Meituan seeks change, taking offense as defense

In the face of intensified external competition, Meituan has actively sought change and growth by adjusting its organizational structure, strengthening technological innovation, and enhancing the integration of internal and external resources to meet challenges and consolidate its leadership in the local life sector.

In the field of local life, although Meituan is already the leading player, it is still making every effort to explore related businesses.

Recently, according to a report by LatePost, Meituan’s takeaway service “Pinhaofan” received nearly 5 million orders per day in the first quarter of this year, accounting for about 10% of Meituan’s total 57 million daily takeaway orders in the fourth quarter of last year. People close to Meituan said that its share of takeaway orders in the long term may reach 20%.

The reason behind this is that as we enter the era of inventory, competition is becoming increasingly fierce. Faced with the rapid expansion of Douyin, Kuaishou, and Xiaohongshu, Meituan must flexibly adjust its organizational structure and strategic decisions to ensure its dominant position in the industry.

The word "change" has almost run through the first six months of 2024 for Meituan.

Since the beginning of this year, Meituan has adjusted its organizational structure four times, carried out in-depth integration of multiple businesses of core local business, and increased the priority of innovative businesses such as technology and internationalization. Last month, it appointed Wang Puchong as CEO of core local business to lead Meituan's core business.

With all these operations, the local life market is likely to be revived.

1. Wang Puchong takes over Meituan’s business

After several rounds of organizational structure adjustments this year, Wang Puchong has gradually stood at the core position of Meituan's business empire.

Since the end of 2017, Meituan's organizational structure has been basically determined. It is divided into two major business groups: home delivery and store delivery, three platforms: Meituan platform, smart transportation platform, and basic research and development platform, as well as several business units such as Youxuan, Kuailv, and Maicai.

In the past, Wang Puchong and Meituan’s senior vice president Zhang Chuan were in charge of the two major business groups, home delivery and store delivery, respectively.

In early February this year, the two business groups, as well as the core Meituan platform and the basic research and development platform, were first packaged and handed over to Wang Puchong for management. In April, Meituan merged the store and home delivery business groups and the basic research and development platform into the "core local business" sector, with Wang Puchong directly serving as the CEO of the core local business.

Meituan’s core local business segment has always accounted for more than 70% of the company’s total revenue. In other words, Wang Puchong has now become the undisputed head of Meituan’s business.

As of this year, Wang Puchong has been with Meituan for 9 years. Since April 2015, he has served as senior product director of food delivery, head of food delivery division and delivery division, etc. In 2018, Wang Puchong was promoted to senior vice president of the group and the youngest member of Meituan's core management team S-team.

Over the years, Wang Puchong has played a key role in the development of Meituan's food delivery business, constantly defeating competitors, and leading Meituan to gain a foothold in the emerging business model of "instant retail."

To a certain extent, Wang Puchong’s successful promotion also implies that Meituan’s strategy has changed.

Under the fierce attack of rivals such as TikTok, Meituan's major businesses should concentrate resources and work together instead of operating separately. Now that Wang Puchong is managing home delivery and store delivery in a unified manner, the two businesses will have more possibilities for mutual reflux and pull, laying a solid foundation for future tough battles.

A few months ago, Meituan CEO Wang Xing also mentioned to the public, "I believe we can pool our strength, improve efficiency, and better serve our customers."

2. Continued development of takeaway and in-store business

There is no doubt that food delivery and in-store dining are Meituan’s most advantageous businesses.

According to the 2023 financial report, Meituan’s revenue last year was 276.745 billion yuan, a year-on-year increase of 25.82%; the adjusted net profit was 23.25 billion yuan, a year-on-year increase of 722.48%.

Among them, the basic plate of takeout is stable. The number of instant delivery orders increased by 24% year-on-year to 21.9 billion last year. The performance of home delivery and hotel and travel is also good, with the transaction amount increasing by more than 100% year-on-year. The annual transaction users and annual active merchants increased by more than 30% and 60% year-on-year respectively.

