The lively takeout war has not yet come to an end. Over the past weekend, many consumers still received coupons issued by the platform, but the overall intensity was not as strong as the previous two weekends. On social platforms, some users shared that they received milk tea redemption coupons from the platform over the weekend, while others also shared their large coupons.
New business formats have also added fuel to the food delivery war. On July 21, China Business News discovered that JD.com’s first self-operated takeout store has opened, and takeout competition may continue in a new form.
On July 18, the State Administration for Market Regulation interviewed three platform companies, Ele.me, Meituan, and JD.com, and required the relevant platform companies to strictly abide by the E-Commerce Law of the People's Republic of China, the Anti-Unfair Competition Law of the People's Republic of China, the Food Safety Law of the People's Republic of China and other laws and regulations, further standardize promotional behaviors, participate in competition rationally, jointly build a good ecology of win-win for consumers, merchants, takeaway riders and platform companies, and promote the standardized, healthy and sustainable development of the catering service industry.
On the one hand, the crazy takeout war has stimulated users' enthusiasm for ordering. Some people say that the takeout market has changed from a stock market to an incremental market due to subsidies. On the other hand, chaos also occurred: the free milk tea was eventually thrown away because no one took it, and some merchants complained that they were being held hostage by the platform. As the war continues, some catering associations have launched initiatives calling for rational competition.
How do businesses view this war? Hot pot franchisee Chen Lei (pseudonym) told China Business News that from an industry perspective, the takeout war has consolidated consumers' ordering habits. During the war, takeout platforms not only offered discounts but also continuously optimized delivery timeliness. Consumers do not have to go through cumbersome links such as going out and finding a parking space. In addition, merchants’ exposure is also increasing during the food delivery war. Chen Lei said that in the food delivery war, in order to gain more exposure and order volume on the platform, merchants often launch substantial discounts and discounts, coupled with subsidies provided by the platform. When these discounts are combined, takeout prices are often more attractive than dine-in prices. This makes price-sensitive consumers more inclined to choose takeaways, and the number of customers in offline stores will naturally decrease. Chen Lei said that hot pot restaurants mainly focus on dine-in, and there are not many takeout orders. Since the takeout war started in July, the store's takeout orders have increased by 20% to 30%.
But on the other hand, Chen Lei believes that the food delivery war will affect consumers' return to offline stores. He said that because the prices of takeout are cheaper compared with dine-in, he has recently received feedback from dine-in customers saying that "eating in stores is not cost-effective." As a hotpot businessman, he said that eating hotpot at home and eating in dine-in are two different feelings. In addition, Chen Lei said that according to his observation, the takeout war has prompted merchants to flood into takeout platforms. In order to cope with fierce competition, some merchants will reduce the quality of ingredients or reduce production costs to maintain low takeout prices. Although this approach can attract orders in the short term, once it is noticed by consumers, it will affect the store's reputation. Not only may the number of takeout orders decline, but it will also make consumers distrust the brand's offline stores, thereby affecting the flow of dine-in customers.
As a merchant, Chen Lei said that when offline stores participate in the takeout war, they need to invest a lot of manpower and material resources to process takeout orders, including preparing meals, packaging, and docking with takeout riders. This distracts the store's energy in dine-in services, which may lead to a decline in the quality of dine-in services, such as slower serving speeds and untimely response from service staff, etc., thus affecting consumers' in-store dining experience, making some consumers unwilling to return to the store for consumption, and further reducing customer flow.
At the same time, Chen Lei said that as a franchisee, the activities of the food delivery platform are decided by the headquarters, and he has no say.
For platforms, the food delivery war is a good opportunity to further attract users and merchants. Taobao flash sale data shows that companies in the catering industry have seen significant growth in recruitment and labor demand, and the number of catering industry employees listed on DingTalk has increased by hundreds of thousands since July, reflecting that physical stores are actively coping with the peak summer customer flow.
But for industry organizations, the negative impact caused by the food delivery subsidy war also needs to be paid attention to. Since July 15, including the China Chain Store and Franchise Association, Shaanxi Provincial Restaurant Association, Shandong Provincial Cuisine Association, etc., have issued documents calling on food delivery platforms to stop "involution" competition.
The Shaanxi Provincial Restaurant Association said that recently, price subsidy wars such as "0 yuan purchase" and "18 off for purchases over 18" initiated by some leading takeout platforms have continued to heat up. This type of low-price melee that relies on capital power has gone beyond the scope of normal marketing. The coercion effect caused by the disguised forced participation of physical businesses, cost transfer, quality concerns, waste of resources and sharp increase in employee pressure is causing systemic damage to the healthy development of the catering industry in our province and even the country.
The association calls for staying away from the vicious cycle of irrational low-price competition of "surprise blood transfusions", abandoning short-term traffic-oriented "involution" behavior, preventing falling into the dilemma of "revenue decline - quality loss - customer loss", return to the origin of catering services, and win the market with stable quality and service experience.
Regarding the situation where the industry has persuaded them to stop but the platform is still issuing coupons, a digital life analyst at the e-commerce research center of the Internet News Agency told China Business News that although the regulatory interviews required that vicious competition be stopped, the food delivery platform still maintained a large promotion effort and the order volume did not see a significant decline. The core reasons are: First, the platform faces the dilemma of "subsidy inertia" and "user retention": the tens of billions of subsidies invested in the early stage have cultivated users' consumption habits, and if they are suddenly cancelled, it may lead to a cliff-like drop in orders. Second, regulatory details have not yet been fully implemented. The current policy only prohibits "sales below cost" but does not clearly define the cost structure or punishment mechanism. The platform avoids direct violations through "combination of discounts". Third, the two-way binding between rider ecology and user emotions. The income of a large number of riders depends on the weekend order peak, and consumers have formed a psychological expectation of "squeezing out wool on the weekends". The platform maintains stable order volume to avoid fluctuations.
Chen Liteng believes that in the future, the price war will gradually subside in stages, and the dimension of industry competition will continue to deepen. In the short term, extreme subsidies may gradually disappear and be replaced by other preferential strategies. In the medium to long term, the main battlefield of competition will shift to efficiency and service, and the industry will return to a healthy profit model.
Zhuang Shuai, founder of Bailian Consulting, said that just as the tens of billions of subsidies launched by Pinduoduo in 2019 have now become a channel for major e-commerce platforms, as long as the subsidies for takeout and flash sales businesses continue, then they will all be winners, and other e-commerce platforms will be even more "injured." At the same time, the food delivery industry will show a more differentiated development trend.