The quick commerce war happening in China right now has seen billions of dollars spent. There have been a record number of subsidies pumped into the war by the major players – over RMB20 billion and counting, and a record number of orders by consumers – 120M daily orders on a single platform.
In this episode, Jianggan and Sabrina dive right into the centre of the battle of the giants – Taobao, JD.com, and Meituan. From billion-yuan subsidy pledges to PR wars, this quick commerce showdown is reshaping not just consumer habits, but also how these tech giants are positioning themselves for the future.
Also available on Spotify and Apple Podcast
Featured Materials:
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99food vs. Keeta, Who will win the food delivery battle?| Impulso E121
Meituan’s CEO, Wang PuZhong Interview
(AI generated transcript)
Sabrina: [00:00:00] Hi everyone. Welcome to The Impulso Podcast by Momentum Works. Today we’re talking about the recent Quick Commerce Wars in China. And before we begin, don’t forget to subscribe to our YouTube channel. So the reason why we’re talking about this is because recently a couple of the players have come up and.
Sabrina: Some very amazing numbers, right?
Jianggan: Very large numbers, for sure. Very large numbers.
Sabrina: So on fourth July, Alibaba announced that there are daily orders for quick commerce. So I think this includes quick commerce and food delivery. Mm-hmm. Exceeded 80 million UN a day. 80
Jianggan: million orders, orders,
Sabrina: 80 million orders a day.
Sabrina: And then the week after Mayan also released saying that they exceeded 150 million orders a day.
Jianggan: Yeah. That’s like larger than the population of many countries.
Sabrina: Yeah. So that’s,
Jianggan: that’s lots of bubble tea.
Sabrina: That’s crazy. Yeah. That’s
Jianggan: a lot of bubble tea. Yeah. So if you
Sabrina: add the tree place, there’s probably like 250 million orders a day.
Sabrina: That’s a lot of orders for.
Jianggan: Yeah. You’ll be very happy there because [00:01:00] I mean, all my friends in Beijing are saying that they’re drinking a lot of bubble tea every day. Exactly. Because it’s free. I mean, solve the orders are actually completely free.
Sabrina: Oh. Like the drink as well.
Jianggan: So them, you pay absolutely zero to get, uh, get the order.
Sabrina: If I’m there, I will drink BB tea like three times a day, four times a day. I’ll just order until I run outta vouchers to drink bubble tea. There was a,
Jianggan: there was this order that somebody did that he, he ordered like 2,200 cups and paid clothes to zero
Sabrina: 2000. Yeah. Not for himself. Right. That’s, man, I can’t even drink that much.
Sabrina: But what you, I don’t
Jianggan: know. I dunno. I think the shop assistant in know store went crazy. They said, look, hell yeah, but that’s
Sabrina: kind of ridiculous because.
Jianggan: Because you look, if you look at Starbucks in Singapore, they do like what, 280? Two 90 like cups A day. A day. And you can think about, I mean, somebody has to fulfill like 2000 orders in the next like
Sabrina: half an hour or so.
Sabrina: Yeah. It’s just like quick commerce be half an hour. That’s mad.
Jianggan: Like yeah, it is mad and
Sabrina: no way anyone is making money from a transaction like that. The only person getting value is the consumer. So [00:02:00] how did we get to this point? How do you get
Jianggan: here? Yes. Yeah.
Sabrina: How do you get to the point where someone can order 2000 cups of bubble tea essentially for free?
Sabrina: Because this walk kind of didn’t escalate so much. It was pretty recent, right? It only started like earlier this year. Yeah. So how it started was that in February, um, JD entered the food delivery scene, and of course they started with this. Sort of zero commission thing, right? But why were they so aggressive?
Jianggan: I still remember like about four, five months ago, February, March, there’s a lot of chatter about, uh, jd, which is, which used to be the second largest, uh, e-commerce player in China, focused on a premium segment, right? And then they entered free food delivery quite aggressively in February.
