China Retail

The subsidies were never the point. The habit was.

10 September 2026

For a year, three of China’s largest companies spent billions of dollars teaching their customers a single reflex. That reflex has now been learned. The coupons are being withdrawn, the free-delivery banners are coming down, and what is left behind is worth more than everything the subsidies cost. A new expectation. When I think of something, I buy it and get it right away.

That sentence is not mine. It belongs to Jiang Yanxin, a Beijing shopper quoted by Reuters, who ordered a doll on her way to meet friends for lunch and found a courier already at the restaurant by the time she reached her table. “I’m used to shopping this way now,” she said. That is the whole war in one line. After a year in which Meituan, Alibaba and JD.com poured money into coupons, free delivery and merchant incentives, what I call  instant retail has become the new battleground: electronics, flowers and even medicine, delivered in under sixty minutes.

The scoreboard has already moved. Goldman Sachs said in April that Meituan’s meal-delivery share had slipped from the 75 to 80 per cent it held before the price war. On Analysys data cited by Reuters, Meituan commanded 45.3 per cent of the broader instant-retail market in the second quarter, with Alibaba’s Taobao Instant Commerce ahead at 45.7 per cent and JD.com holding 7.7 per cent. The meal-delivery fight, in other words, has been swallowed whole by a bigger one.

Here is why it matters, and why the Western reader should not file this under “another Chinese price war.” The subsidies were a customer-acquisition cost disguised as generosity. Liu Xingliang, director of the Beijing-based Data Centre of China Internet, put it precisely to Reuters. The industry, he said, “has moved from the first stage of winning users through subsidies to a second stage of retaining users, expanding supply and calculating order-level economics.” Translation: the giants bought the habit at a loss, and now they must make the habit pay. The clever part was never the discount. It was recognising that a shopper who has had paracetamol at her door in under an hour will never again plan a trip to the chemist. The behaviour is a one-way door.

The damage sits where it usually sits. The food industry analyst Zhu Danpeng, quoted by Reuters, says the battle benefited consumers but the damage to small restaurant operators is still there, because a subsidised order is a thin order, and thin orders on someone else’s platform are a poor way to run a kitchen. That is the ledger the West should read most carefully. Instant retail does not create demand so much as it relocates margin, from the shop you owned to the network you rent. The convenience is real. So is the tax on it.

For a Western retailer, the lesson is not “build one-hour delivery.” It is subtler and harder. The Chinese platforms understood that logistics density, payment and media sit in one loop, so a subsidy in one part of the loop buys behaviour that monetises in another. Amazon has the pieces. Most Western grocers and chains have them scattered across four vendors and three contracts, which is why their version of instant retail is a feature nobody remembers rather than a habit nobody breaks.

What to watch. Watch retention now that the coupons are thinning. The whole thesis rests on whether the habit outlives the discount. If second-half order volumes hold as subsidies fall, the giants have bought something durable. If they sag, they have rented attention at a ruinous price, and the analysts warning that users may not stay will have their answer.

The Roth Read. Stop asking whether you can afford one-hour delivery. Ask what habit you are willing to buy at a loss, and whether you own the loop that makes it pay you back later. China just proved the subsidy is the cheap part; the expectation it leaves behind is the asset, and right now your competitor is teaching your customer to expect something you cannot yet deliver.

America finally cracked live shopping. It did the opposite of what China did.

27 August 2026

I have long been a strong supporter of live shopping. I have seen the Chinese ecosystem firsthand and understand how finely tuned it is. My argument has always been that it can travel beyond China, but only if it is retuned for a western psychology.

For four years the received wisdom in Silicon Valley was that it would not travel at all. Facebook closed its live shopping feature in October 2022. Instagram followed five months later. Amazon Live limped on, described by one analyst in the Chinese tech press as content so awkward most users did not know it existed. The verdict looked settled. China had Li Jiaqi and a live-commerce market worth 4.9 trillion yuan in 2023, close to a third of everything the country bought online. America had a shrug.

Today 833 million people, three quarters of China’s internet users, watch livestreaming. And the category the West wrote off has found its form in the least likely place. A company started in Los Angeles in 2019, selling big-headed plastic figurines, has just raised 545 million dollars at a 20 billion dollar valuation. Whatnot sold 8 billion dollars of goods in 2025. In the first half of 2026 alone it passed that entire figure again, a full year’s trade in six months. And here is the number that should stop any western retailer cold: its users watch for more than 80 minutes a day. That is not shopping behaviour. That is closer to Netflix.

What matters is not that America can do live shopping after all. It is that the American winner looks nothing like the Chinese one.

