these three internet giants underscores the growing prominence of the hard discount market in China.

Why are these major corporations so intensely focused on the hard discount model? The answer lies in its inherent market appeal and potential for disruption.

Traditional brick-and-mortar supermarkets, while selling goods, also operate on a “shelf rental” model. They charge suppliers for shelf space within their stores. This system inevitably leads to higher prices for consumers and limits product diversity, as suppliers with deeper pockets often secure preferential placement.

Traditional supermarkets, community group buying, and fresh food delivery platforms often struggle to simultaneously satisfy the consumer demands for low prices, high quality, and convenience. The hard discount model aims for exactly that.

Instead of selling shelf space, hard discount retailers directly negotiate with suppliers to determine what to sell and at what price, eliminating unnecessary intermediaries and reducing prices.

Fundamentally, hard discount supermarkets streamline product selection. For example, the German hard discount giant Aldi typically maintains a SKU count below 2,000, with approximately 80% focusing on essential goods. In contrast, a traditional supermarket may have over 10,000 SKUs.

Hard discount supermarkets act as curated buyers, selecting a limited range of the best quality, most affordable products rather than inundating consumers with excessive choices. This simplification reduces the complexity of supply chain management, lowers storage costs, and facilitates larger-scale procurements, leading to more significant pricing power.

Furthermore, private label brands are a key element in differentiating hard discount retailers’ offerings.

Essentially all hard discount supermarkets sell their own private label products to varying degrees. This strategy provides greater control over pricing and cultivates brand loyalty, as repeat purchases are encouraged.

The hard discount model presents a compelling value proposition: consumers benefit from lower prices and retailers can potentially thrive through efficient cost management and high sales volume.

However, the aggressive pursuit of supply chain dominance by these corporations likely extends beyond simply opening a few offline stores. These moves suggest a broader strategy involving the future of instant retail.

Super Hema Suan NB recently announced its integration with Taobao’s Flash Delivery service, reflecting the critical importance of fast last-mile delivery. Other players, like JD.com’s discount supermarkets, allow customers to order through the JD.com app and select instant delivery service.

The hard discount market is becoming increasingly competitive. Aldi is expanding rapidly in the Yangtze River Delta region, while Alibaba, JD.com, and Meituan are also poised for extensive growth.

The hard discount landscape differs from typical subsidy-driven delivery wars in that it places a higher premium on selection of goods, supply chain management, cost control, and the development of private-label products. It is hard to predict who will succeed. Consumers, however, may be the biggest beneficiaries of this rivalry, standing to gain the most from lower prices and greater value.