Jianggan: The founder, he actually went to, I mean Richard Li, he actually went to deliver the food himself. Oh, so it’s when they
Sabrina: started?
Jianggan: Yeah. So I mean, I, I think that staged a very, very, uh, interesting sort of PR campaign around that. So the founder went to deliver himself and uh, and I think they pledged to, to treat like every rider as brothers and they pay them the full like, no, no social security [00:03:00] and stuff, and then blaming me for not paying enough to the riders in terms of social security.
Jianggan: Yes. So the
Sabrina: thing about like. Hiring the riders as like full-time employees? Yes. Yes. Which is kind of different from what Ton is using,
Jianggan: which, which I think everybody who is rational in the industry would know that. I mean, if you hire all like millions of riders as full-time employees, yes. The, the economics will not work.
Sabrina: Yes.
Jianggan: So he would still do that because. Because I, I think from PR point of view, I mean, JD was a much smaller player, so for them to, to sound virtuous, I mean, doesn’t cost them much. But if Midtown were to follow, it would cost them a lot to, I mean, get all order to,
Sabrina: for all the rider that they have, like 5.7 or 6
Jianggan: million rider and all of them, if you get social security for all of them, that’s gonna cost a lot.
Jianggan: Yeah,
Sabrina: it is. Yeah. But of course. When JD entered two months later, Alibaba themselves also kind of entered into the quick commerce space. So they kind of consolidated all their quick Commerce offerings into Insta shopping. Yeah. And this was right before like the May holidays in China?
Jianggan: Yes. Uh, they actually announced that, uh, that, uh, [00:04:00] I mean they previously planned to, to join, but because May holiday was coming and they saw some like effect from jd, they said, okay, we should join earlier.
Jianggan: And I think that will take a lot of, uh, sort of decision making from the highest level, probably Jack Ma. Mm-hmm. So, a bit of history, , Alibaba acquired this, food dealer player called Oma in China, I think many years ago. They’ve sunk probably like a hundred billion dollars.
Jianggan: Into this company and Oliver had been competing against meta on food delivery, not winning it. So this time around, I think Alibaba was doing it a little bit differently. So instead of putting lots of resources on ama, which is a separate app, et cetera, so they actually put, um, all the efforts into au Tao’s Alibaba’s main app.
Jianggan: Mm. I mean, historically the Alibaba has been trying to foster other apps like Timo, et cetera, et cetera, but at the end of the. Tao app, which has the most users close to 400 million daily active users.
Sabrina: So they’re trying to consolidate all of it. Yeah. Into the Tobo app.
Jianggan: Yeah. [00:05:00] And they put all the food delivery offerings into that.
Jianggan: So, think from that perspective, you would know that, uh, such a, such sort of. Coordinated effort, uh, will not be able to get done if it’s not from Jack Ma or somebody like, at least at his level, but nobody else is at his level.
Sabrina: It has to be a very top down approach. Right? It
Jianggan: has to be. It has to be.
Jianggan: I was talking to some friends from, from aan. They were saying that they were expecting Ali about to join. To do JD Oh. Earlier rather than later. But I think in the day afterwards, things went a little bit outta control, right? Yes. I, yes.
Sabrina: So, I mean, obviously when all the players entered mm-hmm.
Sabrina: They also kind of started a little price war, right? Yeah. So they, they all started pledging subsidies. So I think, um, JD pledged.
Jianggan: 10 billion,
Sabrina: 10 billion yen in subsidies, and then Alibaba themself committed about 50 billion.
Jianggan: Yeah, no matter pledge saying that over the next year they were gonna spend 50 billion
Sabrina: just to kind of boost like the Insta shopping, which is why someone was able to buy 2000 cups of property for free.
Jianggan: Yeah, I mean, [00:06:00] almost
Sabrina: for free.
Jianggan: I mean, of course we have, I mean, do you know how these vouchers actually work?
Sabrina: Are they stackable vouchers?
Jianggan: They’re, they’re very different kinds of vouchers, right? The mechanism of voucher in China has become super complicated.
