Connecting the membership system may be the best solution for Meituan

Meituan has expanded its "God Member" program to cover both home delivery and in-store services. Let's take a look at how this article evaluates and analyzes this move.

Throughout 2023, Meituan was once viewed by the capital market as a company facing many challenges: competitors (including but not limited to ByteDance) were eroding its in-store business, which was its "profit-making business", and further launched a tentative attack on its home delivery business. People were also worried that in the current complex macroeconomic environment, Meituan would also become a victim of the so-called "consumption downgrade". However, since the beginning of 2024, the above doubts have been dispelled to a certain extent: Meituan's financial performance is good, and its future performance guidance has satisfied investors, and its stock price has rebounded nearly doubled from the bottom.

However, in the eyes of skeptics, the competition problem faced by Meituan has not been truly solved. Douyin will probably not immediately invest in the home delivery business on a large scale, but it will still be eyeing the market and waiting for the opportunity to enter at any time; as for the store delivery business, in addition to Douyin, Kuaishou, Xiaohongshu, etc. are also trying to get in, and almost all content platforms want to get involved in this fertile market. Over the past few years, Meituan has established high competitive barriers in both the home delivery and store delivery business markets through the construction of food delivery capacity and the firm control of merchant resources - but are these barriers insurmountable? If there is no "final answer" to this question, the capital market and the media will always be in a state of "surprise and surprise" towards Meituan, and any slight change in the competitive landscape is enough to make people uneasy.

Fortunately, I think Meituan has found the "ultimate antidote" to the above-mentioned competition problems, which is to open up the membership system of the in-store and home delivery businesses, and use this as a fulcrum to completely integrate the two businesses. In February of this year, Wang Puchong began to manage Meituan's in-store and home delivery business groups; in April, the above two business groups were unified under the "core local business sector". Yesterday, according to a report by 36Kr, Meituan plans to fully upgrade its membership system, and the "God Member" will be expanded from the takeaway business to the in-store business-it is said that this is an internally defined "S-level project". If the report is true, then Meituan is not only expected to significantly widen its moat again, but also to lay a good starting point for the next stage of growth. Of course, the prerequisite is to execute well so that both merchants and users can have a good experience.

As a heavy user of food delivery, I use both Meituan and Ele.me platforms. The latter does not have as rich merchant resources as the former, so why do I still insist on using it? Because I am an Ali 88VIP member, I can automatically enjoy the "Super Foodie Card" treatment of Ele.me. 88VIP membership is also an important reason why I use Youku, Fliggy and AutoNavi to take taxis. They are not leaders in their own market segments, but after being integrated into the Ali membership system, they are still attractive. According to relevant media reports, 88VIP is still in a loss-making state. Its purpose is to occupy the minds of users and promote the synergy of various businesses, rather than directly make profits; I can fully understand this.

I believe that in making the decision to expand the coverage of "God Members", Meituan should refer to Amazon's Prime membership the most - this may be the most successful e-commerce membership system in the world, no doubt about it. By the end of 2023, Amazon will have about 240 million Prime members worldwide, including 170 million in the United States, with an average of one Prime member for every two Americans! Prime itself can bring a lot of revenue to Amazon, but its more important significance lies in the strategic and overall organizational level:

• Prime members spend an average of $1,400 per year on Amazon, while non-members spend only $600. Amazon provides free (or low-cost) delivery services to Prime members, which in turn reduces the cost of delivery services, thereby driving the rapid operation of the so-called "growth flywheel".
• By extending Prime delivery services to third-party platforms and independent sites (Buy with Prime options), Amazon not only improved the utilization rate of its own logistics system and further achieved economies of scale, but also consolidated the minds of users. Third-party platforms were thus incorporated into Amazon's system and were no longer its "competitors."
• Prime members also enjoy content services such as video, music, games, and reading, which provides a key support for Amazon's digital entertainment business. In particular, Prime Video has become one of the top five long-form video streaming platforms in the world; this is unimaginable without the powerful Prime membership system!

Meituan’s goal is obviously to achieve a similar flywheel effect with “God Members” as the starting point: the coverage of “God Members” has expanded from food delivery to in-store and even hotel and travel services, which will encourage more users to join the membership system; the larger the user base, the more traffic can be allocated, and the more actively merchants will participate in providing discounts, which will further stimulate the expansion of the user base! Before this, the membership system was originally the second moat of Meituan’s food delivery business in addition to its fulfillment and delivery capabilities. The upgrade of the membership system is equivalent to turning the moat of food delivery into the moat of the entire Meituan. From a defensive perspective, it can effectively restrain the ambitions of all competitors, because few competitors can replicate this complete membership system covering in-store dining, home delivery, and hotel and travel services; from an offensive perspective, it is a strong backup for emerging businesses, and Meituan’s other business attempts can be positively stimulated under a unified membership system.

