Endgame: After the Three Kingdoms Battle of Food Delivery, Will E-commerce Ultimately Be Dominated by Alibaba?

In the summer of 2025, $Alibaba(BABA.US) achieved a significant victory, as evidenced by both its performance data and stock price. However, this close-range e-commerce battle involving JD.com's provocation, Meituan's response, and Alibaba's full recovery seems to be more than just a victory for Alibaba. Behind the reshaping of the food delivery landscape, it may also have laid the groundwork for changes in the entire e-commerce market structure.

Let's take a closer look at this "fierce" e-commerce war to see who is just running along, who is making noise, who is getting hurt, and who is reaping the benefits?

I. Food Delivery Battle: Each player spending billions, who is winning and who is losing now?

1. Stock prices speak louder than words, "who wins and who loses" is clear at a glance?

Last Friday, with Alibaba, the last and heavyweight player in this year's food delivery battle, also announcing its performance, we can finally get a glimpse of the interim competitive results of this "food delivery battle" in the second quarter. In terms of stock prices, which the capital market is most concerned about (although in the short term, stock prices are just a voting machine), Alibaba, Meituan, and JD.com all announced their performance, with Alibaba, the aggressor, showing the strongest performance, with a single-day stock price surge of nearly 13% (and a 18% surge in Hong Kong stocks), while Meituan, the defender, correspondingly fell by nearly 13%. JD.com, which first initiated this battle, also saw its profits wiped out in the second quarter, with a slight performance decline of less than 3%.

Extending the perspective, looking at the stock price trends of the three companies since February (JD.com officially launched JD Food Delivery in early February), although all three were once affected by the food delivery battle and Trump's tariffs, with a significant decline in early April. However, the subsequent developments were different: Alibaba's stock price quickly rebounded, fluctuating around the price range of approximately $115, and after the release of the new quarterly financial report, its Hong Kong stocks surged 18% on the first Monday of trading, with many Wall Street investment banks generally raising their target prices to around $170, with the bullish scenario target price as high as $198.

In contrast, JD.com and Meituan continued to decline even after most of the tariff risks were lifted, with the former accumulating a decline of about 22% by August 29, and Meituan's cumulative decline being even deeper, nearly 28%.

Combining the above medium-term and short-term trends, from the perspective of stock price performance, we can roughly see the market's view of these three companies:

1) Alibaba: "Invincible in the medium term", with the largest scale and capital advantage, large investments will not hurt the fundamentals, and there is also the storyline of AI and Alibaba Cloud as another pillar. The short-term phased results are better than expected.

2) Meituan: "The war that truly cannot be lost" Although there has always been a voice in the market firmly optimistic about Meituan's operational and cost advantages in the instant retail field, "actions speak louder than words". In fact, before Alibaba entered the game, Meituan's stock price had already entered a downward channel.

From a defensive perspective, Meituan is like "wearing shoes," facing "barefoot" invaders, so regardless of whether its competitive barriers are that strong, facing the increasing risk of progress, the reduction in market share and valuation adjustments are mostly inevitable.

However, because some funds have considerable faith in Meituan, Meituan, which actually suffered slightly less loss due to food delivery compared to Alibaba and JD.com, was significantly more heavily punished by the market.

3) JD.com: Similarly, it cannot lose in the long term, after all, instant retail first erodes the customer base and consumption scenarios that JD.com, which has "fast" and "good" as its main advantages, occupies. If it cannot win this battle, its original business will also suffer a relatively severe impact, so since announcing its entry into the food delivery market, its stock price has also been on a downward trend.

But compared to Meituan, there are no expectations, so there is no disappointment (the market initially did not think JD.com could win the "food delivery battle"), and JD.com also has the option to retreat to traditional e-commerce. Therefore, although JD.com's second-quarter performance in food delivery losses was also significantly higher than expected, the market did not respond with a "plunge" as it did with Meituan.

