China's Food Delivery Subsidy War: Research Shows Merchant Revenue and Net Profits Both Drop
A study by Fudan University reveals that the massive subsidy war in China's food delivery sector crowded out highly profitable dine-in orders, leading to lower overall revenue and net profits for merchants.
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- 📰 Published: April 24, 2026 at 23:16
- 🔍 Collected: April 24, 2026 at 23:32 (15 min after Published)
- 🤖 AI Analyzed: April 25, 2026 at 00:08 (36 min after Collected)
Central News
(CNA, Shanghai, 24th, Reporter Li Ya-wen) Research from Fudan University in Shanghai shows that China's food delivery subsidy war last year caused online orders to crowd out more profitable dine-in orders, ultimately resulting in a dilemma where both revenue and net profits declined. High subsidies kept merchants busy, but they didn't make money.
A sub-forum of the Shanghai Forum 2026 was held on the 24th at the Hyatt on the Bund in North Bund. The theme was "Labor Market Transformation in the Age of AI - New Challenges for China and the World." Associate Professor Hu Bo and Assistant Professor Li Rui from the School of Economics at Fudan University presented their research findings.
Hu Bo and Li Rui took last year's Chinese food delivery subsidy war as their research topic - "Traffic? Or Profit? How the Subsidy War Burdens Catering Merchants." The study found that during the subsidy war, restaurants gained more orders and more traffic; however, actual revenue and net profits both decreased.
This research analyzed daily transaction data of merchants from a certain platform between March and September of last year, comparing it with the same period in 2024, covering a total of 40,275 merchants, including beverage shops, fast food restaurants, Chinese restaurants, and other types.
The research data indicated two key points: the "Super Ten Billion Mega Sale" launched following Taobao flash delivery's App upgrade on April 30 last year, and the start of the subsidy war on July 5. After April 30, delivery orders increased significantly; after July 5, order volumes were pushed even higher, showing a substantial increase compared to the same period in 2024.
Li Rui explained the empirical findings. He noted that general catering merchants have two main businesses: delivery and dine-in. Under high subsidies, order volumes did continue to increase, but the average ticket size for delivery dropped significantly, especially during the intensified competition period (after July 5), with a decrease of about 20%.
Li Rui mentioned that high delivery subsidies did not have a huge impact on the average dine-in ticket size. However, the increase in online delivery orders had an obvious crowding-out effect on dine-in consumption, causing total actual dine-in revenue to drop. "Simply put, huge subsidies made catering merchants much busier, but they actually didn't make any money."
He explained that the average net profit margin for food delivery is about 3.5%; for dine-in consumption, it's about 10%. Under the delivery subsidy war, the "exchanging price for volume" (lowering prices to gain order volume) profit strategy had no obvious effect. Instead, it impacted the higher-profit dine-in business. During the intensified period of the subsidy war, merchants' net profits fell by an average of 9%.
Hu Bo and Li Rui proposed policy recommendations, suggesting an upper limit on high subsidies. This might affect consumer welfare in the short term, but in the long run, it is good for society as a whole. On the other hand, platforms must be strictly prohibited from transferring subsidy costs to merchants, which would cause significant profit losses for them. (Edited by Yang Sheng-ju) 1150424
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(CNA, Shanghai, 24th, Reporter Li Ya-wen) Research from Fudan University in Shanghai shows that China's food delivery subsidy war last year caused online orders to crowd out more profitable dine-in orders, ultimately resulting in a dilemma where both revenue and net profits declined. High subsidies kept merchants busy, but they didn't make money.
A sub-forum of the Shanghai Forum 2026 was held on the 24th at the Hyatt on the Bund in North Bund. The theme was "Labor Market Transformation in the Age of AI - New Challenges for China and the World." Associate Professor Hu Bo and Assistant Professor Li Rui from the School of Economics at Fudan University presented their research findings.
Hu Bo and Li Rui took last year's Chinese food delivery subsidy war as their research topic - "Traffic? Or Profit? How the Subsidy War Burdens Catering Merchants." The study found that during the subsidy war, restaurants gained more orders and more traffic; however, actual revenue and net profits both decreased.
This research analyzed daily transaction data of merchants from a certain platform between March and September of last year, comparing it with the same period in 2024, covering a total of 40,275 merchants, including beverage shops, fast food restaurants, Chinese restaurants, and other types.
The research data indicated two key points: the "Super Ten Billion Mega Sale" launched following Taobao flash delivery's App upgrade on April 30 last year, and the start of the subsidy war on July 5. After April 30, delivery orders increased significantly; after July 5, order volumes were pushed even higher, showing a substantial increase compared to the same period in 2024.
Li Rui explained the empirical findings. He noted that general catering merchants have two main businesses: delivery and dine-in. Under high subsidies, order volumes did continue to increase, but the average ticket size for delivery dropped significantly, especially during the intensified competition period (after July 5), with a decrease of about 20%.
Li Rui mentioned that high delivery subsidies did not have a huge impact on the average dine-in ticket size. However, the increase in online delivery orders had an obvious crowding-out effect on dine-in consumption, causing total actual dine-in revenue to drop. "Simply put, huge subsidies made catering merchants much busier, but they actually didn't make any money."
He explained that the average net profit margin for food delivery is about 3.5%; for dine-in consumption, it's about 10%. Under the delivery subsidy war, the "exchanging price for volume" (lowering prices to gain order volume) profit strategy had no obvious effect. Instead, it impacted the higher-profit dine-in business. During the intensified period of the subsidy war, merchants' net profits fell by an average of 9%.
Hu Bo and Li Rui proposed policy recommendations, suggesting an upper limit on high subsidies. This might affect consumer welfare in the short term, but in the long run, it is good for society as a whole. On the other hand, platforms must be strictly prohibited from transferring subsidy costs to merchants, which would cause significant profit losses for them. (Edited by Yang Sheng-ju) 1150424
Stand with facts; every sponsorship you make is a force protecting press freedom.
Download the CNA 'First Hand News' APP to grasp the latest news instantly.
The text, images, and audio/video on this website may not be reproduced, publicly broadcast, or publicly transmitted and utilized without authorization.