Alibaba Challenges Meituan in In-Store Dining Market

Alibaba Group Holding (BABA) has initiated a strategic expansion into the in-store dining voucher market, directly challenging the established dominance of Meituan (3690.HK). This move signals an intensification of the rivalry between China's e-commerce and local services giants, particularly ahead of the high-spending "Golden Week" holiday.

The Initiative Detailed

On September 20, Alibaba's Taobao Deals, operating under its instant commerce units Taobao Shangou and Ele.me, commenced offering discounted in-store dining vouchers in selected districts across Shenzhen, Shanghai, and Jiaxing. The initiative, which initially targets restaurant chains, tea shops, and bakeries, mirrors a business model successfully implemented by Meituan—following its 2015 merger with Dianping—and subsequently by ByteDance's Douyin in 2020. The timing of this launch, ten days prior to China's "Golden Week" holiday beginning October 1, is strategic, aiming to capitalize on the anticipated surge in consumer travel and spending. Integration with Alibaba's broader ecosystem, including AutoNavi and Alipay, is expected to leverage a vast user base to direct online and offline traffic and facilitate merchant transactions. Notably, Alibaba also launched the 'Gaode Street-Sweeping List' on September 10, backed by over 1 billion yuan in subsidies for offline dining and service consumption, directly competing with Meituan's Dianping ranking system.

Analysis of Market Reaction and Competitive Landscape

This aggressive push by Alibaba is poised to significantly escalate competition in the lucrative in-store dining sector. Meituan has previously demonstrated the market's value, reporting a more than 40% year-on-year growth in order volume for its in-store, hotel, and travel business during the second quarter of 2025. However, this growth came at a cost; Meituan's core local commerce segment saw its operating profit decline by 75.6% year-on-year to 3.7 billion yuan in Q2 2025, with the operating profit margin decreasing by 19.4 percentage points to 5.7%. This pressure on profitability is largely attributed to fierce competition and an ongoing "subsidy war" in the local services sector. Costs of sales for this segment increased by 27.0% year-on-year, driven by increased rider subsidies and overseas business expansion, while sales and marketing expenses surged by 51.8%.

"Meituan's management expressed frustration with what they termed 'irrational spending in the unsustainable manner' by competitors, asserting that their 'operational efficiency has always been ahead of competitors, and this advantage is actually expanding during the current intensified competitive period.'"

Conversely, Alibaba has committed substantial resources, with public statements indicating a commitment of RMB 50 billion (US$7 billion) in subsidies for food delivery and quick commerce. Following their respective earnings calls, Alibaba's share price advanced by over 10%, while Meituan's share price declined by a similar margin, reflecting investor sentiment regarding the competitive dynamics.

Broader Context and Implications

The expansion into in-store dining is a natural progression of the "super app and ecosystem" model, a trend popularized by Chinese internet companies that integrates various services within a single platform. This move by Alibaba aims to further diversify its e-commerce offerings and capture a larger share of consumer spending. A crucial factor in this intensifying "war of attrition" is the financial capacity of the contenders. As of the end of June 2025, Alibaba held approximately RMB 586 billion in cash and other liquid investments, significantly outweighing Meituan's RMB 170 billion in cash and short-term investments. This disparity suggests that Alibaba possesses superior resources for a sustained competitive effort.

Chinese local lifestyle platforms, including Meituan with its KeeTa brand, have also been expanding into global markets. However, the escalating domestic competition may compel Meituan to re-evaluate its resource allocation, potentially slowing international ventures to reinforce its position in the home market.

Expert Commentary

Citi analysts, in a recent report, highlighted the potential for Alibaba's initiative to effectively capture the upcoming busy travel season, driving users to physical stores and restaurants. The bank emphasized the synergy created by leveraging Taobao Deals, AutoNavi, and Alipay to convert transactions for merchants and support consumption. Citi maintains a target price of $187 for Alibaba (BABA.US), anticipating that Taobao's flash sales will stimulate consumer spending during the "Golden Week" holiday.

Looking Ahead

The intensified competition in the in-store dining and local services sector is expected to continue, potentially leading to further pressure on profit margins for all players. The substantial financial backing of Alibaba positions it to sustain aggressive subsidy campaigns, which could continue to impact Meituan's profitability in the near term. Key factors to monitor include the sustainability of subsidy levels, the effectiveness of platform integration in driving consumer traffic and conversions, and any potential for regulatory intervention to mitigate excessive competition. The strategic responses from Meituan—particularly concerning its domestic market defense versus global expansion—will be critical in shaping the future landscape of China's local services industry. The upcoming "Golden Week" holiday will provide initial insights into the efficacy of Alibaba's new offensive. The long-term profitability of both companies in this fiercely contested market will depend on their ability to balance market share gains with sustainable operational efficiency. Keywords: BABA, 3690.HK, In-Store Dining, Competition, Golden Week, Alibaba, Meituan, Taobao Deals, Ele.me, Local Services, E-commerce, Subsidies, Profitability, China Market, Tech Rivalry, Dianping, Douyin, Instant Commerce, Amap, Gaode Street-Sweeping List, Citi, Analyst Views, Financial Performance, Market Share, Consumer Spending, Regulatory Environment, Strategic Expansion, Market Dynamics, Online-to-Offline, O2O. All data based on information available as of September 2025.