S26: Price Wars

• 2015: Merger of Meituan Corporation (Meituan) and Dianping Holdings (Dianping)
• 2018: IPO the Hong Kong Stock Exchange
• Third-largest Chinese tech company by market capitalization in 2020, trailing Alibaba and Tencent

• China has over 10 million delivery riders.
• As of 2025, Meituan’s rider base has grown to 7.45 million, with an annual growth rate of nearly 20%. Ele.me has over 4 million riders.
• Scale in perspective: The combined number of registered riders from Meituan and Ele.me exceeds the permanent population of Hong Kong in 2023 and the total population of Hainan Province.

• How did Meituan, a food delivery app, become one of China’s leading tech firms?
• Gig economy and labor: What’s the deal for delivery workers?
• Platform economics and monopoly power: What is a “super app”? How does its algorithm shape Chinese economy and society?

• Have you used a food delivery app? What’s the experience?
• How are American/Chinese food delivery apps similar/different?
• How do the platforms work with merchants?

Business model: “food + platform” strategy:

• Focus 1: Food consumption (essential, frequent purchase): services across the food value chain (reviews, booking, discounts, dining, takeout).
• Focus 2: Online-to-offline platform connecting consumers and merchants: digital solutions like online reviews, digital payments, and order management.

• Meituan.com was cofounded in March 2010, offering local deals for services.
• Intense competition in China between 2009 and 2014 was known as the “Thousand Groupon War.”
• In 2011, Meituan focused on low-tier cities, unlike competitors and built local offline sales teams to help businesses go online.
• Meituan partnered with popular local restaurants, offering sales guarantees for exclusive online rights. Featured items had deep discounts, and Meituan took a cut of sales.
• Merchant numbers grew from 2,400 to 900,000 between 2010 and 2014.

• Tao Zhang launched Dianping.com in 2003, having studied and worked in the US for 10 years.
• Yelp’s success in the US led to Dianping receiving its first investment from Sequoia Capital China in 2006.
• Dianping collected more detailed user ratings than Yelp (e.g., food quality, service, decor) and offered featured dish recommendations.
• Dianping was an early adopter of the web-to-mobile trend, offering in-store services via its app by 2013.

• Meituan, Dianping, and Nuomi were the top three group purchase platforms by 2015, backed by Alibaba, Tencent, and Baidu.
• Amid price war, Sequoia Capital China pushed for a merger between Meituan and Dianping to prevent cash depletion and defeat Nuomi.
• Tencent, a Dianping investor, supported the merger to build business ecosystems by taking minority stakes in start-ups and integrating their services with its WeChat app.

The merged company, NMD, was established in 2015 with a co-CEO system and an integration committee for post-merger management.

• What did Meituan do next?
• Should it venture into new business areas?
• What could be the new areas of growth?

• Xing Wang expanded businesses like food delivery and hotel booking to grow revenue.
• Xing shifted focus from products to consumers, assessing demand and Meituan’s ability to meet it.
• Under his leadership, Meituan became the third-largest tech company in China and evolved from a service provider for group purchases to a one-stop platform providing consumers with all-encompassing offerings and enabling merchants with a wide range of solutions.

• In 2014, Dianping invested in Ele.me and allied with Tencent against Meituan Delivery.
• By 2015, Ele.me and Meituan Waimai had similar market shares.
• In 2015, Alibaba invested in Koubei to counter Tencent’s alliance. That year, Meituan merged with Dianping, disrupting Alibaba and changing alliances.
• After 2016, Alibaba first invested in Ele.me then bought merged Ele.me and Koubei into Alibaba-Local-Life Company (ALLC).

• Meituan focused on a “food + platform” strategy, with food delivery as its main business.
• Meituan Waimai became dominant in food delivery, significantly increasing its market share.
• Meituan (NMD) raised USD4.2bn through an IPO in September 2018.
• Meituan (NMD) and Alibaba (ALLC) competed intensely in local services.

• Meituan initially focused on selling hotel e-vouchers for local demand, not targeting frequent travelers.
• Meituan developed an online booking system in 2015 and became a significant online travel agency (OTA) after merging with Dianping.
• In 2016, Ctrip focused on acquisitions to compete with rival firms, while NMD copied its successful strategies.
• By 2019, NMD became China’s second-largest hotel booking platform.

