Rational competition urged for platform economy

A food delivery man rides after snow in Xining, capital of northwest China's Qinghai Province, Nov. 4, 2018. [Photo/Xinhua]

China's latest efforts to regulate the promotional activities of major food delivery platforms and urge rational competition will help maintain market order and promote the healthy and orderly development of the platform economy, experts said.

These platforms should ramp up technological innovation, optimize delivery networks and adopt differentiated strategies to further improve user experience and prevent cutthroat competition, they added.

Their comments came after the State Administration for Market Regulation on Friday summoned three food delivery platforms — Ele.me, Meituan and JD — calling on them to strictly adhere to e-commerce, fair competition and food safety laws, and assume more professional responsibility.

The regulator urged the three platform companies to further regulate promotional activities, participate in competition rationally, and foster a healthy ecosystem that benefits consumers, merchants, delivery riders and platform operators so as to promote the regulated, healthy and sustainable development of the catering services sector.

The authority's meeting with major food delivery platforms followed the recent fierce competition in the country's instant retail sector — with players offering huge discounts and subsidies to grab a bigger slice of the pie — which triggered a relentless price war.

"The latest move has demonstrated the government's firm determination to maintain fair market order, signaling its 'zero-tolerance' attitude toward disorderly subsidies and vicious competition," said Jiang Han, a senior analyst at market consultancy Pangoal, adding that the regulated and healthy development of the food delivery sector is directly related to consumers' rights and interests.

It is of great significance to safeguard a fair and orderly market environment and avoid the "involution-style" competition in the food delivery sector, which is experiencing a price war, as major platforms have continuously stepped up subsidies to compete for market share, leading to the compression of merchants' profits and the decline in consumer experience, Jiang said.

He said platform enterprises should provide differentiated innovative services, such as optimizing delivery efficiency, enhancing food safety standards and improving after-sales services, thereby creating a healthy competition environment, and promoting the high-quality and sustained development of the food delivery sector.

In May, the SAMR and four other government departments summoned major food delivery platforms to address prominent issues related to competition in the food delivery sector and to rectify unfair market practices.

The regulator called on the platforms to comply with laws and regulations, fulfill social responsibilities, strengthen internal management, engage in fair and orderly competition, and better safeguard the rights and interests of consumers, merchants and delivery staff.

Cao Lei, director of the Internet Economy Institute, a domestic consultancy, said the continuous steep discounts will pose challenges to platform companies' profitability, intensify competition and further squeeze the survival space of small and medium-sized merchants.

Cao said the platforms should increase investments in technologies such as artificial intelligence-powered algorithms and intelligent scheduling to enhance fulfillment efficiency, while optimizing supply chain management, safeguarding the legitimate rights and interests of consumers, and improving the welfare of delivery staff.

Zhu Keli, founding director of the China Institute of New Economy, said it is important that platform enterprises pool more resources into technologies and optimize cost structure through highly efficient inventory management and intelligent warehousing systems.