Meituan “learns” from Pinduoduo

As 618 approaches, major e-commerce platforms have launched a low-price war, and even group buying platforms such as Meituan have raised the banner of "low price".

As the 618 shopping festival approaches, e-commerce platforms such as Taobao, JD.com, and Pinduoduo have launched a low-price war. Group buying platforms such as Meituan are also raising the banner of "low price".

Recently, Meituan’s low-priced in-store product “Special Price Group Purchase” was renamed “Special Price Group” and occupies a more prominent position in the upper half of Meituan’s homepage, which shows the importance of Special Price Group to Meituan.

Image source: Meituan APP

Specifically, the special price group brings together many local life services from catering to leisure and entertainment. The core idea is to create a super low price mentality with "super big brands + platform subsidies", use strong product discounts to attract consumers, and the scenarios are mainly based on high-frequency rigid needs such as "eating, drinking and having fun".

During our experience, we found that the top-selling products near Liangmaqiao in Beijing were Luckin Coffee 10 Pick 1 (9.9 yuan), KFC Golden SPA Chicken Burger Meal (17.9 yuan), Starbucks Classic Large 6 Pick 1 (27.6 yuan), etc.

The outside world believes that Meituan’s idea of ​​creating special discount groups is to “learn” from Pinduoduo – focusing on products and using low prices to attract price-sensitive consumers. From a more fundamental business model perspective, Meituan’s special discount groups do have similarities with Pinduoduo, but there are also many differences between the two.

1. Price is the only thing that matters

Drucker, the father of modern management, once said: The competition between enterprises today is the competition between business models. In recent years, Pinduoduo has become the most powerful force in the domestic e-commerce track. Recently, its market value has surpassed Alibaba again, becoming the "new upstart" in e-commerce. The analysis of its business model in the market has never stopped.

In fact, the essence of Pinduoduo's business model can be more intuitively and clearly felt from the words of Pinduoduo's founder Huang Zheng. He once wrote an article titled "Turning Capitalism Upside Down". Almost all of Pinduoduo's business layout after its establishment was carried out around the core ideas in the article.

Simply put, "turning capitalism upside down" means that the rich buy the certainty of future demand from the poor, while the poor get discounts on the supplied goods, thereby eliminating the mismatch between demand and production. For example, if a thousand people jointly ask a factory to buy down jackets in the summer, the factory owner will definitely be willing to give a 30% discount because he can activate production capacity and obtain the certainty of order demand. This has led to the result of "turning capitalism upside down" - the rich are spending money to buy insurance from the poor, and the poor are getting price discounts.

Meituan's special discount group model has many similarities with Pinduoduo's business model. For example, Pinduoduo's business perspective is to start from the consumer demand side, and then negotiate prices with merchants after mastering consumer orders, so that merchants follow the customers. Like Pinduoduo, the business perspective of the special discount group is also to start from the demand side, anchoring consumers to provide lower discounts.

Screenshot of special group offer. Source: Meituan APP

Since its launch in November 2022, the special price group has been continuously launching the strategy of "trading price for volume" for users. In May this year, the special price group also launched a 10 billion subsidy activity, which involved McDonald's, KFC, Starbucks and other leading catering brands, with a wide range of stores, and users have a stronger perception of low prices.

In addition, the similarity between Special Price Group and Pinduoduo is that they use goods as the smallest operating unit, not stores. In Pinduoduo, factors such as the type and style of the store are not important, and price is the bottom line. Some netizens compared Taobao and JD.com to well-decorated supermarkets, while Pinduoduo is a small store with messy and even dusty items. Consumers will only pay attention to the goods and prices after entering.

Similarly, the special offer page also displays individual products, not stores, and the store names are very small, so small that they are inconspicuous. In contrast, the display logic of Meituan's "Takeaway" and "Food" pages is mainly based on stores.

In general, the similarities between Special Price Group and Pinduoduo in their business models are that they are centered on "consumer perspective" and "low-priced goods". In addition, their business philosophy is to use "affordable price" and "cost-effectiveness" to attract attention.

2. There are similarities and differences

Although there are similarities in their business models, there are still many obvious differences between Tejiatuan and Pinduoduo. First of all, Tejiatuan is part of Meituan’s local life store business and can be regarded as a service e-commerce, while Pinduoduo is mainly engaged in online transactions and belongs to physical e-commerce. In the physical e-commerce model, standardization is the most obvious feature.

Most physical goods are clearly marked with product parameters and are the product of the assembly line. For consumers, it is relatively simple to compare product information, just pay attention to the price, parameters, etc.

Secondly, Pinduoduo pays special attention to the online experience, integrating entertainment and social elements into e-commerce operations, and improving user stickiness through the "social + e-commerce" model, increasing the time users stay on the platform, and promoting an increase in per capita consumption. Compared with physical e-commerce, service e-commerce has a more obvious non-standardized feature.