• Meituan acquired shared bike service Mobike in 2018.
• The Mobike acquisition aimed to boost Meituan’s GTV and gather user data.
• Tencent supported Meituan’s deal for Mobike over a rival offer from DiDi.
• Mobike’s competitor, Ofo, failed in late 2018 due to an unsustainable business model.
• Merchants heavily relied on food takeout orders from Meituan during the pandemic.

• What explains Meituan’s successful expansions?
• Did it bite off more than it could chew?
• What makes these super apps possible? What is the nature of their competition?

• Who are China’s delivery workers?
• What is a typical day like?
• What is their employment status?

• A 45-year-old man loses his job but hides it from his family.
• To cover family expenses like the mortgage, he starts working as a delivery driver.
• He argues with his wife, and initially, their main concern is keeping their house.
• Later, they realize that their family, not the house, is their true priority.

• “The rich are performing us, making us pay to watch ourselves.”
• “Those laughing in front are all actors! Those not laughing behind are the real delivery riders!”

What’s missing:

• Negotiations with platform companies or insurance providers.
• Rise of zero hour contract for delivery riders.
• Causes of “involution” or intense competition driven by the platforms.
• Shortcomings in government policy and protections for labor rights, such as the inability to negotiate legally with platforms.

Instead we get:

• Happy ending: Protagonist helps improve app efficiency, embraces “flexible employment”, reunites with family
• “Healthy new realism”: reflects social issues and offers empathy but avoids their core contradictions
• Despite their limitations, these films provide an outlet for popular debate in China’s restrict media landscape.

• In 2023, 12,000 traffic accidents involving delivery riders occurred in China, with nearly half caused by riding against traffic.
• Platform algorithms tightly link rider efficiency and pay with reward/penalty systems, using overtime compensation rules to pressure riders into risking their personal safety for better performance.
• This pressure leads to common unsafe practices like speeding and running red lights, making the delivery rider profession high-risk, with frequent news of accidents and sudden deaths.

• The gig economy is booming, but flexible work is not freer work: The workers are controlled by algorithmic systems.
• Algorithms dictate shorter delivery times and lower pay per order, requiring riders to work longer hours.
• Many riders work more than 8 hours daily, some over 12 hours, with few or no days off.
• Platforms shift management responsibility to algorithms and consumers, diluting their employer duties.

• China’s social insurance system includes basic pension, basic medical insurance, work injury insurance, unemployment insurance, and maternity insurance.
• Delivery riders are primarily concerned with medical insurance and work injury insurance.
• Previously, delivery platforms offered very limited accident insurance, with riders often viewing a daily 3 yuan service fee deduction as their “insurance,” receiving no further protection from the platform.

• JD.com announced that starting March 1, 2025, it will gradually provide social security for its full-time delivery riders and accident/health insurance for part-time riders.
• Meituan also stated it will provide social security for its full-time and stable part-time riders nationwide, expected to be implemented in Q2 2025.
• Currently, the majority of gig and part-time delivery riders are not covered by social security.

• Does authoritarian rule “stimulate” China’s economic growth? If so, how?
• “The ‘left’ cannot build a welfare state, while the ‘right’ is not capable of building a fair market.” – What can then?

Key points:

• In today’s China, one cannot rely on the Western characterizations of the “left” and “right.”
• “new nationalization” on the one side and “privatization of power” on the other.
• Each country is interpreting “China’s success” in the way most advantageous to itself.

Change will come only by helping China to improve its human rights, and particularly to safeguard the rights of its workers and peasants. If economic globalization is not accompanied by the globalization of human rights, it will bring ill or even disaster.

Is that the world we live in now? Does economic liberalization lead to political liberalization? If not, what can?

• A “food delivery war” began in China after JD.com announced its entry into the market, launching “10 Billion Subsidies” which saw over 5 million orders in its first five days.
• Major competitors responded: Alibaba joined with Taobao Flash Purchase, integrating Ele.me into its e-commerce division, while Meituan declared its intent to compete aggressively.
• The competition led to extremely low prices, with milk tea often costing under 10 yuan and making established low-price brands like Luckin Coffee less competitive.

Context

• Significant financial outlays projected: 25 billion yuan invested by Meituan, JD, and Alibaba in 2Q of 2025 alone.
• The Chinese government has been emphasizing the need to curb “involutionary” or “cut-throat” competition, with new anti-unfair competition laws enacted.

Discuss:

• What’s the motivation?
• How could Meituan fight back?