New Chinese regulation hits online food delivery giants

The new regulation on online food delivery platforms in China has hit the industry hard, eroding over $25 billion in the stock value of the Meituan food delivery app being run by Alibaba.

A group of Chinese authorities has announced that the food delivery platforms should further reduce the service fees charged to restaurants in order to lower the operating costs for food and beverage businesses, reports TechCrunch.

The news sent Meituan's stock down more than 15 per cent, erasing over $25 billion in market value.

"Between 2016 and 2020, the number of people who ordered food online in China doubled to 400 million," the report said late on Sunday,

The Chinese online food livery market is dominated by Meituan and Ele.me -- just like India where the market is dominated by Zomato and Swiggy.

Commissions contributed as much as 60 per cent to Meituan's revenues in the three months ended September 2021.

Chinese authorities have also ordered food delivery platforms to improve the safety of their workers.

"The challenge for Meituan and Ele.me is how to balance workers' well-being and business profitability," the report noted.

Over the past two years, Meituan has flown 19,000 meals to 8,000 customers across Shenzhen, a city with nearly 20 million people.

Meituan has applied to operate a commercial drone delivery service across all of Shenzhen.