Source | Innovation Retail Society ID | dnwlkjyxgs Author | Qi Te

Recently, a rumor circulated in the market: Alibaba is about to exit the food delivery war. It was said that Alibaba plans to continuously reduce the proportion of food delivery and tilt subsidies toward flash sales. Although this rumor was not subsequently confirmed, it at least indicates two expectations. First, both Alibaba and Meituan are not in a good situation; neither side in the subsidy war has the ability or the need to continue fighting. Second, through short-term subsidies on the food delivery front, Alibaba has partially dismantled Meituan's delivery capacity. Against the backdrop of increased order density, Alibaba's loss per order is also narrowing and approaching Meituan's level. In this context, whether large-scale investment in food delivery is still needed is worth considering. After all, Alibaba wants to leverage food delivery to drive flash sales order volume.

Progress in the Instant Retail Market After a rapid surge in order volume in August, the market began to cool down in October. The peak daily order volume dropped from 120 million to approximately 70-80 million. But overall, it can be considered that Alibaba has achieved its first-stage strategic goals. Specifically, part of Meituan's delivery capacity has been dismantled by Alibaba. Alibaba's current loss per order is about 4 yuan, narrowing compared to the past. At the same time, although Alibaba has attacked local life traffic through Gaode's street-sweeping campaigns, Meituan's merchant barriers in the to-store segment remain very solid. Importantly, as we previously judged, Alibaba's non-food order volume is now about 14 million, very close to Meituan's approximately 18 million, consistent with our earlier assessment that Alibaba and Meituan will achieve a 50-50 share in the non-food sector. It can be said that after achieving its phased strategic goals, Alibaba has temporarily ceased fire and shifted strategy. For Alibaba, the next core strategic focus should be:

