The instant retail sector started 2026 with a bombshell announcement. MEITUAN-W (HK:03690) issued a profit warning, projecting a net loss exceeding 23 billion yuan for the full year 2025. Its core local commerce segment, previously profitable at 52.4 billion yuan a year earlier, abruptly turned to an estimated loss of approximately 7 billion yuan.

Prior to this, Alibaba's (NYSE:BABA) financial report indicated a sharp decline of about 33.8 billion yuan in profit year-over-year for its China e-commerce segment, attributed to massive investments in Taobao Quick Deals.

With both giants simultaneously reporting results centered on "exchanging losses for growth," a critical question emerges: will this battle continue? How much of MEITUAN's competitive moat remains intact?

On February 13, MEITUAN revealed its figures—a projected net loss of 23.3 to 24.3 billion yuan for 2025, contrasting sharply with a 35.8 billion yuan profit in 2024.

This dramatic reversal stems primarily from the collapse of its most profitable business line. Core local commerce, encompassing food delivery, quick commerce, and in-store services, has long been MEITUAN's profit engine. It earned 38.7 billion yuan in 2023, grew to 52.4 billion yuan in 2024, but is now expected to lose 6.8 to 7.0 billion yuan this year. This single division's swing from a +35.8 billion yuan contribution to a -24 billion yuan level, a 60 billion yuan reversal, has pulled the entire group into the red.

MEITUAN attributed this to an intensely competitive industry, citing strategic investments in three key areas. First, the subsidy war. Since last year, JD.com (NASDAQ:JD) and Alibaba aggressively entered the food delivery market with a simple, brutal tactic: handing out cash. Users receive large coupons, slashing order costs by 10-20 yuan. Forced to respond, MEITUAN ramped up spending, with quarterly marketing expenses doubling from 18 billion yuan to 34.3 billion yuan—equivalent to burning 400 million yuan daily to retain user satisfaction.

Second, delivery rider costs. Previously manageable, these costs surged in 2025. Riders demanded higher pay during rain and holidays, and the nationwide rollout of social security benefits meant platforms had to contribute substantial funds. Analysts estimate fully covering rider social security could cost MEITUAN an additional tens of billions annually—an unavoidable expense.

Third, merchant incentives. Previously criticized for high commission rates, MEITUAN now faces competition from Alibaba and JD.com offering better terms. In response, MEITUAN reduced fees, offered subsidies, and assisted with digitalization—essentially spending to regain merchant loyalty. In October alone, it announced an additional 2.8 billion yuan to help merchants "protect profits."

While burning cash domestically, MEITUAN continues investing overseas, making the overall losses unsurprising. The pressing question is: what exactly is MEITUAN defending at this stage—its competitive moat, or merely its pride?

Analysts initially forecasted a 19 billion yuan loss for MEITUAN in 2025, but the actual figure reached 24.3 billion yuan, exceeding expectations by 5 billion. A quarterly breakdown reveals a starker picture: Q1 net profit was 10.05 billion yuan, Q2 saw a slim profit of 365 million yuan (barely avoiding a loss), Q3 recorded a net loss of 18.63 billion yuan, and Q4 is estimated at a 15.78 billion yuan loss.

Notably, Alibaba's food delivery subsidy war intensified in Q3, and MEITUAN's loss curve perfectly aligns with this competitive offensive. The 2025 price war essentially involved MEITUAN, Alibaba (Ele.me + Taobao Quick Deals), and JD.com battling for dominance in instant retail. According to LatePost, the trio collectively burned over 100 billion yuan on the food delivery war in Q2 and Q3 last year. MEITUAN's Q3 sales and marketing expenses alone skyrocketed to 34.3 billion yuan, doubling year-over-year, while Alibaba and JD.com also at least doubled their marketing spend. The result was MEITUAN's largest loss since its IPO.

Without this battle, MEITUAN could have easily earned 40 billion yuan in 2025. Instead, it lost 23.3 billion yuan, implying a total financial impact exceeding 63 billion yuan. Simply put, the combined assault from JD.com and Alibaba in food delivery and instant retail effectively obliterated MEITUAN's annual profit foundation.

The market structure has also shifted. The previous "MEITUAN + Ele.me" duopoly has evolved into a three-player contest. Reports suggest the consolidated market share by end-2025 was approximately: MEITUAN 48-50%, Alibaba ecosystem (Taobao Quick Deals + Ele.me) 33-42%, and JD.com 8-19% (estimates vary but trends are consistent). J.P. Morgan's (NYSE:JPM) research provides more detail: MEITUAN handles 71 million daily orders (~50% share), Alibaba 42%, JD.com 8%.