2. Equally losing billions: Meituan and JD.com's profits wiped out, Alibaba "slightly bleeding"

From a performance perspective, the entire market's most concerned question about the second-quarter performance (perhaps the only one) is how much loss or profit pressure did the food delivery battle actually cause for the three participating companies? This question can be viewed from three angles:

1) Static profitability of the group in the second quarter: Meituan's overall operating profit was only 200 million, a year-on-year plunge of 97%, and JD.com's overall operating profit was -860 million, directly turning into a loss. It can be seen that the massive subsidies for food delivery have led to the complete zeroing of Meituan and JD.com's overall profits.

In contrast, Alibaba's overall adjusted profit (adjusted EBITA) was 38.8 billion, a year-on-year decline of less than 14% (the decline is even smaller if calculated on an operating profit basis), the investment in food delivery in the second quarter did not really "hurt the bones and muscles" of Alibaba's profitability. (Of course, part of the reason is that JD.com vs. Meituan fought for the entire second quarter, while Alibaba roughly only fought for half a quarter)

Capital is inherently a part of business warfare. Compared to JD.com and Meituan's single-quarter profit scale of about 10 billion, Alibaba, with a larger scale, more diversified business composition, and larger profit scale (about 40-50 billion per quarter), has stronger risk resistance and choice. The so-called "one force subdues ten skills," the so-called moat of operational, efficiency, and cost advantages accumulated previously, also inevitably shows shortcomings in the face of the opponent's investment intensity and determination.

2) Dynamic changes in profits caused by food delivery: From a relative perspective, the year-on-year decline in profits caused by food delivery, according to our estimates, the spending intensity of Alibaba, Meituan, and JD.com in the second quarter was actually roughly the same, with JD.com's net increase in losses/profit decline due to food delivery being about 13 billion, Meituan about 11.5 billion, and investment banks like Citigroup and JP Morgan predicting Taobao Flash Sale losses around 11 billion.

From this perspective, the market generally believed before the performance that Meituan, with its efficiency advantage, could respond to competition with lower investment and higher ROI (for example, Meituan's subsidy of 1 yuan is equivalent to JD.com and Alibaba's subsidy of 2-3 yuan), but the nearly 1:1:1 decline in profit amounts largely shattered this belief.

We believe the fundamental reason behind this is the limited scale effect of the instant retail business model itself and the low profit margin it leads to. After all, before the battle, Meituan's single-order profit was only 1-1.5 yuan, and the UE gap with Ele.me was roughly 2 yuan.

So in a stable and refined operation period, a 2-yuan UE gap may be a huge chasm, meaning earning 1.5 yuan vs. losing 0.5 yuan. But in a high-intensity competition period, a 2-yuan UE gap may just mean that if Alibaba subsidizes 8 yuan, then Meituan needs a slightly lower subsidy of 6 yuan.

In summary, the higher the subsidy intensity, the more negligible the original efficiency difference becomes, and only when all parties involved turn to profit-oriented can the 1-2 yuan profit gap per order become a decisive factor. But the problem is, from an ecological synergy perspective, for Alibaba and JD.com, relying on instant retail for profitability may not be their goal for a long time.

3. Besides the "more explainable" losses, what else did Alibaba gain from the "food delivery battle"?

As can be seen from the above, Alibaba's stronger financial strength gives it more confidence in the face of similar losses, but neither Alibaba nor any company will be satisfied with just "not being afraid of losses."

So far, what has Alibaba gained from this round of the food delivery battle, with losses of over 10 billion in the second quarter and likely more than doubling in the third quarter? In simple terms, more and more active users, a doubling of order volume and nearly half of the market share, and the initial cross-selling pull effect.

1) The food delivery battle has driven a comprehensive increase in daily active users for all participating parties: According to QuestMobile data, it is clear that since the start of the food delivery battle, JD.com and Meituan's DAU (daily active users) have started to rise significantly from April, accelerating month by month.

And Alibaba, due to its late entry, saw its DAU directly reverse the situation in April with a year-on-year increase of 17% as subsidies intensified in July, significantly widening the gap in daily active users with its main competitor in traditional e-commerce, Pinduoduo.

