---
title: "In the Billion-Yuan Food Delivery War, Has Alibaba Already Won?"
description: "Alibaba's Taobao Flash Purchase has made significant inroads in the food delivery market, but its strategy is not without flaws. Meituan, despite a sharp profit drop, still holds a strong moat due to scale advantages and customer lock-in, making the final outcome uncertain."
author: "在写稿的燃"
publisher: "New Distribution"
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published: "2025-09-17"
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# In the Billion-Yuan Food Delivery War, Has Alibaba Already Won?

> Alibaba's Taobao Flash Purchase has made significant inroads in the food delivery market, but its strategy is not without flaws. Meituan, despite a sharp profit drop, still holds a strong moat due to scale advantages and customer lock-in, making the final outcome uncertain.

### **Source** | Shangyin She **ID** | shangyinshecj **Author** | Ran, writing for the publication
Rome wasn't built in a day, and neither are moats dug in the short term.
The Taobao Flash Purchase narrative
Recently, the latest quarterly reports from the "Three Fools of Food Delivery"—JD.com, Meituan, and Alibaba—have been released, revealing the brutal intensity of the food delivery price war.
In Q2, JD.com's revenue increased 22.4% year-on-year, but net profit fell 50.8%, with an estimated burn of nearly 14 billion yuan on food delivery.
Meituan's revenue grew 11.7% year-on-year, but net profit plummeted 89%, burning approximately 11.5 billion yuan.
Alibaba, with its vast resources, saw revenue grow only 2% year-on-year, but net profit dropped 18%, with an estimated burn of 10 billion yuan on the "food delivery war."
According to the plans announced by the three platforms, they will invest a cumulative total of nearly 100 billion yuan in the food delivery war this year.
Meituan, which relies on food delivery as its foundation, appears to have suffered the most from the simultaneous attacks by JD.com and Alibaba. After its earnings report, its Hong Kong-listed shares plunged 10%, hitting a new low since September last year.
This also takes into account the heavier investment and fiercer competition in July and August, causing Meituan to bleed more. Wang Xing admitted: "We expect significant losses in core local commerce due to strategic investments in Q3, but we remain confident that the industry will return to reasonable levels in the future."
In contrast, Alibaba's stock surged over 12% after its earnings release.
Consequently, many media analysts believe that Alibaba has wiped out nearly 90% of Meituan's profits with a single move, and with continued investment of tens of billions in Flash Purchase over the next year, coupled with its cash and other liquid investments of 585.66 billion yuan—the highest among the three (JD.com and Meituan have 223.4 billion and 171.1 billion yuan, respectively)—the massive capital injection will surely secure victory in the food delivery war.
But food delivery is ultimately a tough business. Both Ele.me and Taobao Flash Purchase have been loss-making. What if the massive investment doesn't lead to sustainable profitability?
In response, Jiang Fan explained at the earnings call that Alibaba's logic is not about food delivery per se, but using this high-frequency scenario to drive traffic to the slowing Taobao platform.
In other words, the strategic position of the food delivery business must be viewed within a larger chessboard, and its own profitability is not the primary concern.
Some analysts further argue that Alibaba spends over 100 billion yuan annually on purchasing traffic from channels like Xiaohongshu, Bilibili, and Douyin. The food delivery subsidies essentially redirect these tens of billions to subsidize users, which not only brings traffic to Taobao but also supports the growth of Flash Purchase.
Under this narrative, it seems only a matter of time before Taobao Flash Purchase defeats Meituan, both in the short and long term.
But this is an overreaction to short-term events.
It's important to clarify that Alibaba's stock surge after earnings was not due to the success of Flash Purchase, but rather to the better-than-expected 26% growth of Alibaba Cloud and its self-developed AI chips.
As Goldman Sachs noted in its report, the market's initial positive reaction to Alibaba's earnings was mainly attributed to the accelerated growth of the cloud business and higher-than-expected capital expenditure.
In fact, the narrative of Taobao Flash Purchase has several flaws.
**First, the synergy between food delivery and e-commerce is not obvious.**
Jiang Fan disclosed at the earnings call that Taobao Flash Purchase's average daily orders of 80 million in August boosted Taobao APP's daily active users (DAU) by 20%. But this is August data; perhaps in Q2, Flash Purchase orders hadn't reached a critical mass, and the impact on DAU was not significant.
Such heavy subsidies, where many tea drinks can be obtained for free with coupons, inevitably lead to a significant increase in monthly active users.
The increase in DAU is ultimately aimed at driving more transactions. In Q2, Taotian's core customer management revenue (mainly from commissions and advertising) grew 10%, but in the previous quarter it was 12%, making it hard to see the driving effect of Flash Purchase.
Additionally, Alibaba's sales and marketing expenses this quarter were 53.1 billion yuan, over 20 billion more than the same period last year, with over 10 billion used for subsidies. Currently, this has not offset advertising investment, and whether food delivery traffic can replace ad spending remains to be seen.
Moreover, advertising attracts relatively high-intent users who click in voluntarily, which differs from users attracted by low-price coupons to order food.
**Second, Alibaba's approach to Taobao Flash Purchase still follows a "cannon fodder" mindset.**
Alibaba has shown great determination and intensity in launching Taobao Flash Purchase, quickly achieving good results, and many see the capable Alibaba again.
But Taobao Flash Purchase is essentially still about solving the traffic scarcity problem of Taobao's main site. This continues the previous approach: the ROI of the business itself is not important; as long as it benefits the entire ecosystem or brings traffic to the e-commerce business, it's considered a success.
Alibaba's strength lies in its powerful ecosystem and emphasis on synergy, with e-commerce at the core. During its aggressive expansion years, acquisitions like UC Browser, Youku Tudou, AutoNavi, and Ele.me all served the purpose of channeling traffic to the main site.