Jianggan: Um, but we have also seen mechanisms like what Meta has been doing extensively. MATA will go to a merchant and say that, okay, I’m gonna buy, um, I dunno. Like half a million drinks from you, uh, across the country because there’s a chain and I’m gonna offer that to consumers, uh, for zero.
Sabrina: Oh, okay. So, and, and the
Jianggan: consumers have to, and go to the store to pick, pick it up themselves.
Sabrina: Oh, so it’s not a delivery, it’s a pickup.
Jianggan: Yeah. So, lots of disorders that may have announced 150 million are actually pick up. And of course, uh, you will see people arguing, saying, no, this is not really for delivery. You’re not really within the war. But I think since, since this like worst minute is, anyway, so, so why don’t you just, um, and procure this.
Jianggan: I mean, you probably paid three to four year and to, to buy this in bulk. [00:07:00] And you have offered to do, to do consumers for free, and it doesn’t occupy your delivery space, which you need to pay the fulfillment network. Yes.
Sabrina: So
Jianggan: at the end of the day, it might come. Come back, I mean, cheaper compared to if you were to like, just give a lot of subsidies, just give a discount.
Jianggan: Yeah. For free
Sabrina: delivery discounts. Yeah. Yeah, yeah. But the walk has kind of escalated quite a lot that even the government or regulators are starting to get concerned, right? So last week we published an article called, what does Beijing really think about the Quick Commerce Wall, where we talked a little bit about what the regulators.
Sabrina: So have been safe.
Jianggan: So, so this is actually, uh, interesting and, , you need to understand lot of nuance to understand what the messages regulators are trying to, to send. There are two articles from the People’s Daily, which is the official newspaper of the Central Committee of the Communist Party, which is Obviously’s the highest propaganda machine.
Jianggan: And one of them is critical saying that, oh. There’s no winner in the price war, and, uh, you can [00:08:00] only have a future if you innovate the next one coming from a different department of people’s Daily and saying that, oh, uh, because there are more orders and, uh, lots of SMEs are actually benefiting from that.
Jianggan: And that’s good for consumption.
Sabrina: Very mixed messagings from the same source.
Jianggan: It is very Chinese. So basically government and sending, sending a message saying that, oh, um, we welcome the. Positive aspects of that boosting consumption, benefiting SMEs, but we don’t want it to be out of control.
Sabrina: I mean, obviously with what’s happening now, I think there’s a lot of like mm-hmm. I, I wanna say artificial demand, like you’re not actually creating, you’re creating orders just because of how cheap it is, I think. But how sustainable it is in the long run.
Jianggan: It is not sustainable. Everyone knows it.
Jianggan: Yeah, everyone knows it because how much money
Sabrina: can you burn?
Jianggan: For food delivery, for the, for the beverage market, it has probably reached the peak.
Jianggan: Mm. So whatever demand you create on top of that is not gonna sustain. I think the real world here is, it’s on the instant retail quick commerce part. Um, so people say that it’s because, uh, JD started [00:09:00] this war in February because they, they attacked Midland. But what happened before that is Mayan consolidating all their quick commerce, instant retail offerings into a single offering called Mid Instant Shopping.
Jianggan: With now, you can sort of buy electronics, buy branded goods, et cetera, fulfill from the brand stores, like almost real time, like 30 minutes, 40 minutes, 30 minutes delivery. So that is a big problem for jd, which has built a lot of warehouses, lot of distribution centers to be able to deliver next day.
Jianggan: So they feel threatened and uh, and I think, I think it’s right for them to, to find ways to contact, to remind consumers that JD can also be fast and they can still be fast. Yeah. And, and I think it’s the same thing for tbo, right? I mean, they have all the brand relationships. They have, they have a fulfillment, networking early months.
Jianggan: So, so, so naturally they wanna defend their turf in e-commerce.
Jianggan: And this, this is what hap what happens in a war, right? Because, because everyone is trying to calculate, uh, what the others motifs and move are, what and what can I
Sabrina: do?