It can be seen that the claim made by both Alibaba and JD.com that spending money on external platforms to acquire users can also achieve impressive customer acquisition and traffic diversion effects through instant retail subsidies is not an empty statement. According to previous news reports, this is also one of the key factors that convinced Taobao to continue fighting this food delivery battle.

2) Not only has it driven user growth, but after the initial exploration in May and June and the offensive in the third quarter, Taobao Flash Sale has achieved order volume and market share roughly equivalent to the original leader Meituan in just 4-5 months.

Before the food delivery battle (in the first quarter), the order ratio between Ele.me and Meituan was about 3:7, but according to the data predicted by Goldman Sachs in the chart below, in the third quarter, Taobao Flash Sale's average daily order volume has explosively grown to 75 million orders (an increase of nearly 1.8x from the first quarter), and is "within reach" of the expected 90 million daily orders for Meituan.

Moreover, according to LatePost's report, during the "First Cup of Milk Tea in Autumn," "88 Membership Day," and "Super Saturday" cross-member system promotions from August 7-9, Taobao Flash Sale's daily order volume exceeded 100 million orders for three consecutive days, and it is reported that Taobao Flash Sale's order volume surpassed Meituan for the first time on the last two days.

These data all indicate that the original fundamental reason for the profitability gap between Meituan Food Delivery and Ele.me—the order volume gap—has been largely closed within a few months. With the order volume gap closed, Alibaba's next goal is to narrow the direct single-order profitability gap between Taobao Flash Sale and Meituan.

In this regard, Alibaba's management also clearly stated in the conference call: "In the past, when the scale gap was huge, talking about efficiency was meaningless, but now that the scale gap has been basically closed, Taobao Flash Sale will subsequently optimize user structure (from acquiring new customers to increasing the order frequency of existing customers), order structure (increasing high-ticket orders such as meals and daily necessities), and fulfillment costs from multiple angles to narrow losses, with the UE (i.e., single-order loss) expected to be halved starting in September."

Whether the UE loss can actually be halved needs to be verified over time, but order volume and density are the key factors determining the UE model of the instant retail business, which is the core lifeline of this business.

Logically, as Taobao Flash Sale's order volume doubles and the gap with Meituan is not large, excluding subsidies, which can be dynamically adjusted, and only looking at cost differences in fulfillment and other operational aspects, the current UE gap between Taobao Flash Sale and Meituan is indeed logically expected to narrow compared to before the pandemic. Alibaba stated in the communication that the current fulfillment cost per order for Flash Sale is only 0.5 yuan higher than Meituan, which indeed aligns with the above logic.

3) Finally, but actually most importantly, how much has doing food delivery and instant retail driven Alibaba's entire China e-commerce business? Can it achieve the ultimate significance of subsidizing Taobao Flash Sale by bringing incremental sales and profits to the core business?

For this point, using Taobao and Tmall's CMR as an observation indicator, the 10.1% year-on-year growth in the second quarter, although slightly slower than the previous quarter, still maintains double-digit growth and slightly exceeds the seller's expectations, which is still a good performance. Objectively speaking, in the second quarter alone, the synergy effect of Flash Sale on the original e-commerce business was still relatively small. Of course, part of the reason is also that Alibaba entered the battle late in the second quarter and did not invest particularly at the beginning, so the pull effect was not obvious.

However, Alibaba's management's statement in the conference call was very optimistic, expecting CMR to maintain the impressive growth of the past two quarters in the subsequent quarters of fiscal year 26. In the long term, it is expected that the subsequent cross-selling of Taobao Flash Sale will bring a potential incremental space of 2%~3% to CMR (corresponding to an annual incremental revenue of over 10 billion). Whether the actual situation will be as expected can only be verified over time, but Alibaba's management (based on the data and trends they can see) believes there is this space.