China built live commerce on a single mechanism. The platform owns the traffic and routes it to a handful of superhosts who convert it. The platform decides who is seen, and the host holding that visibility holds the leverage. It is efficient, it is enormous, and it is fragile, because it started to rest on a few individuals and the terms set for them.

Whatnot inverted it. There is no superhost. There is a golf-gear seller who did not know how to switch the stream on until his viewers taught him, and who then sold over 100,000 dollars of clubs in a single six-hour session. There is a 25-year-old with no degree whose business now turns over more than a million dollars a week. There is a trading-card shop in Florida that went from two staff to thirty-nine. Not one star pulling a crowd, but thousands of small communities pulling their own.

The distinction runs deeper than personnel. TikTok Shop, the other American contender, is discovery commerce. The algorithm decides what you did not know you wanted, and short video, not live, does most of the selling. That is advertising economics wearing a shopping cart. Whatnot is the reverse. The buyer arrives already knowing what they love, a sneaker, a sports card, a vintage bag, and the auction is where the tribe transacts. Not attention converted into sales. Passion given a till.

Three models, one sentence. China sells through the few. TikTok sells through the feed. Whatnot sells through the crowd.

The question now being asked, in Shanghai as much as in San Francisco, is which of those is actually the healthier ecosystem. Growth that depends on no single star does not wobble when a host defects or a contract sours. It compounds. Western retailers spent four years concluding that live shopping was un-American, and missed this entirely, because they were asking the wrong question. They asked whether America would copy China. The answer was no. America found a different physics.

What to watch. Whether the model survives category expansion. Whatnot grew up in collectibles, where scarcity and community are native. Groceries and electronics have neither. If the auction energy holds as the catalogue broadens, the community model is genuinely general. If it curdles into another marketplace, the moat was the hobbyists all along.

The Roth Read. Stop asking whether your customers will watch a livestream. Ask who is doing the selling, and whether they belong to your brand or to a community you do not control. The work is not casting a host. It is finding the communities already trading in your category and earning a place among them. China bet everything on a handful of stars. America bet on the crowd, and the crowd does not sign with a rival next quarter. If your live-commerce plan has one face on it, you have built the fragile version.

Thirteen shops, two small cities, and a lesson the giants cannot buy

20 August 2026

China’s most talked-about retailer does not operate in Beijing, Shanghai or Shenzhen. It sits in two cities few Westerners would recognise, Xuchang and Xinxiang in Henan province. It has thirteen locations. And by reputation it is one of the highest-earning retailers in the country, on a fraction of the floorspace.

The company is Pang Dong Lai (胖东来, roughly “Fat Dong Lai”), named for the childhood nickname of its founder, Yu Donglai. On TikTok and across the Chinese social platforms, shoppers describe it in language usually reserved for a pilgrimage: about eight thousand staff on an average nine thousand yuan a month, against a national retail average nearer three and a half; seven-hour shifts and full weekends; thirty to forty days of annual leave, plus ten days of “unhappy leave” a year that managers are forbidden to refuse; refunds granted without argument; produce fresh enough to shame a wet market. One widely shared video this month put it plainly: here is a man who became a retail legend “not by following business principles, but by sticking to human values.” On Xiaohongshu, customers post the queues like trophies.

The temptation for a Western reader is to file this under sentiment. A kindly boss, a feel-good story, a rounding error next to Walmart China or Freshippo. That reading misses the mechanism entirely.

What Yu has actually engineered is a closed loop between how a shop treats its staff and how it treats its shelf. Pay a checkout worker properly and give her real authority to solve a complaint, and she stops treating the customer as a threat to her shift. Stock only what you would eat yourself, publish the margins, hand back money on any grievance, and the store’s word becomes the product. Where shoppers complain of counterfeits and opaque sourcing, and platforms are built to extract the last yuan of attention, trust becomes the scarcest inventory in China. Pang Dong Lai discovered it could sell that. Not the groceries, not the price, the trust.

This is why China’s own retail establishment has been making the trip to Henan to study it. Struggling chains far larger than Pang Dong Lai have invited Yu’s team in to overhaul their operations, a practice the trade now calls a Pangdonglai-style adjustment. Yonghui, a supermarket group with hundreds of stores, began remodelling nationwide with his team in May 2024: revamped branches have seen customer traffic rise around eighty per cent, and the first made-over Beijing store took six times its usual daily sales on opening day. The method fills the shop. It has not yet fixed the company: Yonghui closed 381 stores last year while renovating 315 more, and, as Caixin put it, the makeover draws crowds but profits lag. The teacher has thirteen shops. The students have thousands. Sit with that.

