Liu Cheng interviews a delivery worker in front of a restaurant. Photo: COURTESY OF LIU CHENG

Today, placing a food delivery order with a few taps on a smartphone has become a routine part of daily life. Yet beneath this convenience, Liu Cheng, a research fellow from the National Academy of Economic Strategy at the Chinese Academy of Social Sciences, has detected troubling signs. As platform algorithms grow more sophisticated and competition intensifies, many merchants—eager to capture traffic and boost order volume—have adopted increasingly aggressive promotional tactics: discounts, spend-more-save-more schemes, freebies, and, notably, covering delivery fees that should be borne by consumers. While these measures appear to benefit customers, they have quietly triggered a destructive cycle of rat-race competition within the industry. Merchants are absorbing rising competitive costs without seeing corresponding gains in profits.

To better understand this delivery fee dilemma, Liu launched a comprehensive investigation. He visited restaurants and food delivery companies and interviewed numerous delivery workers. His research led to a clear conclusion: Resolving the rat-race dynamics around delivery fees cannot rely solely on the self-restraint or concessions of any one party. Rather, it requires coordinated efforts across multiple fronts—regulatory frameworks, platform governance, business upgrading, and consumer education—to shift the sector away from low-level, repetitive competition toward high-quality, differentiated development.

Discovering problems from daily life

Liu has long focused on the platform economy and related fields, consistently identifying research questions rooted in everyday life. As food delivery has become deeply embedded in daily routines, he developed a strong interest in the sector and has closely tracked its economic shifts.

Delivery services constitute a crucial link connecting businesses and consumers. Broadly defined, delivery fees refer to the logistics costs incurred in moving goods from the point of supply (such as a storefront or warehouse) to the customer. In the context of the platform economy, delivery fees have evolved beyond the basic costs of “delivering to doorsteps,” becoming strategic tools and variables for traffic allocation, market competition, and profit optimization.

As the digital economy rapidly expands, instant delivery platforms—from e-commerce to food takeout to community group buying—have diversified consumer options while also reshaping how businesses operate. To attract customers and increase orders, merchants deploy various promotional tactics—including discounts and gifts—and often assume delivery costs themselves. Though seemingly advantageous to consumers, this model has intensified intra-industry competition. Businesses face mounting costs, but with no guarantee of commensurate returns—a textbook case of involution.

It was against this backdrop that Liu first noticed changes in who bears delivery costs during his own food orders. Whereas consumers once chose whether or not to pay a delivery fee, it has become increasingly common for merchants to shoulder the cost. What competitive logic underlies this shift? What broader market dynamics are at play? Driven by these questions, Liu embarked on a deeper inquiry into the evolving landscape of food delivery.

Multi-faceted research approach

To gain a comprehensive understanding of the intensifying delivery fee competition on food delivery platforms, Liu embedded himself among diverse stakeholders—merchants, couriers, and others—to collect firsthand data. He adopted a multi-faceted research approach: establishing a data-sharing arrangement with Meituan Research Institute (under the auspices of China’s lifestyle services giant Meituan) to access operational platform data; conducting field visits and spontaneous interviews with restaurant owners representing various types of eateries; and holding conversational interviews with delivery workers to capture their work experiences. Liu seized every opportunity in daily life to interact with potential informants, methodically deepening his grasp of the subject.

During conversations with restaurant owners, Liu often took advantage of casual dining occasions to extract research-relevant information through informal exchanges. In these relaxing interviews, he gradually uncovered the candid views of small and medium-sized businesses toward the food delivery industry. His investigation revealed that such merchants face severe competitive pressures and shrinking profit margins. To win customers and orders, they must navigate the promotional schemes and delivery fee policies imposed by platforms. Choosing to bear delivery costs further squeezes their profits, while passing the fees on to customers risks losing out to cheaper rivals.

One restaurant owner confided in Liu with evident frustration: “The platforms are to blame—they have designed all these promotional tools and delivery fee rules. On paper, it is our choice to make, but really, we are doomed to cover the delivery fees. If we don’t, customers just get undercut by cheaper competitors.”

Liu often approached resting delivery workers on the street or in restaurants for deeper conversations. From them, he learned that most workers care little about who pays the delivery fee—their focus is squarely on their own earnings. Despite rising delivery fees, they feel no tangible benefit, believing that platforms pocket most of the increase. One worker put it plainly: “All we want is more deliveries and better pay, but our per-delivery compensation hasn’t increased much. Honestly, it is getting harder to grow our earnings.”