In addition, the Guanghua School of Management at Peking University also conducted a special study on whether Flash Sale subsidies can leverage consumption. Each 1 yuan effective Flash Sale subsidy coupon can directly generate about 1.65 yuan of additional new consumption on the Ele.me platform. In addition to direct food delivery consumption, according to the research by Guanghua School of Management, each consumer who used a 1 yuan Flash Sale subsidy, based on their payment data on Alipay, will generate about 6.8 yuan of additional consumption, of which the amount driving online e-commerce physical consumption is 3.1 yuan. This research also shows that in the current era of promoting consumption, this kind of subsidy itself is an effective way to subsidize service consumption and commodity consumption.

II. Why can Taobao reshape the food delivery landscape in 2025?

The soul of internet business can basically be summarized as first-mover advantage and scale advantage, the former focusing on cultivating user habits, and the latter on user mindshare confirmation, as well as supply and user ecosystem barriers.

In the food delivery track, an interesting point is that in terms of first-mover advantage, Ele.me absolutely had it, and even around 2016, Ele.me's market share once led Meituan, but in the end, it was Meituan that captured the market.

1. Strategic Core: Full-scale war, order volume first!

In the balance of first-mover advantage and scale advantage, food delivery, as the "heaviest asset" business form in the internet light asset business, actually places the most importance on scale advantage, which is different from the nationwide scale advantage brought by physical e-commerce's cross-regional logistics.

The scale advantage of food delivery is more like a nationwide network connected by small city networks. Each small network has three core players: self-owned riders, public merchants, and public users. In this triangular ecosystem, food delivery is high-frequency and just-in-time, and when you're hungry, you want to eat, and freshly made food retains its taste, so it's time-sensitive, price-sensitive, and if it's expensive (compared to dine-in), users order less, fewer orders can't sustain the rider network, insufficient capacity inversely prolongs delivery time, and if the delivery time is too long, the product directly deteriorates.

As for food delivery merchants, their importance is actually much weaker than the other two, mainly because there are too many offline restaurants in China, with countless closures and openings every year, and once the penetration rate of food delivery reaches scale, such as accounting for 30% of the catering market, dine-in sellers actually need to join food delivery to increase their coverage radius and compete with surrounding restaurants, so merchants may need BD, but among the three ecosystems, they are relatively secondary.

In summary, establishing a ground force that can be freely dispatched, fully obeys commands, and is unstoppable is the first priority, involving dispatch systems, the organization and management of a massive ground force, etc. Once these mature through years of food delivery battles, the real core is still order density, and preferably global density, rather than density in a single city.

In other words, among the three ecosystems, although the rider ground force is the soul, the most critical thing to sustain this massive ground force is order volume and order density. Conversely, let's address a soul-searching question: why can the battle that couldn't be won in 18-19 be won in 2025?

In simple terms, there are several key points:

a. Shift from single-city order density to global order density;

b. To achieve this goal, food delivery traffic positions, user mindshare marketing, and subsidies are fully "saturated" investments, all striving for order volume, and not stopping until the order volume is achieved!

This also involves an interesting point in this round of the food delivery battle: Meituan emphasizes that its subsidies can be picked up in-store to improve subsidy efficiency and maintain order volume, using this to attack Taobao's food delivery subsidy efficiency as low and crude money-burning, etc.

But Taobao has always emphasized that only those with delivery count as food delivery, and the essence behind this is that Meituan is defending order volume and user mindshare, and ultimately, whether users choose food delivery or in-store pickup, it's all business within its own plate. But Taobao needs to raise the order volume of food delivery, and then on top of the scale order volume, balance the single-order scale economy issue, and in-store is not Taobao's core consideration.

2. Food Delivery Battle: 2018 vs. 2025, what's different about Alibaba?

In previous battles, because the small networks based on regions or cities were opened, Ele.me tore a hole in Meituan's nationwide network in a single city, but in single-point battles, Meituan could completely use its in-store, WeChat, and other in-store-to-home ecosystem advantages to slowly sew up this small hole.

