Hi, Everyone!
As of lately, I’ve been fascinated by the evolving world of food delivery providers and how these systems move our cities through logistics, route algorithms, and digital ecosystems.
Each one of us on our way to Woudestein campus will cross bike paths with food riders slipping through traffic. By observing this everyday convenience we can understand how innovation, human behaviour and pricing strategies shape these platforms. Today, I will share an example that offers a glimpse into digital platform economics.
In early 2025, China’s food delivery market mainly represented by Meituan, Alibaba’s Ele.me and JD experienced a frenzy of coupons, near-free meals, and there in 30 minutes or free delivery promises.
For weeks, users were flooded with deals, riders earned record wages, and restaurants struggled to keep up with surging demand. Here we see in action indirect network effects as the mutual dependency between consumers and restaurants. As more restaurants joined, users gained variety, convenience, and faster delivery. This surge in demand was only initially sustainable by Meituan and Ele.me who subsidized both sides heavily, hoping to lock users into their ecosystems.
The result? Well, as imaginable an exponential user growth but collapsing margins. Meanwhile, same-side network effects were also observable. As more users joined, platforms benefited from richer data, social coupon sharing, as well as users positive word of mouth that built trust.
However, in this delivery war between Meituan, Ele.me and JD, customer loyalty went down as digital platforms allowed easily for multi-homing and forced even deeper discounts. That is when negative network effects became visible through rider oversupply, restaurants facing price pressure, and consumers questioning service reliability.
Each company offered layered membership programs, flash discounts, and bundled services. For once, Meituan’s premium pass, and Alibaba’s integration with Taobao remind us of bundling and price discrimination dictated by algorithms favouring recurring transactions.
Luckily, regulators such as the China Securities Regulatory Commission stepped in to stop these predatory pricing strategies and protect small businesses. Moreover, JD started curating the supply side more by offering social security coverage for full-time and part-time riders, signalling a turn toward long-term sustainability. Briefly after, also Meituan announced similar benefits adjustments.
This episode shows that network effects can both build and break digital platforms. Where do you see the future of delivery ecosystems here in Europe, one of sustainable growth or one driven by endless price wars?
Interesting example of how network effects can both drive growth and create instabiltiy in digital ecosystems. In class we discussed how data monetization can help companies create new value streams. But we also looked at how overregulation could limit growth.
I am curious how the EU will try to find a balance between innovation and regulation. Do you think stricter overwatch like DMA would be suitable in this case? Also it would have been nice to further understand if EU companies can achieve the same growth without big goverment intervention.
I believe that European governments will have to innovate as well to realistically have any oversight and regulate in digital ecosystems. I see an increasingly faster innovation pace while regulatory agencies and opening of new economic channels, where we could test these potentially disruptive ideas, always lag behind. Government intervention is necessary in Europe in my opinion, not to inject liquidity, but to facilitate with bureaucracy.