Competition erupts between wealthy contenders in China's food delivery sector: JD challenges Meituan's dominance
A heated verbal spat between two Chinese Big Tech food delivery giants, each backed by household-name billionaires, has sent shockwaves through the industry, slashing billions off their market values.
Richard Liu Qiangdong, with a personal net worth of US$6.3 billion and founder of JD.com, ignited the rivalry in February when he marketed his company as a better partner than industry leader Meituan, led by tycoon Wang Xing, worth US$10 billion, in terms of treatment for restaurants and gig economy delivery workers.
This week, the feud escalated as both companies accused each other of blocking delivery riders from accepting orders on rival platforms, with additional allegations of unfair treatment towards these workers. The name-calling wiped $13 billion off the combined market capitalization of the companies.
According to senior equity analyst at Morningstar, Chelsey Tam, the stock slip is due to investor anxiety over their potential increasing investments in the food delivery business, which may negatively impact their margins.
Analyst Chen Liteng of market consultancy 100ec.cn believes that the back-and-forth was inevitable since JD and Meituan have overlapping businesses. However, he added that the spat helped boost the brand exposure of JD.
The conflict primarily revolves around two major labor issues. JD accuses Meituan of restricting riders from working for competitor companies, whereas Meituan claims JD imposes stricter penalties for delivery delays and enforces similar restrictions. Another point of contention is public perception, with JD's founder Richard Liu placing emphasis on positioning the company as a worker-friendly alternative. In response, Meituan denies exclusivity claims and highlights its 30-minute delivery brand that relies on the flexibility of gig workers.
In attempt to disrupt Meituan's $100 billion food delivery empire, JD has launched "自營秒送" (self-operated express delivery) with over 1 million daily orders. On the other hand, Meituan is focusing on strengthening "Meituan Instashopping" for instant retail. While JD is moving towards a full-time rider model, Meituan maintains a hybrid workforce of full-time and part-time riders, thanks to its historical 75%+ market share.
The long-term consequences of this conflict include regulatory risks, investments in technology, market fragmentation, and brand differentiation. Regulatory scrutiny may arise as a result of the public dispute, particularly regarding labor practices, reflecting China's 2021 regulations on gig workers' rights. Both firms may also accelerate the adoption of drone delivery and AI routing to cut back on rider costs. The market could become increasingly fragmented as JD challenges Meituan's near-monopoly, potentially leading to price wars and tighter margins. Lastly, JD's emphasis on worker welfare might resonate with China's "common prosperity" policy focus, while Meituan's efficiency remains its core strength.
The ongoing combat highlights the competitive environment in China's saturated tech market, as giants compete in overlapping sectors as growth slows down. The battle's end game remains uncertain, as both parties strive to balance worker retention, service quality, and regulatory compliance.
- The verbal spat between JD.com and Meituan, two Chinese tech giants in the food delivery business, has caused billions of dollars to be wiped off their market values.
- Analysts suggest the stock plunge is due to investor anxiety over potential investments in the food delivery business, which may negatively impact their equity margins.
- The dispute revolves around labor issues, including accusations of restricting delivery riders from working for rival companies and imposing stricter penalties for delays.
- JD has launched a self-operated express delivery service to compete with Meituan, while Meituan focuses on strengthening its instant retail service.
- The long-term consequences of this conflict include regulatory risks, investments in technology, market fragmentation, and brand differentiation, with potential impacts on China's gig worker rights, drone delivery, and AI routing developments.