But this round of the food delivery battle is completely different:

a. Different project status: The 18-19 food delivery battle was a secondary battlefield for Alibaba, with physical e-commerce being the main battlefield. But in the 2025 food delivery battle, due to the blurred boundaries between long-range e-commerce and close-range e-commerce, if not preemptively, it may eventually be like boiling a frog in warm water, waiting for Meituan to gradually erode high-frequency daily necessities transactions in physical e-commerce with close-range small stores and small warehouses. Because of this, the 2025 food delivery battle is already a war on the main battlefield in Alibaba's eyes.

Essentially, after the relationship between Ant Financial and Alibaba was gradually clarified, the focus of the Alibaba system returned to the single Taobao app, and service consumption and commodity consumption must be driven by dual wheels, only then can Taobao support a life consumption app with 1 billion users in the next decade, supporting Alibaba's future valuation imagination.

b. Alibaba's "Great Coordination" era of e-commerce: After years of exploration, Alibaba's e-commerce has reached an era of absolute unification—international e-commerce and domestic e-commerce are unified, and within domestic e-commerce, Alibaba Mama, Taobao, Tmall, 1688, Xianyu, Fliggy, and Ele.me all fully obey one commander in battle.

With the confirmation of the grand strategy in the first position, internal resource scheduling has little internal friction, quick response, and unified direction. A very obvious characteristic:

In the previous round of battles, Ele.me's traffic entry was only the Ele.me app and the ten-grid on the Alipay homepage, but in this round of battles, a prominent red independent entry was directly placed in the Taobao app with 500 million DAU, and food delivery and physical order products were integrated overall.

In the 2025 food delivery battle, the food delivery business has been fully integrated into Alibaba's e-commerce ecosystem, with a continuous supply of traffic from the Taobao system and external support from other businesses.

3. Tactics: Perhaps clever, indeed effective

Looking back at this round of the food delivery battle initiated by JD.com since the end of February, it can be said that the current "success" of Taobao Flash Sale is partly due to its relatively smart and clever tactical approach.

1) Latecomers surpassing the predecessors, planning before acting: First, in terms of entry timing, after JD.com and Meituan had already competed with considerable intensity for nearly two months, raising consumer attention to instant retail and partially consuming the funds of these two companies,

Alibaba was able to enter in May after having more time to think about the logic of e-commerce companies entering instant retail and finding it indeed feasible and profitable, and began large-scale subsidy increases in July, officially entering the game.

By pouring higher-density subsidies in a shorter time, it quickly captured the attention that JD.com had painstakingly built up. With a shorter investment time and not significantly higher absolute investment amounts than the other two in the second quarter, it became the player that gained more net attention and order volume in the instant retail industry. It played a good time difference.

2) First rush for order volume, scale first: Although there have always been doubts in the market about whether the tea drink orders brought by subsidies are really valuable, Alibaba also adopted the strategy verified by JD.com of first focusing on tea drinks with more demand elasticity, which can quickly increase volume through subsidies, to support order density and rider scale.

Moreover, the order density is advanced in a stepwise manner, reaching a certain height and then maintaining stability for a period to iterate organizational efficiency, business cooperation, etc., to avoid damaging user experience and causing large-scale delayed fulfillment. And during the order advancement process, user mindshare is intensively brushed, with a matrix of celebrity endorsements appearing in turn.

First quickly expand the order scale, and after having a scale close to Meituan, then consider the issue of refined operations. If it were the other way around, directly competing with Meituan in refined operations from the beginning, using its own disadvantages to fight Meituan's biggest advantage, it would obviously be "hitting a stone with an egg."

In contrast, as mentioned earlier, pulling Meituan into a scale investment competition from the beginning prevents Meituan from leveraging its efficiency advantage, while using its own obvious scale advantage to press the opponent. It is indeed a reasonable choice and tactic.