For MEITUAN, the golden era of "70% market share + 20% profit margins" seen in 2024 appears to be over. This trend has crushed market sentiment. On February 13, MEITUAN's stock fell over 4% intraday, with its market capitalization dropping below 500 billion HKD before closing at 502.1 billion HKD, down 3.18%.

The investment community is deeply divided. One poignant view questions MEITUAN's moat: turning a 35 billion yuan profit in 2024 into a 24 billion yuan loss in 2025 after competitors intensified efforts, with the swing happening within a quarter. Some contrast this with ByteDance, which pressured Tencent (HK:00700) and Alibaba without reporting losses. Critics argue MEITUAN's defenses proved shallow, easily breached by a year of focused attacks.

Beyond the profit warning, MEITUAN recently received two more challenges. First, Douyin quietly launched a "DouShengSheng" app. Second, Alibaba internally affirmed its commitment to Quick Deals, stating it should operate for three years without concerns about losses.

Regarding Alibaba, in restaurant food delivery, the market share gap between Taobao Quick Deals and MEITUAN has narrowed to about 10 percentage points. Further gains would yield diminishing returns. Notably, leaked Q4 forward guidance suggests Taobao Quick Deals' loss is expected to be around 20 billion yuan—showing a faster rate of loss reduction compared to competitors. Goldman Sachs (NYSE:GS) calculated the per-order loss difference narrowed from 3.4 yuan in Q2 to 2.5 yuan in Q3, further shrinking to 1.5 yuan in Q4, and potentially approaching 1 yuan recently. This rapid narrowing indicates Alibaba is aggressively closing the gap.

Over the past year, Taobao executed its Quick Deals strategy effectively, maximizing the value of Ele.me's assets. With Taobao's core e-commerce facing challenges, Quick Deals represents its strongest "second growth curve." Having seized a significant opportunity, Alibaba is unlikely to relent. At an early January investor meeting, Alibaba set the tone for 2026: increase investment to achieve absolute leadership in instant retail. The internal message was stronger: Quick Deals performed well last year; focus on stabilizing daily orders while pursuing higher-value orders and synergies with Tmall Supermarket and Freshippo over the next three years, without loss concerns. Taobao Quick Deals' internal focus for 2026 is clear: target major categories like pharmaceuticals, alcohol, and fresh produce in instant retail.

In essence, the food delivery battle continues, while the next phase—focused on instant retail—is already scheduled. An industry insider noted that while restaurant food delivery lacks differentiated supply, instant retail offers this opportunity. The 2026 outcome will depend on both companies' controlled supply infrastructure: MEITUAN (Ele.me Supermarket, Dingdong Maicai, Waima Songjiu, Squirrel Convenience, Happy Monkey, Flagship Flash Warehouses) versus Alibaba (Freshippo, Tmall Supermarket, Taobao Convenience Stores, Flagship Flash Warehouses).

Regarding Douyin, an investor highlighted that MEITUAN's most pressing concern may not be food delivery, but group buying. He observed that young users in smaller towns now check Douyin first for group buys, seamlessly purchasing coupons while watching videos—a smooth experience. The threat to MEITUAN's group buying business resembles the pressure汽水音乐 placed on NetEase Cloud Music. An expert noted Tencent Music lost users in tier-3/4 cities to汽水音乐. Douyin's core advantage in e-commerce lies in its massive, low-cost video traffic, efficiently converted into transactions. This logic is now applied to group buying—abundant traffic needing only conversion to consumption scenarios. In contrast, platforms like Alibaba, MEITUAN, and JD.com lack independent traffic sources, relying on purchased traffic or low prices to attract users, making Douyin's impact particularly severe.

For MEITUAN, the 60 billion yuan loss hasn't brought respite but intensified competition. With Alibaba pressing on instant retail and Douyin encroaching on group buying from behind, MEITUAN faces a textbook pincer movement.

Furthermore, ByteDance, the unlisted tech giant, single-handedly suppresses the valuation ceiling of the entire Hang Seng Tech Index. Heavyweights like Tencent, Alibaba, MEITUAN, Kuaishou, Baidu, and JD.com all operate under its shadow.