Meituan—Past, Present, and Future Part Ⅱ

The following steps serve as an example of how the consumer side of the closed-loop ecosystem is formed:

Therefore, in this way, based on the customers it gained from food-related service, Meituan has expanded its services into every daily aspect of a customer’s day-to-day life.

The cost on gaining new customers is minimized and many customers now relies on Meituan for multiple services. Thus, a closed-loop ecosystem on the customer’s side is formed.

Meanwhile, Meituan also plays the role of a middleman, negotiating with business owners on behalf of the customers, providing the customers with more transparent information and better deals, which in turn improves both the service quality and reputation.

At the same time, Meituan standardizes its platform by further segmenting its services into more detailed categories. For example, its beauty service is segmented into hair-cutting, hair-dying, hair-perming, and so forth.

On the business side, food & beverage industry is still the core, and based on this core, Meituan develops and arranges a closed-loop that covers every operational aspect for every local business owner who runs a restaurant or a beverage shop.

Generally speaking, running such a business includes purchasing supplies, marketing, gaining customers, taking orders, delivering orders, recruiting & managing staff.

For marketing and gaining customers, Meituan have got them both covered with its online reservation and food delivery services.

For store management, Meituan has developed its own Restaurant Management System (RMS) to help with that

For purchasing supplies, Meituan has got Quick Donkey (快驴), a service that provides the business owners a complete ingredients supply chain.

On the financing part, Meituan offers business owners petty loan service.

And last year, Meituan developed a job-hunting app and even established a vocational school to help business owners hire various needed talents.

All these services above revolve around the needs of business owners.

To construct a complete closed-loop on both the customer side and the business side is Meituan’s long-term strategy. To do so, Meituan is reaching into every area of customers’ daily life, and covering all operational aspects of business owners.

In other words, Meituan takes care of everything: operating stores, gaining customers, marketing, payment, delivery, recruitment, customer reviews, etc.

And also in doing so, a mutual adhesiveness and dependence is formed between the customer side and the business side, and a customer-platform-business balance can be striven for, and a positive cycle can be achieved among the accumulated Meituan users and consumers.

Once a closed-loop ecosystem like this is formed, it will bring a lot of benefits to Meituan, and it will be especially hard for a worthy contender to rise among the many competitors and challenge Meituan’s superior position, since to obtain sufficient funding alone would render the whole ambition rather difficult. 

By the end of 2019, Meituan was the internet company black horse with the highest rise in its stock price, with its market value saw a 140% year-on-year increase; while Jingdong saw a 70% increase, Alibaba 61%.

By the second half of January this year though, due to the local life services being hurt by the Covid-19 outbreak, Meituan’s stock price decreased by 14% during one point, which was a bigger drop than the other internet giants.

In these local life services, the food & beverage industry is the one that felt the heaviest blow, which is also the industry that consists of Meituan’s core.

However, according to what have been learned from the 2003 SARS outbreak, once the crisis is over, the food & beverage industry is also the one that enjoys the most rebound.

Therefore, those food & beverage brands which have got enough cash flow will eventually survive, and new opportunities will arise.

In this February, although the outbreak is still a threatening existence, Meituan has already seen a surge in its fresh food ingredients delivery service—a 200% increase in its sales, compared with last year.

The fact that most people are keeping themselves at home instead of going out definitely contribute to the increase. But also because of the outbreak, a lot of offline businesses (such as cocktail delivery) and business owners who never went online prior are forced to do their business online, in order to survive.

So here’s the thing:

The customers are already used to using delivery apps, and the business owners also pay a lot of attention to such a service. So in the future, we will only see more and more restaurants and other businesses going online. And the outbreak only served to accelerate it.

Meituan mainly profits in three ways: collecting delivery fees from customers, collecting commissions from business owners, and charging business owners for advertising. The last method is the easiest one to profit and comes with the highest gross margin.

And this is also why ever since last year, Meituan’s executive level hinted multiple times that the company will entice more business owners to spend on Meituan’s advertising service.

This is a signal that Meituan is favoring big business owners who can afford advertising, while owners of small businesses are not too happy about it.

And there have already been a lot of small business owners, especially those who are in the food & beverage industry, voicing their discontent.

For example, amid the outbreak, an open letter to Meituan co-founder/CEO Wang Xing (王兴), in which he is called the “Jack Ma” of the food & beverage industry, has been circulating on the internet. And the letter basically called him a blood-sucking vampire.

Most small business owners are angry at Meituan due to these five aspects:

And among these five aspects, the first issue of high and rising commissions is the causes the most concern for small business owners.

So, with Meituan’s core business already making profits, it still needs to find a balance in order to successfully appease the business owners in terms of the five aspects in the long term. If a maintainable balance can not be found, it is going to have a certain influence on Meituan’s reputation or even stand in it's way to fully achieve its closed-loop ecosystem. 

Also because of the outbreak, Meituan immediately introduced its Contactless delivery service to each and every household.

While placing an order, as long as you select the “non-contact delivery” option, the delivery man will just leave your order on your door knob or at a designated spot outside your apartment / office.

And each delivery man is also equipped with facial masks and gloves, and their gears is constantly sanitized, to ensure the safety of all parties.

And in some residential areas, Meituan has dispatched smart lockers, as an upgraded version of the Contactless delivery service, in which the delivered food or items are stored.

This January, Meituan and Valeo introduced to the world eDeliver4U, a driverless delivery vehicle which is capable of making 17 deliveries each trip.

And on February 18, Meituan’s driverless delivery car nicknamed Magic Bag (魔袋) hit the road in Beijing, thus beginning its food ingredients delivery career at the speed of 20 kms per hour.

There is no doubt that the emerging 5G technology has made all this driverless delivery possible, which in turn further enhanced Meituan’s Contactless delivery options.