4. Rider management is crucial!

In terms of the crucial rider issue, as order volume increases, Alibaba has also adapted a relatively refined capacity solution:

Taobao Flash Sale's rider management adopts a "Fengniao instant delivery system + grid contracting system + dynamic capacity pool" three-tier structure.

a. The instant delivery system continues to use the Fengniao system, automatically delaying the dispatch time of non-urgent orders such as daily necessities during peak periods, prioritizing the guarantee of time-sensitive orders such as fresh food and medicine, with a food delivery on-time rate of 96% in August. Riders from the other three grids can cross-district to grab orders to support orders in other areas, reducing the overtime rate.

b. In terms of capacity organization, a grid contracting system is used, dividing the city into different areas based on kilometers, contracted and operated by third-party services such as Dada, and these contractors must meet corresponding indicators, such as rider retention rate, otherwise, they will be penalized. In terms of rider incentive mechanisms, high-performance riders are selected and upgraded to star riders, enjoying priority order dispatch, equipped with smart helmets that can receive orders by voice and AR navigation, etc., to improve human efficiency.

Overall, unlike the city street battles with Meituan in 2018, where no trace was left after the battle; this round, Alibaba used unprecedented great coordination, high-density funds, resources, and internal coordination to launch a full-scale war, substantially breaking through Meituan's defense line, bringing the market share to a 50-50 situation, which is very different from the 2018-2019 food delivery battle.

III. Alibaba: The ambition of "aiming for 5 years," what does the future look like?

The above performance of Alibaba Group and Taobao Flash Sale so far can be described as commendable. But obviously, if it is only by relying on massive subsidies to achieve the current order volume share, it is not a result that can be accepted and maintained in the long term. Taobao Flash Sale's current "victory" has taken the first step in a phased manner, the more critical question is:

1) If Alibaba's subsidies start to decline, can it continue to maintain the current order volume and market share close to Meituan?

2) Before that, can Taobao seize the time window to further narrow the efficiency gap with Meituan in terms of operations and fulfillment under normal conditions, and subsequently run Taobao Flash Sale sustainably and long-term in a slightly loss-making or even slightly profitable state, while also bringing more value to the group.

To these questions, Alibaba's management's answer is:

1) Category structure: By the end of August, tea drink orders have been continuously optimized. Currently, the proportion of tea drink orders has gradually decreased. Therefore, as the proportion of higher-value meal and other daily necessities orders increases, the current average order value of Taobao Flash Sale is still only about 20% lower than Meituan. Subsequently, Alibaba will further attack the higher-value meal field.

2) UE optimization: With the increase in average order value and the order volume scale having caught up with the industry leader, Alibaba's subsequent investment in rider scale and delivery subsidies will also gradually narrow. Driven by both, it is expected that Taobao Flash Sale's single-order loss will be reduced by 50%. If this guidance is true, then according to our simple calculations (for reference only), Taobao Flash Sale's single-order loss is expected to decrease from 5 yuan to about 2.5 yuan. This is only about 0.5 yuan different from the estimated single-order loss of Meituan in the third quarter.

According to the company, in high-line cities such as Shanghai and Hangzhou, Taobao Flash Sale's market share is already close to Meituan, and UE is almost the same. It is mainly the lower-line cities' UE that is poor, dragging down the overall performance.

According to the above data, the future of Alibaba Flash Sale is undoubtedly bright. Achieving a market share and single-order profit nearly equivalent to Meituan in the medium to long term seems to be within reach. But Alibaba's ambition is obviously not satisfied with this, integrating existing various business segments to form an "all-encompassing" Alibaba consumer platform is its true goal.

In addition to the current food delivery + instant retail covered by Taobao Flash Sale, plus the core Taotian responsible for traditional e-commerce. Alibaba also clearly mentioned in the conference call that it will accelerate the transformation of Tmall Supermarket's self-operated business to a near-field flash sale model, and the number of flash warehouses has reached 50,000, which is basically the same as Meituan's front warehouses.

In addition, businesses such as Hema and Alibaba Health can further enhance Alibaba's store and category supply in the online and offline omni-channel consumer platform. Subsequently, Alibaba is also likely to refocus on in-store business and Fliggy's travel business.

It can be said that whether it is Alibaba, JD.com, or Meituan, they have all more or less envisioned a unified large platform that includes online and offline, long-range and close-range, food, goods, in-store, travel, etc., including all channels, all services, and goods. This time, the ultimate battle of the general retail platforms may really not be far away.