Sabrina: And
Jianggan: we see. [00:10:00] And, you know, the, I mean, in some, the immersions that we did in China, we see that how people monitor their competitors real time, right? So you look at your competitors, say, Hey, are they gonna release lots of vouchers? If they do, uh, we’re, we’re gonna preempt.
Jianggan: , I think the key executive admit that even you talk about all the historical, like, you know, internet wars, tech wars, subsidy, wars, and uh, now the historical ones has, has burned as much money as what we seen now
Sabrina: They burned a lot and I think there was a very interesting interview by Ong who is the CEO of core Local commerce Atan.
Jianggan: Yeah. He doesn’t give interviews. Actually, no.
Sabrina: This is his first public interview. Oh, is his first, okay. Yeah, it’s his first, and it’s also the first time in eight years. That is like executive at Meine has come out to give like an interview.
Jianggan: Interesting, interesting. I mean very unlike jd, right? Yeah. Over the place in pr. So
Sabrina: very different. So, um, the interview will be linked down in the show notes below in Chinese. You guys wanna check it out? Uh, it’s in Chinese. Oh, you transl can use Google Translate.
Sabrina: That’s what I did. Or g pt it, it works. Yeah. But I think it was very interesting ’cause in the [00:11:00] interview he talked a lot about Maan strategy and what’s happening now. Right. General, um, summary. He seems to think that the entire war, pointless sub war is pointless. And he feels that the only reason why Maan is participating in this war is just retaliation because their competitors are doing it.
Sabrina: Yeah. And he thinks that there’s no point. He mentioned this point about. Um, subsidies creating a sort of demand bubble. Yeah. And how all the order numbers are so inflated now. Yeah. And that the competitors have to look beyond order numbers to actually start looking at like, what’s the average revenue you’re getting per order.
Sabrina: Mm. Otherwise you’re just burning money for, for nothing, essentially. Well,
Jianggan: I mean, this is, this is common knowledge, right? Yeah. So. So what people didn’t notice is that a day before, before this interview was published, uh, there were a number of articles, uh, syndicated into Chinese media, probably by TAB or Alibaba, saying that, uh, a lot of the Midtown orders are just.
Jianggan: Zero, I mean zero year orders, right? Consumers not paying anything. How is that [00:12:00] sustainable? So, so I think he was in a way, responding to that message and also in a way sending a, a message to Alibaba saying that, Hey, you guys should probably de deescalate because, um. Because we have the means to defend if we need to, but we don’t want to do this.
Jianggan: So that’s sending a signal, right?
Sabrina: That’s his warning. Yeah. Yeah,
Jianggan: yeah.
Sabrina: He mentioned a lot that like, we can do it, but we won’t lose as much. We won’t burn as much money as you guys. We don’t do it, but we don’t want to do it.
Jianggan: So he, so, so here comes the interesting question and, and obviously Alibaba is much more profitable than Mayan, and I think the house has much more cash.
Jianggan: Um, but the issue is that, uh, I mean the core business is still e-commerce on top of, right? Mm. So this is a new business. So are they going to, um, spend all their sort of reserves to actually fight this endless war? Or would, because this is their core business, they have to defend it. I mean, I mean this is just no other choice.
Jianggan: I mean, I
Sabrina: mean, yeah.
Jianggan: So, so behind yourself is the cliff and sea. So, so you have to defend it.
Sabrina: Um, but he also talked a lot about the business model of, [00:13:00] and this is something that we’ve talked. About in a lot of previous podcasts, right? Mm-hmm. Obviously, food delivery itself is a very operationally intensive business.
Sabrina: A lot of it is about minimizing, like optimizing small parts of it to be efficient. Yeah. And that’s how Maan has kind of managed to succeed. Yeah. That’s how they manage to grow their skill, right? Yeah. So the question is, with Tatau and JD just sort of throwing this subsidies, will they be able to make their fleet as efficient as Maan to actually compete on a level?
Sabrina: I more than just subsidy boss.