  1. Further drive main-site traffic
  2. Expand the scale of order flow and order volume

New Outlook for Alibaba's Instant Retail Business First, regarding main-site traffic, recent management meetings emphasized that flash sales significantly boosted Taobao's DAU by about +20%, with positive effects on advertising and CMR. Third-party data also provides some corroboration. QuestMobile's latest data shows that from July to September, food delivery and instant retail pushed the main site to high traffic levels. The Taobao App's flash sales entry had nearly 370 million MAU in July, and the industry's total daily orders rose from about 100 million to over 200 million in August. Overall, we can roughly judge that the most intense subsidy period in August was the peak for flash sales driving main-site traffic. Entering October, the platform shifted toward service and structural optimization, such as overtime guarantees and 88VIP benefits, to further retain users and better absorb this new traffic. At the same time, Alibaba's flash sales non-food business is far from peaking, but supply needs further optimization to expand the scale of order flow and order volume. As we previously explained, order flow refers to when a user's delivery address happens to have a store with the same product in stock nearby, the platform directly reassigns the order that would normally go through Tmall/express delivery to the local store for immediate fulfillment. Currently, Alibaba is actively testing this in some categories and with some brands. Mechanically, Alibaba has already run through the model of one store connecting multiple channels. Consumers can choose between store delivery or DC warehouse delivery. That is, after Tmall brands and authorized stores connect to flash sales, they are simultaneously exposed on the Taobao main site, flash sales Tab, Ele.me, Alipay, and Gaode; the product inventory and stores are included in the order flow channel for nearby delivery and hour-level delivery. Its essence is a model that integrates Tmall flagship stores and offline stores into one inventory, one price, and one marketing system. Considering issues such as store-level labor efficiency, sales per square meter, and picking efficiency, Alibaba is also testing having some brands push products to Alibaba's front warehouses for stocking (similar to Miniso's lightning warehouse model). Therefore, over the next 3-6 months, my overall prediction is that the possibility of Alibaba exiting subsidies is very low, but after cost and delivery density improve, it is also strategically reasonable to structurally tilt subsidies toward the flash sales side. This maintains a high-frequency entry point while increasing subsidy ROI. From a specific strategy perspective: First, Alibaba will further optimize the subsidy structure. It will continue to maintain the low-price entry point of food delivery, but more coupons will be tied to flash sales channels, non-food categories, and store self-delivery/nearby delivery, such as 88VIP linkage and overtime free orders, to turn them into benefits. This can more stably precipitate food delivery traffic into repeat purchases for non-food categories. Second, the scale of order flow will continue to expand. Increase the exposure of Tmall brands on flash sales, give flash sales weighting in main-site search and events, and with the expansion of front warehouses and store fulfillment nodes, continuously increase the proportion of store immediate delivery, and continuously optimize consumer experience, because only then can Alibaba truly make the business run without large-scale subsidies. Of course, in these two key strategies—driving main-site traffic and expanding order flow scale—Alibaba undoubtedly faces certain challenges. First, the core of further driving main-site traffic is not to further sprint order volume, but to do a good job of absorbing main-site traffic. After the subsidy pace slows, it is inevitable that user mindset returns to rationality. The content mindset of Douyin live streaming and the extreme low-price mindset of Pinduoduo will continue to divide the time of users returning to Taobao. How the main site retains users is actually a more important issue. At the same time, the parallel multi-entry points of the main site, Ele.me, Gaode, and Alipay are beneficial for customer acquisition but also bring internal competition. Second, Alibaba's order flow strategy also has certain execution difficulties, mainly reflected in the difficulty of implementing the integration of online and offline inventory. Different brand chains have different OMS and ERP standards, and there are differences in inventory accuracy, price consistency, and picking SOPs. The result is inevitable issues with delivery time and out-of-stock compensation. Therefore, we have also seen that Alibaba has temporarily adopted the approach of pushing brand merchants' products to front warehouses for processing. Third, the profitability of Alibaba Cloud and the international e-commerce segment is still uncertain, and there is uncertainty in the intensity and sustainability of Alibaba Group's subsidies. In the medium-to-long-term competitive cycle, I believe the biggest variable for Alibaba or the entire instant retail industry is the progress of AI applications. Frankly speaking, in the short term, Alibaba does not even have the ability to integrate a quasi-Super Agent, and its current capabilities are difficult to serve the C-end, at most serving internal and B-end. But in the medium term of 1-2 years, Alibaba may expand Agent to cross-scenarios such as brand operations, supply chain, and fulfillment, and even integrate some C-end scenarios. For example, when a brand product is ordered on Taobao, the Agent automatically determines the optimal inventory node, delivery method, coupon combination, and triggers it. But the foundation for this must be that Alibaba has already solidified a good offline fulfillment service system in these 1-2 years, namely front warehouses/lightning warehouses + store delivery + front-loaded DC warehouses.

Final Thoughts If the speed of change in China's retail and internet industries is measured in years, then the instant retail industry may be measured in months. The industry is indeed changing very fast. I can predict that although today both Meituan and Alibaba's flash sales are called instant retail by the industry, in the future, I believe the two will have completely different ecosystems. For brands, the two platforms will form completely different values and positioning. Meituan may become what is called scenario-based e-commerce in the future. But for Alibaba, brands need to consider more about the main-site traffic absorption capacity, that is, using main-site traffic as a brand operation position, pushing the flagship store's inventory structure to flash sales, such as same price, same benefits, and minute-level delivery. For brands, they will also adopt different strategies and tactics. To this end, in response to these industry changes, we have specially organized the "2025 Instant Retail Supply Summit and First Instant Retail Store-Warehouse Product Selection Conference." This conference invites FMCG brands, lightning warehouse brands, and service partners to discuss related themes, analyze the latest practical cases and tactics, build an efficient and precise supply-demand exchange platform, and explore new growth solutions in the instant retail era. November 25-26, Hangzhou—Make supply more controllable, make growth more certain! Friends who care about instant retail channels should not miss it! 🔺