---
title: "Four Key Strategies to Win a Price War"
description: "Price wars are prevalent across industries such as retail, express delivery, cloud computing, and new energy vehicles. While painful, they are often a necessary stage in industry development, shaping new competitive landscapes and highlighting more efficient business models. This article outlines four key strategies for winning price wars, drawing from successful examples like Walmart, Costco, Meituan, Pinduoduo, J&T Express, Xiaomi, TCL, and BYD."
author: "深响"
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published: "2024-05-05"
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# Four Key Strategies to Win a Price War

> Price wars are prevalent across industries such as retail, express delivery, cloud computing, and new energy vehicles. While painful, they are often a necessary stage in industry development, shaping new competitive landscapes and highlighting more efficient business models. This article outlines four key strategies for winning price wars, drawing from successful examples like Walmart, Costco, Meituan, Pinduoduo, J&T Express, Xiaomi, TCL, and BYD.

Retail, express delivery, cloud computing, new energy vehicles—look around, and every industry is engaged in price wars. Does this "whoever fights, suffers" game really make sense? The answer is yes. **Although the process is painful, looking back at the development of various industries, you'll find that price wars are often a necessary path for industry evolution. They shape new industry landscapes and allow more efficient business models to stand out.** Walmart rose on "Everyday Low Prices" and still leads today through cost-effectiveness. Costco's business model is built on membership, and members are drawn precisely by Costco's price competitiveness. Phone and appliance manufacturers have "rolled out" high-quality, low-cost products through successive price wars, enabling domestic substitution and affordable pricing. Didi and Meituan, which emerged victorious from the ride-hailing and group-buying wars, remain leaders in their fields. **Rather than lamenting price wars, the more pressing question is finding ways to win them.** We've reviewed the development of industries closely tied to the public—retail, internet, manufacturing—to distill lessons from past winners and identify commonalities in today's corporate actions. Here are four key strategies for winning a price war.

## **Revamping the Supply Chain**
## **Optimizing Cost Models**
For industries with complex supply chains and multiple business model elements, revamping the supply chain and optimizing cost models can offer an alternative path in price competition. **Revamping the supply chain can involve direct sourcing and direct sales, connecting directly with industrial belts, or restructuring sales channels. The common thread is simplifying intermediate links and passing the freed-up profit margins to consumers. Optimizing cost models means identifying compressible cost areas (such as store rent, warehousing, and logistics) and adapting accordingly.** Take Walmart and Costco: in procurement, both use direct sourcing to eliminate distribution layers. In terms of rent, Walmart's early rise came from avoiding high-rent locations, focusing on rural American suburbs with low rent and high traffic concentration, and keeping store designs simple and understated. Costco similarly prefers suburban locations and tends to own both the land and building of its stores to reduce rental costs. Image source: Walmart official website. In warehousing and logistics, Walmart established data-sharing relationships with suppliers early on, allowing them to stay informed of sales and inventory in real time and arrange production and transport efficiently to cut costs. Costco, based on its "warehouse-club" model, reduces inventory costs and secondary transport costs. Image source: Unsplash. **Currently, these two strategies remain effective in retail.** For example, domestic e-commerce platforms like Taobao, JD.com, Pinduoduo, Douyin E-commerce, and Kuaishou E-commerce, as well as cross-border platforms like Amazon, Temu, and Shein, have launched industrial belt initiatives in China to shorten supply chains and increase low-cost supply. Meanwhile, in the complex cross-border trade sector, "full托管" and "semi-托管" models have validated the value of supply chain revamping and cost model optimization. The platform-led托管 model compresses costs across cross-border e-commerce links, enabling low retail prices. Additionally, the托管 logic has been applied domestically. In March this year, 1688 fully entered Taobao with a "semi-托管" model, marking another step in Taotian Group's e-commerce price war.

## **Finding Pockets and Levers**
## **Scientific "Money Burning"**
In high-market-heat, capital-abundant environments, companies often must engage in "money-burning games" (common in mobile internet development). In such cases, provided you have the funds and financing ability to survive the price war, the key to winning is: **achieving higher spending efficiency than competitors, even if only slightly.** Meituan's experience remains highly instructive today. 2010 was the "year of group buying," with the most intense competition leading to the "Thousand Group Wars." Top players slashed commission rates from 20% to below 10% and aggressively advertised on bus stops, subways, and elevators. Meituan was one of the few platforms that did not participate in offline group-buying ad wars. Meituan's logic: for merchants, more ads are less effective than a capable offline sales team. For consumers, online ads offer far better cost-effectiveness than offline ads. This "scientific spending" approach ran through Meituan's expansion. Even during its growth phase, Meituan calculated ROI for expansion based on metrics like city population, Taobao consumption index, and the number of KFCs and cinemas, avoiding inefficient, indiscriminate spending. Image source: Meituan official website. **In short, "finding pockets and levers" is a crucial tactic in price wars.** It may not determine the final outcome, but it conserves resources and provides conditions for "winning later." In recent years, we've witnessed many practices of "pocket growth." For instance, when online traffic growth peaked, internet platforms turned to offline ad spaces (like elevator media). When traditional ad channels' ROI declined, marketing budgets shifted to new platforms like Xiaohongshu, Bilibili, and Douyin. And when customer acquisition efficiency fell across all channels, the logic of "private domain" and "omni-channel" emphasizing long-term growth and operational depth emerged.