Jianggan: I think unless the people I know generally, um, they believe that mainten is the most efficient in terms of, uh, in terms of the whole operations from planning to optimization. And, uh, they believe that, I mean, Alibaba, I mean if who leads right? If he puts, um, his real sort of attention on it and if he can streamline organization, they can probably be efficient as well.
Jianggan: Um, nobody holds very high regard for JD in that regard. I dunno why. And, uh, and then it’s just, people don’t [00:14:00] seem to, to think that JD iss a relevant player. They asked him
Sabrina: in the interview if they saw JD as a competition and his response was, ha ha ha. And
Jianggan: he also met, not joke, he said. He said the, the fiercely, the fiercest competitive, uh, city in China during the car war switching, which is the, the hometown of the founder of jd.
Sabrina: Jd. Yeah.
Jianggan: I think he probably like mentioned it as a mockery or something, but, but it shows that, uh, uh, that Midtown probably doesn’t take JD very seriously, but they take a couple. Reasonably seriously. And so that, I mean, executive comes out for interview and first time he had ears and to send a message.
Jianggan: Mm-hmm. I think one question which is probably relevant for the rest of us is that, would, would this war, I mean continue, and if it continues, would it distract amitan overseas efforts? Right. I mean, they’re, they’re expanding from Saudi Arabia to Kuwait, Qatar, and UAE. And thanks
Sabrina: to Brazil as well.
Jianggan: Yes. And there are rumors of them sort of looking at Southeast Asia, et cetera. Because at the end of the [00:15:00] day, I mean the, the leadership attention’s limited. Mm. But then, um. Then, so first I don’t think they would lose this wall. So eventually how things will settle. Right. Um, I think if things settle in in a way that if they still own like 65, 70% re market share, that’ll be stable.
Jianggan: Mm-hmm. Because once you’re 70, you don’t have incentive to, to pick beat the other one who is 30 because the cost of like, you know. Getting, like additional market share would be very high. But if it ends up with, with 60 40 or 50 50, that would not be stable. That then they would prolong
Sabrina: the war
Jianggan: a little bit.
Jianggan: Yeah. Or, or at least it would take lots of attention because I mean, people know that it will not be stable. I think when it come out to different countries, it by itself, it’s very challenging, so
Sabrina: it’s already very time consuming it
Jianggan: to think about. It’s, it’s, but we look at certain markets, right?
Jianggan: I mean, look at Saudi Arabia. We look at UAE, you look at. Brazil, et cetera. You look at incumbents, you see how, how fat the profit they’re making and saying, oh, what, what we’re doing with so much efficiency in, in China, the margin is so low and we must have lots of opportunities [00:16:00] there to, to attack. So let’s see.
Sabrina: We will see. But of course I don’t expect this price war to continue that long either. Right. Considering that last week all three players were kind of summoned by top regulators mm-hmm. For discussions.
Jianggan: I think my understand about regulators is, uh, it’s, they probably just set boundaries. Mm-hmm. I, I think it hasn’t reached a stage where they’re asked to stop. I mean, historically they were like. Two or three instances where the regulators asked the players to stop certain things. Oh. But, but this time it seems that it’s just a, it’s just a tea session and, uh, it’s more of a discussion.
Jianggan: Like it’s more drawing some boundaries. Yes, yes. And, and if you operate within these boundaries, then you’ll probably fine. But if, if, if you step O over, then we’re gonna come in, come down. Yeah.
Sabrina: So thank you guys for tuning into another episode of the Impost Podcast. We hope that you guys enjoyed this week’s episode.
Sabrina: If you did, do give us a thumbs up and subscribe to our YouTube channel to stay up to date on the latest happenings and trends in tech, new retail, and the broader digital [00:17:00] economy. Thank you, and bye-bye. Enjoy.
Jianggan: Bye.
Sabrina: Ah, $0 ba.
The post Behind $0 Bubble tea in china: China’s quick commerce war explained | Impulso E128 first appeared on The Low Down - Momentum Works.