The deliberate refusal to scale is the whole argument. “We do not want to be big,” Yu has said. “We want our employees to have a healthy and relaxed life so that the company will too.” No franchises, no debt, none of the dilution of standards that national ambition demands. In a retail culture obsessed with gross merchandise value and store count, here is an operator who treats slowness as a strategy and quality of experience as the asset that compounds. The West spent a decade learning that lesson from Trader Joe’s and In-N-Out and then promptly forgot it the moment a private-equity deck promised a hundred new locations.

There is a harder truth underneath the warmth, and honesty is the point of this series. Pang Dong Lai works partly because Yu owns it outright and answers to no one but his own conscience. Public markets do not reward patience; they punish it. That is precisely why this experiment is worth studying rather than dismissing. It is a live demonstration that the trade-off between margin and decency is often a failure of nerve dressed up as a law of nature.

What to watch. Watch what happens to the chains that let Yu “adjust” them once his team leaves the building. If the improvement holds, it proves the method is transferable and not merely a cult of one founder. If it fades, the West has its answer about how much of retail excellence is systems and how much is simply a person who cares, standing on the shop floor, refusing to lie.

The Roth Read. Stop asking how many stores you can open this year. Ask whether a single one of them would make a stranger queue in the rain to shop there. China’s most admired retailer chose trust over scale and got both; you have been told scale first, always, and it is time you checked who profited from that advice. Treat your people as the product, or watch someone who does eat your lunch.

First cheap goods, now cheap intelligence. The playbook has not changed.

13 August 2026

Temu did it to your wardrobe. Shein did it to your fast fashion budget. Now the same promise is being made about the machine that answers your questions, and the West is once again surprised by a move it has watched happen twice already.

The observation came from the investor Juan Gonzales on X this week, and it is worth repeating because it is so plain. “When Chinese platforms offer a simple promise · we will charge you less · consumers use them,” he wrote. First it was Temu and Shein for physical goods. Now it is DeepSeek, Alibaba’s Qwen and Moonshot’s Kimi for artificial intelligence. His verdict: “It’s not consumer betrayal. It’s basic economics.”

He is right, and the timing is not a coincidence. Over the weekend, as Ben Thompson noted at Stratechery, another open weights model out of China, Kimi K3, approached the state of the art and was argued over for days. Not because it was better than everything in the West, but because it was nearly as good and effectively free to download. The debate was not about capability. It was about price.

This is the same experiment run in a new laboratory, and Western retail should recognise the equipment. The mechanism that made Temu and Shein hard to counter was never a single clever trick. It was structural: manufacture close to source, iterate at speed, price at a level that made the incumbent’s margin look like an insult, and let the consumer do the rest. The product did not have to be the best. It had to be good enough, and cheaper by an amount the shopper could feel.

Apply that to intelligence and the discomfort sharpens. A Western brand could tell itself that Shein was about corners cut and quality lost, a race to the bottom that premium players need not join. That story is harder to tell about a model you can inspect, run yourself and improve. Open weights change the argument. The Chinese labs are not undercutting on quality alone; they are handing the tool over and betting that ubiquity beats exclusivity. Give the capability away, own the standard, monetise the next thing. It is the marketplace logic that built Alibaba, pointed at software.

Here is what the West keeps getting wrong. It treats each of these moves as a separate shock, a bad weekend, a policy problem. It is not. It is one consistent strategy applied to whatever category is next. Goods, then fashion, then intelligence. The category changes. The playbook does not. And a rival who runs the same play three times is not lucky. He is disciplined.

For the retailer and the brand, the lesson is not about AI models at all. It is about what happens to any business whose entire defence is that the customer will pay more for the familiar name. Temu tested that assumption on price and found it thinner than anyone admitted. The consumer, it turns out, is loyal right up to the moment the brand attributes start slipping on worth paying more for and the maths stops making sense. That is not betrayal. Its a lethal cocktail of declining brand value and arithmetic, and it does not care how long you have been on the shelf.

What to watch. Watch whether Western brands start building on these open Chinese models quietly, the way they already sell through Chinese factories quietly. The tell will not be a press release. It will be a product that suddenly costs less to run and nobody explaining why. When your supplier of intelligence is the same country as your supplier of goods, the dependency is no longer a talking point. It is the plumbing.

The Roth Read. Stop asking whether the Chinese model is as good as yours. Ask what your customer does the day the brand and the product it is good enough and free, because that is the only day that decides anything. If your whole moat is that people are used to paying you more, you do not have a moat. You have a habit, and habits are the cheapest thing in the world to break.