Taking the special price group as an example, consumers need to go to the offline store for "verification" after placing an order online, which is the biggest difference from Pinduoduo.

The offline consumption process is very complex and non-standard, including the experience of the service venue, the quality of the service personnel, and even the service and product characteristics of different regions. For example, when a special group places an order for car washing or pedicure services, the consumption experience in different cities will be different, and even the pricing will be different.

Image source: Meituan APP

The ultimate goal of the special price group is to encourage consumers to shop in stores, so it is weak in online social and entertainment attributes, and instead emphasizes attracting consumers from online to offline through low prices.

Finally, since merchants in the special price group are generally offline and are asset-heavy operations, the special price group will be more inclined to give merchants more traffic and commission support. For example, merchants in the special price group that can provide the lowest price on the entire network will obtain more timed and targeted accurate traffic, thereby greatly improving the conversion rate; Meituan has also launched a commission reduction policy, renegotiated the commission rate with merchants, etc. From the perspective of the model, the biggest difference between the special price group and Pinduoduo is the existence of offline links, which is destined to its characteristics of "light online and heavy offline".

3. “Learning” from Pinduoduo

The conspiracy behind the scenes In fact, Meituan started out as a group-buying store business (formerly known as O2O), and then its business continued to spread and its territory continued to expand. After many years, Meituan once again vigorously promoted its store business, which has a lot to do with the increasingly fierce competition in the industry. At present, local life services are still a huge hot spot.

The "2023-2024 China Local Life Service Industry Market Monitoring Report" released by iMedia Consulting shows that by 2025, the scale of my country's local life service market will reach 2.5 trillion yuan.

In this hot land, Meituan is not facing start-ups, but Internet giants such as Alibaba, Douyin, and Kuaishou. Especially from last year to now, the competition in the local life field has become increasingly fierce.

Last year, Alibaba launched the "most important organizational change in its 24 years of existence", dividing the organizational structure into "1+6+N". Local life is one of the six major business groups and is highly expected by Alibaba. The fast-growing TikTok is also extending its tentacles into the field of local life services.

In 2023, the total transaction volume of Douyin's life service platform increased by 256%, a fierce growth. In addition, Douyin's group buying channel has added three modules: "Special Group Buying", "Popular List" and "Free Trial". Kuaishou is also playing the price card in the local life sector, such as launching the service brand "Dare to Compare Prices", so that users can intuitively see the price difference and finally make a choice. In the first quarter of this year, the average daily number of paying users of Kuaishou's local life increased by nearly 9 times year-on-year.

Of course, as a leading player who has been rooted in local life for a long time, Meituan's performance is also outstanding. In the report "Meituan Youxuan starts to reduce losses, and profits may be optimized in the second half of 2024", Bocom International pointed out that Meituan's in-store GTV will exceed 700 billion yuan in 2023, a year-on-year increase of more than 100%, and the growth rate is expected to exceed 40% in 2024. Some industry insiders pointed out that since Meituan's in-store GTV target was exceeded last year, Meituan's in-store GTV target in 2024 may be set at 1 trillion yuan.

It can be seen that the in-store business is one of Meituan's strongest growth points. Facing the offensive of Alibaba, Douyin, Kuaishou, etc., Meituan is also strengthening its defense. In April this year, Meituan integrated the platform, in-store, home delivery, and basic research and development to form a core local business sector, and strengthened its combat effectiveness through business structure adjustments.

Meituan renamed "Special Price Group Buying" and placed it in an important position, which can also be seen as a means of enhancing competitiveness with a low-price strategy. The main advantages of Douyin and Kuaishou are traffic and communication, which can allow merchants to cover more users. However, traffic alone is not enough. The platform must allow users to continuously generate repeat purchases and achieve long-term growth. The key is to build a credible evaluation system, which is also Meituan's advantage.

Image source: Zheshang Securities

Because when consumers choose businesses in local life services, most of them will refer to the real evaluations and feelings of previous users and then decide whether to consume.

Meituan platform has accumulated a large number of real user reviews, and the consumption impetus brought by these reviews is actually greater than the recommendations of experts in short videos. Zheshang Securities even pointed out in a research report that "the core scene of in-store shopping is unplanned and quick decision-making, but as an experience product, the word-of-mouth effect is obvious, and the evaluation data accumulated by Meituan is a core data asset."

Moreover, Meituan's merchant evaluation system was not formed in one day, but accumulated over many years. If merchants want to jump from this system to another platform system, they will also incur huge migration costs.

The name change of the special price group may just be an appetizer. It can be predicted that Meituan’s local life services will continue to change this year.