From the perspective of an ordinary user, I hope that the preferential discount system for in-store and takeaway businesses can be connected. There are many distinctive restaurants near my home. If I have enough time, a good mood, and weather conditions permit, I prefer to eat in the store and take a walk by the way; but if things are too busy, or it is raining heavily like today, I will choose a store I am familiar with and order takeaway. Can my in-store and takeaway consumption in the same store be connected? For example, can the amount of takeaway consumption be included in the store's own regular customer system, and can the discount coupons obtained from in-store consumption be used for takeaway? Until now, the above idea is still an unattainable daydream. If it can become a reality, I will welcome it with both hands.

So, what do merchants think? From my personal experience, many merchants welcome the linkage between in-store and home delivery services, because this can improve user stickiness and realize the intensiveness of marketing activities. In the past few years, one of the main concepts of many popular new retail and new consumer brands was "online and offline integration", which includes the integration of user experience and the integration of marketing and promotion. In the early stage of promotion, some merchants may have doubts: Will connecting their member data to the Meituan system lead to being restricted by the platform? Will the unification of the promotion system for in-store and takeaway squeeze their own profit margins? In the final analysis, this is still a question of the distribution of interests between the platform and merchants. If Meituan takes the expansion of the pie and the promotion of long-term development as its foothold and provides merchants with enough benefits, then most merchants should be happy.

By the way, Meituan's "God Member" is a very interesting gameplay. It is the product of the integration of the past takeaway membership and the God Coupon tool. There are two types: free collection of God Coupons and paid purchase of coupon packages. The basic denomination of the paid God Coupon is 5 yuan, which can be expanded to tens or even hundreds of yuan in the expansion gameplay scenario. The specific amount varies according to different business scenarios. For users, the expansion gameplay not only provides discounts, but also provides uncertainty and fun. Just like the card drawing in the game and the random full reduction in retail, it is a unique form of enhancing user experience-who doesn't like a little surprise in daily life? For merchants, the expansion gameplay is a differentiated marketing method; users who use God Coupons through the expansion gameplay are generally heavy users of takeaways, and the potential repurchase rate may be higher.

Facts have proved that "God Member" is a successful promotion system: in August 2023, the month of its launch, the orders of Meituan users using the "God Member" service increased by 38% compared with the same period of the previous year, and the number of Meituan takeaway orders in the same month broke the historical peak! It is conceivable that this set of interesting and efficient gameplay, after expanding to in-store, hotel and travel, life services, leisure and entertainment and other businesses, may create more interesting sparks. If all goes well, I may change my habit of using Meituan and Ele.me platforms at the same time for many years, and rely entirely on Meituan to meet local life service needs.

I have many friends who work in the local life service e-commerce industry, and they have all noticed Meituan's plan to upgrade its membership system. Most people believe that this is the general trend, and that the in-store and home delivery businesses should be completely integrated, and the membership system is the most important part that should be integrated. They also pointed out in unison that the connection of data systems and the emphasis on merchants' demands will be the key factors in the success of this integration. After all, home delivery and store delivery businesses have followed different development trajectories and development models in history. Meituan's integration of them has only been accelerated this year, and there are many problems in the execution link that need to be properly handled. More haste, less speed, and steady progress is the best choice.

In February 2005, Amazon launched its Prime membership system for the first time. The main selling point at the time was the "free two-day delivery service". In 2006, Prime Video became the earliest entertainment content service under this membership system. In 2015, Amazon began to provide free same-day delivery service to Prime members in 14 metropolitan areas across the United States; the first "Prime Day" promotion was also launched in July of that year. In 2024, Amazon also included its fast-growing fresh food e-commerce business in the Prime membership system, and set up a separate payment tier for this purpose. Without a strong Prime, Amazon's core e-commerce business would be far less powerful than it is today, and many emerging businesses would not be able to develop.

All competitors want to emulate the Prime membership system, including traditional retail giants such as Walmart and Target. Faced with such a fiercely competitive environment, Amazon still has the ability to repeatedly increase Prime membership fees: from the initial $79 per year to $119, and then to $139, and fresh food e-commerce members have to pay an additional $9.99 per month. The price increase for Prime membership did not drive users to competitors, even though WalMart's membership fee is significantly lower. Why? Because Amazon provides users with a rich enough selection of goods, good enough logistics and delivery services, and has opened up various service formats for e-commerce and non-e-commerce. Other members are just isolated "familiar customer discount plans", while Prime membership is a real system that has formed a synergistic effect.

I think this is the purpose of Meituan's expansion of "God Member" to cover both home and in-store business. If it can also establish an all-encompassing membership system with strong internal synergy, then the discussion of "how reliable is Meituan's moat" and "whether competitors will grab the in-store market" will come to a near-permanent answer. Can Meituan do this? Let's wait and see, but this path is undoubtedly the right one.

Author: Pei Pei, leader of the Phantom Thieves

Source: WeChat public account "Internet Phantom Thieves (ID: TMTphantom)"