Why is this story bubbling up now? Because a renewed round of heavy discounting by China’s delivery giants has restarted a conversation few expected to return with such force: when does a race for market share funded by near-limitless cash reserves stop being competition and start being waste? The short answer: when operational efficiency loses to the ability to outspend rivals. What follows is a look at who’s doing the spending, why it matters, and what it means for couriers, merchants and broader markets.
Lead: who, what, when, where
Over the past several months, China’s largest on-demand delivery platforms have poured money into consumer coupons, merchant subsidies and driver incentives in an effort to prop up order volumes and grab market share. The contenders — including apps connected to the country’s biggest e-commerce and food-delivery names — rolled out promotions across major cities from Beijing to Chengdu. The campaign intensified after a recent slowdown in gross merchandise volume and follows a wider tech-sector shake-up that left platforms with the strategic choice to defend market positions or cede ground.
The trigger: why coverage spiked
The latest surge in reporting began when analysts noticed unusually large promotional budgets and when several platforms disclosed increased marketing and subsidy spending in quarterly updates. That publicity coincided with commentary from industry insiders and courier groups about disrupted labour conditions and changing pay structures — which made the subsidy story tangible rather than abstract. Observers began asking: are these subsidies restoring value, or simply masking inefficiencies?
Key developments
Recent moves include expanded consumer vouchers, discounted delivery fees, and higher per-order payments for couriers in contested areas. Platforms are also offering targeted subsidies to small restaurants to keep them visible on apps. At the same time, investor notices and regulatory statements imply a closer watch on how platform economics affect competition and labour markets. For background on the scale of China’s digital commerce ecosystem, see the e-commerce in China overview.
How the subsidy race works — and why it erodes efficiency
Subsidies distort the usual demand-supply signals. Instead of price reflecting delivery costs, platforms subsidise the gap: consumers get lower fees, merchants receive platform support and couriers get short-term boosts. That sounds great — until you look at unit economics. Subsidy-heavy strategies rely on deep pockets (cash reserves, investor backing, or diversified revenue streams). They can temporarily increase orders but rarely improve fulfilment efficiency or long-term margins. In practice, dispatch algorithms are tuned to chase orders that are profitable only after subsidies — a fragile equilibrium.
Background: the longer arc
To understand today you have to look back. China’s delivery market evolved rapidly over the past decade: explosive urbanisation, smartphone adoption and integrated apps turned meal and goods delivery into a high-frequency service. Platforms built logistics networks and experimented with price to scale fast. That growth era normalised aggressive sales and marketing. After an unpredictable economic period and regulatory shifts across tech sectors, companies face slower demand and tougher scrutiny, so some have doubled down on subsidies to defend share rather than pivot to higher-margin services.
Multiple perspectives
From a platform perspective, subsidies are a rational short-term tactic: they protect two-sided networks and keep users engaged. I spoke with industry analysts who argued that, in winner-takes-most markets, temporary cash outlays buy strategic breathing room. But critics — including some economists and labour advocates — say it’s unsustainable and masks deeper problems in logistics and platform governance.
Couriers tell a different story. For delivery riders, the immediate benefits of higher per-order incentives matter. But earnings volatility and shifting incentive rules breed frustration. Merchant owners, especially independent restaurants, appreciate short-term visibility but worry about becoming dependent on platform payments that can be cut with little notice.
Regulators are watching too. A subsidy war can lead to market distortions, potentially harming smaller competitors and creating long-term consumer harm if platforms later roll back benefits. That’s why antitrust bodies and consumer protection agencies have flagged platform practices before — and why new rounds of heavy subsidy could draw renewed scrutiny. For commentary on corporate disclosures and investor context, see Alibaba Group investor relations.
Impact analysis — who wins, who loses
Consumers may win short-term: lower prices and promotions are attractive. But there are risks. If the subsidy model ends abruptly, consumers could see sudden price rises. Couriers are in a bind: temporary incentives can obscure inadequate base pay, and the orthodox gig-economy trade-off — flexibility for income instability — becomes starker.
Small merchants may face the biggest strategic choice. Accept subsidies and rely on a platform-shaped pipeline, or resist to preserve a healthier margin but risk lower order volume. The market’s current configuration nudges many toward dependency on platform economics they don’t control.
Investors and public market watchers care because subsidy-heavy growth often masks weak unit economics. If platforms can credibly transition to better monetisation — for example, by improving logistics efficiency or adding profitable services — heavy spending may be justified. If not, the financial narrative becomes worrying.
Multiple viewpoints and expert takes
Economists I consulted say this is classic market-share competition fuelled by capital abundance. One expert observed that platforms are effectively buying demand, which can be destabilising if it suppresses natural price competition. Labour groups emphasise the human cost: earnings uncertainty and changing incentive rules create stress and turnover among couriers.
Platform spokespeople often frame subsidies as consumer-first initiatives meant to stimulate local economies and help small businesses. They argue that promotions are targeted and temporary — designed to smooth demand and support merchants. Skeptics counter that such moves come at the cost of operational discipline.
Real-world consequences
On the ground, the subsidy war reshapes work patterns and consumer behaviour. In busy districts, couriers report busier shifts tied to campaign timings, while restaurants sometimes reallocate staffing to meet promotional demand — a short-term boost that can leave them stretched when normal volumes return. Municipal regulators also face pressure to ensure traffic rules, rider safety and employment standards keep pace with shifting delivery volumes.
What might happen next
Several plausible scenarios deserve attention. One: the subsidy war continues until cash-constrained players exit or consolidate, tightening the market and returning pricing power to the survivors. Two: regulators step in with clearer rules about platform subsidies, transparency requirements, or protections for couriers and small merchants. Three: platforms pivot, investing in logistics automation, better routing algorithms and premium services to restore healthy unit economics.
Each path has trade-offs. Consolidation might stabilise prices but reduce choice. Regulation could protect workers but slow innovation. A technology-led pivot could improve efficiency — if platforms invest in the hard, costly work of logistics optimisation rather than in coupons.
Related context
This story links to broader themes: platform capitalism, gig work dynamics and how capital allocation shapes market outcomes. For ongoing reporting and broader tech coverage, see Reuters technology coverage.
Bottom line
Subsidy wars are not new. What’s striking now is the scale and the stakes. Platforms with ample reserves can rewrite market economics temporarily, but they can’t sustainably replace efficient logistics, fair labour practices and resilient merchant relations with coupons alone. The real test will be whether firms convert short-term spending into long-term improvements — or merely burn cash to postpone hard decisions. That’s the question investors, regulators and the people delivering your meals will be asking next.
Frequently Asked Questions
It refers to aggressive promotional spending by major Chinese delivery platforms — consumer discounts, merchant subsidies and courier incentives — aimed at boosting orders and market share, often at the expense of unit economics.
Subsidies can quickly drive volume and retention, which is attractive in winner-takes-most markets. Improving efficiency requires longer-term investment in logistics, tech and operations that may not yield immediate gains.
Couriers may benefit from higher short-term incentives but face earnings volatility and changing rules. Increased order spikes can also create safety and workload issues.
Yes. Regulators could require greater transparency, limit predatory pricing or introduce protections for workers and smaller competitors if subsidies lead to market distortion or consumer harm.
Merchants should weigh short-term promotional gains against long-term margins, diversify their channels where possible, and seek clarity from platforms on the sustainability of subsidy programs.