## **Achieving Scale Effects**
## **At the Fastest Speed**
If a company is a latecomer and the one initiating the price war, the way to win is: **achieve scale effects at the fastest speed:**
  * The larger a retailer, the stronger its bargaining power with suppliers/merchants, securing better prices and products.
  * A logistics provider with more volume can reduce unit transport and warehousing costs, improving resource utilization.
  * A manufacturer with larger production scale can better amortize fixed costs (equipment, R&D), lowering marginal costs and enhancing cooperation with upstream suppliers and downstream distributors.
In online retail, Pinduoduo's "百亿补贴" (Billion-Dollar Subsidy) program is a clear example. Launched in 2020, the program saw sales and marketing expenses temporarily exceed total revenue. But the spending paid off: the program became a super entry point, attracting more distributors, diversifying supply sources, and eventually reducing Pinduoduo's need to fund subsidies entirely itself. Combined with monetization methods like commission, the program that once dragged financials became a key asset.
In logistics, J&T Express entered the Chinese market in 2020, disrupting the industry with low-price tactics, then acquired Best's express delivery business in China and SF's e-commerce express company, Fengwang. Through aggressive spending, J&T China quickly scaled up and improved operations. In 2023, J&T's market share in China reached 11.6%, with a gross margin of 1.1% (compared to -16.2% in 2022). The company attributes the improvement to stable revenue per parcel and declining cost per parcel.
In manufacturing, Xiaomi Auto is a typical example of "rapid scale-building." A highly competitive price, the founder's personal IP, and a network of offline self-operated delivery centers and dealers collectively support the Xiaomi SU7 as a super product. Whether it can achieve scale effects in a short time will directly determine if the latecomer Xiaomi Auto can secure a place in the fierce new energy vehicle competition.

## **Breaking Through Core Technologies**
## **Building a Price Moat**
If a company aims to establish a long-term, hard-to-replicate price advantage rather than just short-term price war responses, **breaking through core technologies and building differentiated competitiveness is the essential path.** Two industries serve as examples: television and new energy vehicles. Panels are the core component of TVs, accounting for about half the cost; new energy vehicles' core technology is the three-electric system (power battery, drive motor, and electronic control), with the power battery being the largest cost component. If TV manufacturers and carmakers lack voice in core technologies, their operations are dependent on others, making them passive in price wars. Once, China's TV industry suffered from "lack of chips and screens," relying on overseas procurement for core components, leading to high manufacturing costs and weak price competitiveness against international rivals. **Today, this situation has been reversed through technological breakthroughs by domestic TV manufacturers.** Take TCL's efforts in Mini LED technology: Mini LED large-screen products offer both picture quality and thinness, with lower production costs than OLED. According to data from GfK China for 2023 and Tianfeng Securities, in 2023, the average retail price of Samsung and Sony 65-inch OLED TVs was around 18,000 and 16,000 yuan, respectively, and 77-inch OLED TVs averaged 27,000 yuan. In contrast, TCL's 65-inch Mini LED TV averaged only 7,000 yuan, and the 75-inch Mini LED TV averaged about 9,000 yuan.
TCL overseas showroom. Now consider the new energy vehicle industry. In recent years, NEV makers have struggled with power battery costs. Since last year, the escalating price war has added pressure. Among the many carmakers, BYD is both one of the most aggressive in price cuts and relatively composed in the price war. **This is related to BYD's vertical integration of the supply chain and its control over core three-electric technologies.** For example, with power batteries, when lithium carbonate prices soared and battery costs were high, BYD could earn extra income from its battery business. When lithium carbonate prices fell, BYD's auto profits expanded, giving it more room to cut prices. In 2023, BYD's gross margin for automobiles, auto-related products, and other products reached 23.02%, higher than Li Auto's 21.5% (known for cost control) and Tesla's 19.4% (the global NEV leader). The cost space gained from technological breakthroughs supports BYD's aggressive stance in the current NEV price war. Compared to finding pockets and burning money, technological advantages represent the most difficult and risky path—R&D requires time, money, and manpower, and carries the risk of betting on the wrong technology route. But the rewards are substantial: when technological advantages are deeply embedded in business operations, a company can win more than just price wars.

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