Meituan exec calls China delivery price war 'irrational'

A senior executive at Meituan has called the ongoing price war in China’s instant-delivery market ‘irrational,’ as major players like Meituan, JD.com, and Alibaba offer deep discounts to gain market share.

Wang Puzhong, head of Meituan’s local commerce division, said the company didn’t plan to engage in aggressive pricing but felt compelled to join to avoid looking weaker.

“We are good at fights, but not belligerent,” he told LatePost.

The competition has intensified, with all three companies expanding beyond food delivery to include groceries and more.

Alibaba pledged a 50 billion yuan (US$7 billion) subsidy for its Taobao Shangou service, while JD.com pledged 10 billion yuan (US$1.4 billion) for its food-delivery platform.

Wang criticized these subsidies as unsustainable and not aligned with business fundamentals. He urged a focus on long-term growth rather than short-term metrics like order volume.

Subsidies have led to a surge in transactions, with 30-minute deliveries increasing over 150% this year. Meituan reported a daily record of 150 million orders, compared to Alibaba’s 80 million and JD.com’s 25 million.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Price wars create a classic “prisoner’s dilemma” for e-commerce giants

Wang Puzhong’s characterization of the instant commerce battle as “irrational competition” illustrates a classic game theory scenario that has played out in Chinese e-commerce.

Research shows that when competitors like Meituan, Alibaba, and JD.com enter price wars, they face a prisoner’s dilemma: if all maintained higher prices, each could potentially earn profits of up to 100 units, but price-cutting traps them in a cycle where all earn significantly less (around 70 units each)1.

This pattern has historical precedent in Chinese e-commerce, notably in 2014 when social media posts from Jingdong’s CEO triggered a cascading price war across the home appliance sector, leading to industry-wide margin erosion1.

The dynamic explains Wang’s reluctant participation. Meituan understood the collective harm but couldn’t afford to be the only company maintaining rational pricing while competitors slashed prices.

This highlights how competitive pressures often override rational economic decisions, creating market conditions where companies knowingly engage in financially damaging behavior to protect market share.