Liu’s detailed investigation into Meituan’s platform perspective found that the company views delivery fee allocation as a natural market outcome; they are merely providing options for businesses. To attract both users and businesses amid ferocious competition, the platform has deployed various promotional mechanisms and delivery fee rules, leading businesses to proactively absorb these costs for survival.

“Within platform-dominated retail and service ecosystems,” Liu explained to CSST, “delivery fees should represent fair consumer payment for ‘doorstep convenience.’ Yet under distorted market mechanisms, this cost has gradually shifted to businesses. By leveraging traffic allocation systems and algorithmic rules, platforms essentially transform delivery fees into implicit costs for businesses competing for visibility. To secure better rankings, premium placements, and higher conversion rates, restaurants feel compelled to subsidize consumers—absorbing what should be user-borne delivery costs partially or entirely.”

Consequently, although all stakeholders—businesses, delivery workers, and platforms—disclaim responsibility, this dynamic objectively intensifies rat-race competition within the food delivery sector.

Countermeasures from four dimensions

Based on his research, Liu contended that resolving the cutthroat competition over delivery fees requires multi-dimensional collaboration and adjustments. He recommended that platforms should shift algorithmic governance toward a “value-driven” mechanism, diminishing the dominance of price factors. At present, platform algorithms place excessive weight on “immediacy indicators” such as conversion rates, order volume, and price sensitivity, inadvertently incentivizing merchants to shoulder delivery fees in exchange for traffic—thereby intensifying rat-race competition in the short term. Going forward, platforms could gradually introduce long-term evaluation dimensions like “quality weighting,” “businesses’ growth value,” and “service stability.” Factoring in product quality, service performance, and genuine repurchase behavior could help establish a virtuous cycle where high-quality businesses are rewarded with greater exposure.

Liu proposed targeted solutions from the perspectives of merchants, consumers, platforms, and regulators. He believes that merchants must achieve a “value breakthrough” by enhancing their brand and improving quality. Small and medium-sized businesses should move beyond the inefficient strategy of “absorbing delivery fees for traffic” and instead focus on improving product competitiveness and service standards. This includes strengthening standardization and operational stability, boosting product quality, enhancing customer satisfaction, and increasing the likelihood of repeat purchases. Merchants should also invest in brand-building—particularly through digital content and customer engagement—to foster loyalty. In parallel, they can moderately develop private traffic channels or build in-house delivery systems to reduce dependence on a single platform while still maintaining platform-based orders.

Simultaneously, efforts are needed to foster a more rational consumer culture. In a platform environment where pricing is highly transparent, consumers’ sensitivity to “whether the delivery fee is zero” is continually amplified by platform mechanisms, inadvertently reinforcing businesses’ overdependence on price wars, Liu suggested. To reverse this trend, a mindset that cost-effectiveness does not equal to lowest prices must be cultivated among consumers. On one hand, platforms can redesign interfaces—through visual layouts and featured tags—to highlight non-price indicators like “high user ratings” and “high repurchase rates,” steering consumer attention toward holistic service quality. On the other hand, media and relevant institutions should advocate for “fair compensation for service labor” to promote public recognition of delivery workers’ and service providers’ value.

From a regulatory standpoint, Liu called for stronger safeguards around fair competition and greater transparency in cost allocation across the platform economy. Drawing on the Anti-Unfair Competition Law and principles against rat-race competition, authorities should clarify accountability boundaries for delivery cost transfers, specifically targeting dominant platforms that exploit algorithms to manipulate pricing and suppress merchants’ bargaining power.

At the same time, Liu advised that regulations should mandate open and transparent delivery fee pricing structures, establishing standardized cost-accounting benchmarks for instant-retail and on-demand delivery sectors to define reasonable fee composition and ranges, and prevent platforms from using technological “black boxes” to pass hidden costs onto merchants. Furthermore, data disclosure requirements could compel platforms to publicly release data such as merchant profit margins, subsidy structures, and delivery cost burdens across different categories, thereby improving governance transparency and pressuring platforms to optimize their business ecosystems.

Liu believes that only through such multidimensional collaboration can the food delivery industry transition from low-level meaningless competition to high-quality tiered development, thereby resolving the predicament of rat-race competition over delivery fees and guiding the market toward healthier, sustainable evolution.