For example, after Alibaba and Ant Financial fully acquired Ele.me for $9.5 billion in 2018, then-CEO Wang Lei believed that "given Ele.me's three major values to Alibaba Group (local life entrance, instant delivery, and payment scenarios), any investment is worthwhile."
At that time, Ele.me focused on third- and fourth-tier cities as its core battlefield, because Alibaba considered that a new customer from lower-tier markets would bring both a new Alipay user and a new Taobao app user.
Ecosystem synergy can help new businesses leverage the ecosystem's strengths to fill gaps and quickly break through, but it also risks losing the initiative for the new business.
If a new business is anchored from the start to provide traffic for the core business, its development becomes tightly bound to the core. If the core business faces difficulties, the new business, which was built at great expense and lacks self-sustaining ability, becomes extremely awkward and turns into "cannon fodder."
According to Goldman Sachs estimates, Taotian's GMV growth in Q2 was around 5%, while Pinduoduo, Douyin E-commerce, and Kuaishou all maintained double-digit growth.
Moreover, while Alibaba attacks the food delivery battlefield, Pinduoduo and Douyin E-commerce are vigorously supporting small and medium-sized merchants. Pinduoduo has launched a "billion-yuan support" plan, and Douyin E-commerce has invested over 16 billion yuan cumulatively. They are all trying to upgrade the supply side with quality SMEs that can better capture consumer demand, which may further impact Taotian in the future.
More importantly, Taobao Flash Purchase is still in a "wartime state," relying on heavy subsidies to maintain current order volumes. In July alone, monthly subsidy peaks exceeded 10 billion yuan. HSBC previously estimated that in fiscal year 2026, Alibaba's food delivery business would lose 2.7 yuan per order, and instant retail would lose 3.7 yuan per order. After the low-price tide recedes, it's unknown how many users attracted by low prices will stay.
Whether Alibaba can ultimately win depends on balancing market share and average unit cost.
Meituan's Moat
After profits dropped 89%, many believe Meituan's moat is not as impenetrable as imagined, and some even question whether Meituan has a moat at all.
When new entrants attack with tens of billions in the short term, any moat, no matter how solid, will shake. Moreover, Meituan has only been consistently profitable for about three years, with quarterly net profit of around 10 billion yuan, while competitors are willing to spend 50 billion upon entry.
What exactly constitutes a moat?
After reviewing much material on moats, I find the most systematic explanation comes from Bruce Greenwald, a professor at Columbia Business School, in his book "Competition Demystified: A Radically Simplified Approach to Business Strategy." He suggests that companies with moats typically have these characteristics: stable market share with long-term dominance; few new entrants in the industry; and the ability to sustain high profits.
How are moats built? Greenwald argues it's mainly a combination of scale economies and customer lock-in.
First, scale economies: "Scale economies" means that within a certain output range, fixed costs don't change much, so as output increases, new products can spread fixed costs, lowering average unit costs.
Many people misunderstand scale economies, equating it with size, but they are quite different.
For example, opening 100 stores might have worse scale economies than 50, because the fixed costs of rent, management, and labor increase, potentially raising the cost per unit.
Moreover, opening stores everywhere leads to more intense competition in each region, increasing marketing costs, further raising unit costs and reducing profits.
What is "customer lock-in"? It's essentially customer mindshare, which may stem from usage habits, user experience, switching costs, etc. In short, a significant number of customers consistently choose your product. Measured by data, it's a consistently high market share.
When these two aspects lock together, the power is formidable: low average unit costs ensure sufficient profits, and new entrants can't lower their unit costs without achieving comparable share; customer lock-in maintains market share, ensuring scale effects.
So, as mentioned earlier, Alibaba ultimately needs to balance market share and average unit cost; market share gained solely through subsidies is far from sufficient.
From these two aspects, how does Meituan fare?
According to a UBS report, current food delivery market share is Meituan 65%, Ele.me 28%, and JD.com 7%.
In terms of average unit cost, Meituan's earnings report data shows that the UE (unit economics) gap with its main competitors has widened from 2 yuan to 4 yuan. That is, before the food delivery war, Meituan earned 1.5 yuan per order, while Ele.me lost 0.5 yuan; after the war, Meituan loses 2 yuan per order, and Taobao Flash loses 6 yuan. Meituan has a competitive advantage in average unit cost.
But it's also unreasonable to conclude that Meituan's moat is very solid, since, as mentioned, companies with moats can sustain high profits. Meituan's profits have been growing in recent years but have been temporarily interrupted by the price war.
How to explain this?
I believe it's related to the strength and size of the challenger. A moat's role is to block competitors and monopolize industry profits. The more competitors it can keep out, the stronger the moat.
Initially, when facing JD.com's challenge, Meituan's pressure wasn't as great, and profits remained relatively normal, still over 10 billion yuan, indicating that JD.com's food delivery could be blocked by Meituan's moat.
But when facing a super-giant like Alibaba, which can invest 50 billion upon entry to compete for market share, Meituan's moat's blocking effect weakens.
In short, moats are dynamic. If Meituan ultimately wins this time, it will actually strengthen its moat.
Rome wasn't built in a day, and moats aren't dug in the short term.
Greenwald believes that if there are entry barriers in the industry and you are the dominant player, you only need to manage your competitive advantages when facing challengers.
Image source: Bruce Greenwald, "Competition Demystified"
When entry barriers don't exist or are unstable, efficient operations (efficiency, efficiency, and more efficiency) are the only top priority.


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- Publisher: New Distribution
- Author: 在写稿的燃
- Published: 2025-09-17
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- Original source: https://mp.weixin.qq.com/s/AaT9l-nb9L2ZtqBcNWobMw

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