In order to defend its territory, Meituan has used a combination of live streaming and subsidies over the past year.

In order to compete with Douyin live streaming, Meituan’s food delivery live streaming was launched during the “Shen Coupon Festival” in April last year, and another official live streaming IP “Shen Gaoshou” was launched in May. In July, Meituan’s homepage officially launched a fixed entrance for live streaming.

Compared with its competitors, Meituan users have a stronger transaction mentality, so the conversion effect of Meituan live broadcast is also very obvious.

According to 36Kr, in July when the first-level entrance to live streaming was just launched, Meituan Live’s GMV reached 500-600 million yuan a month, with a month-on-month growth rate of 20%. In August, it rose to 1-1.2 billion yuan, and there were live streaming rooms with over 100 million viewers. By October, sales exceeded 2 billion yuan a month.

At the same time, in the second quarter of last year, in order to ensure that the price of the same package on the platform of the same merchant is not higher than that of Douyin, Meituan began to implement a policy of heavy subsidies for the top merchants. If there is a price difference, this part will be made up by Meituan itself, and rebates will be provided to some merchants.

However, the subsidy war also brought certain financial pressure. According to the financial report, in the second quarter of last year, Meituan’s sales and marketing expenses reached 14.553 billion, a year-on-year increase of 61.95%.

At present, after Meituan’s organizational structure adjustment, Meituan’s takeaway and in-store businesses are undergoing further resource integration.

It was previously reported that Meituan will officially launch a new version of "God Member" in July this year, and the scope of application of member coupons will be expanded from takeout to in-store dining, hotels, travel, leisure and other local life consumption.

On the one hand, food delivery is a high-frequency traffic entrance with strong user stickiness, which can activate the vitality of in-store scenarios. On the other hand, in the in-store business, Meituan has extensive merchant and user evaluation data. For example, the Meituan food delivery must-order list launched in April this year is also a transmission of the in-store advantage to the food delivery scenario.

Connecting the takeaway and in-store businesses from within to form a closed loop is also one of the important ways for Meituan to build a moat.

3. The leader’s position is stable, and newcomers are entering the game

It is undeniable that in the local life sector, Meituan is still the only big boss.

According to the report data of Bocom International, in 2023, Meituan’s in-store GTV (total transaction volume after write-offs) exceeded 700 billion yuan, an increase of more than 100% year-on-year; data from Haitong International’s research report showed that during the same period, Douyin’s local life GTV reached nearly 200 billion yuan.

All in all, Douyin’s local life transaction volume is less than one-third of Meituan’s.

But even so, the existence of Douyin still makes Meituan alarm bells ring. Douyin has more than 800 million monthly active users, and can use short videos and live broadcasts to accurately push and continuously "actively market" to users. In addition, according to QuestMobile data, the user overlap between Meituan and Douyin reaches 320 million people, with an overlap ratio of up to 81%.

The opponent's advantages are obvious and the user overlap is high. Once users develop the habit of placing orders on Douyin, they may switch from Meituan to others.

In addition to TikTok, many other newcomers have also set their sights on the local life pie.

Some time ago, Video Account officially announced the policy for local life merchants to settle in, inviting catering and hotel merchants to settle in Video Account stores, and gradually relaxing the merchant settlement rights.

Last year, Kuaishou also launched a series of support plans to encourage merchants, service providers and influencers to join and build their own closed-loop transactions. In just half a year, Kuaishou's local life payment GMV increased 9 times. Xiaohongshu was not to be outdone. In April last year, it opened an official local life account "Tuboshu", launched a group purchase function in May, and launched a store exploration cooperation center in July.

It is not difficult to see that market competition in local life will gradually become fierce.

Looking back, behind Meituan’s live broadcasts, subsidies, and frequent adjustments to its organizational structure, it is also an attempt to better defend itself during this turbulent time.

Author: Chen Yan, Editor: Dafeng This article is written by the author of Operation School [Zinc Finance], WeChat public account: [Zinc Finance], original/authorized to be published in Operation School, and any reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 protocol.