In 2021, Meituan's new business (mainly community e-commerce) revenue accounted for less than 30%, but it generated an operating loss of 38.393 billion yuan in one year, resulting in an adjusted net loss of 15.572 billion yuan in 2021. However, Q4 METUAN began to make strategic adjustments, and the profits of the old business exceeded expectations; the new business decelerated, reduced costs and increased efficiency, and the operating loss in the quarter narrowed significantly.
The author | Monday around
Editors | peace of mind
How determined is Meituan to do retail? Just look at the 2021 earnings report.
On March 25, Meituan released its 2021 Q4 and annual financial reports. In 2021, Meituan's revenue was 179.128 billion yuan, an increase of 56.0% year-on-year; the annual loss was 23.536 billion yuan, and the adjusted net loss was 15.572 billion yuan.
In 2020, Meituan achieved a net profit of 4.708 billion yuan and an adjusted net profit of 3.120 billion yuan.
New business (community e-commerce, B2B catering supply chain services, travel) is the "culprit" that led to Meituan's losses. Community e-commerce (Meituan Preferred, Meituan Grocery Shopping, Meituan Flash Sale) is the key to this.
In 2021, meituan's new business revenue accounted for less than 30%, but it generated an operating loss of 38.393 billion yuan in one year.
Meituan's mature business is still revenue and profit. In 2021, catering takeaway, in-store, hotel and travel contributed more than 70% of revenue and operating profit of 20.268 billion yuan.
As the largest online life service platform in China, Meituan will vigorously promote the "technology + retail" strategy in 2021.
While expanding its territory in the field of community e-commerce retail, Meituan has also re-entered the period of heavy investment. The price is that the financial report has a long-lost huge loss.
However, starting from Q4, Meituan began to make adjustments: whether it is new business or mature business, profits have been placed in a more important position, the profit performance of mature business is better than expected, and the loss of new business is significantly narrowing.
Specifically, the food and beverage takeaway Q4 achieved an operating profit of 1.736 billion yuan, and the market expected 1.5 billion yuan; the operating profit of in-store, hotel and tourism was 3.897 billion yuan, and the market expected 3.6 billion yuan. The operating loss of new business was 10.205 billion yuan, and the market expected loss was 11.4 billion yuan.
At the same time, the expansion rate of new business in Q4 and a number of operating expenses decreased to varying degrees compared with Q3. As a result, Meituan's operating loss ratio in Q4 2021 fell to 10.1% from 20.7% in the previous quarter.
It can be seen that after the extensive expansion in the early stage, in Q4, cost reduction and efficiency increase have become a more prominent demand of the US group. In the current economic environment, running fast is not as good as running far, making money is the last word, and Meituan is no exception.
Community e-commerce: from staking land to being meticulous
Wang Xing once likened Meituan to Amazon in the field of online life services: you can buy a lot of things from Amazon or Alibaba's Taobao, but they only apply to physical goods, and Meituan is an e-commerce platform that provides services.
Meituan's entry into commodity retailing has been a matter of recent years.
In July 2018, based on the user's demand for takeaway delivery such as fresh food, supermarket daily use, clothing, etc., Meituan officially released the "Meituan Flash Sale" brand.
In 2019, Meituan launched "Meituan Grocery Shopping", which is a life service APP that buys vegetables and provides delivery services. By the end of 2021, Meituan has completed coverage of first-tier cities - Beijing, Shanghai, Wuhan and Shenzhen.
In July 2020, Meituan announced that it will set up a "Preferred Business Department", launch Meituan Preferred, enter the community e-commerce track, and further explore the community fresh retail format. After that, Meituan preferred to expand all the way. As of Q1 2021, Meituan Preferred has expanded to more than 2,600 cities, basically completing the goal of covering the whole country.
Wang Xing has high hopes for the community retail business. At the strategy meeting in September 2021, Wang Xing upgraded the MEITUAN strategy from "Food +Platform" to "retail + technology", with a new organizational structure, and set up a retail task force, with Wang Xing personally leading the team.
At the end of Q1 2021, Meituan's annual trading users were close to 570 million, a net increase of 58.7 million in a single quarter; plus the net increase of 34.1 million in Q4 of 2020, nearly 100 million new users were added in the two quarters.
In May 2021, Wang Xing said at the Meituan performance meeting that Meituan's preferred choice is of strategic significance to the group, and half of the group's new users come from this business. He expects the opportunity to bring in 300-400 million new users in the coming years. Therefore, he is confident in the potential of the business and will firmly invest in the long term.
Entering the second half of 2021, the signs of strategic adjustment of Meituan's preferred strategy have emerged. For example, in November 2021, according to the "Late Post" report, meituan preferred no significant growth in single volume and new users since the third quarter, and the platform turned to price increases and pursued gross profits; in addition, the recruitment speed of Meituan preferred slowed down.
According to meituan's financial report, in Q3 2021, Meituan's annual trading users reached 670 million, an increase of 39.1 million in a single quarter; by Q4, there were only 23 million new users in a single quarter.
The revenue growth rate of Meituan's new business also slowed down significantly in the second half of the year. In the first two quarters of 2021, meituan's "new business and other" revenue growth rate far exceeded 100%. The year-on-year growth rates of Q3 and Q4 slowed down step by step, only 66.7% and 58.7% respectively.
Of course, in the second half of last year, the sales cost of Meituan was also declining. In Q4 2021, Meituan's cost of sales was 37.5 billion yuan, a decrease of 510 million yuan or 1.3% from Q3; the percentage of revenue was also reduced by 2.1%.
One of the reasons behind this is the increase in gross profit margin of new business. To improve gross profit margin is nothing more than to increase high unit price and high gross profit goods, or reduce subsidies.
In the middle of last year, a number of community e-commerce platforms received regulatory notices and were required to tighten subsidies. Among them, Meituan was asked to remove the "second sale product" with a price of 0.01 yuan.
Mature business with annual income of 20 billion
The reason why Meituan dares to do a new business with an operating loss of nearly 40 billion yuan a year comes from the earning power of mature business.
In 2021, Meituan's takeaway revenue was 96.312 billion yuan, and the revenue of in-store, hotel and tourism business was 32.529 billion yuan, accounting for 71.9% of the total revenue.
During the same period, these two items generated a total operating profit of 20.268 billion yuan, of which the operating profit of Meituan takeaway was 6.175 billion yuan, and the operating profit of the store, hotel and tourism business was 14.093 billion yuan.
Meituan's three major businesses all have distinct personalities: new business investment is the most and the fastest growth; Meituan's takeaway revenue is the largest but hard work; and the store, hotel and tourism business has the smallest revenue scale, but the most profitable.
In the four quarters of 2021, the year-on-year growth rate of Meituan's takeaway revenue declined, and the year-on-year growth rate of Q4 was only 21.3%, the lowest in the four quarters.
However, the operating profit of the Q4 takeaway business reached 1.736 billion yuan, which was close to double compared with Q4 in 2020 or Q3 compared with the previous Q3.
This also means that the profit of each takeaway order of the US group has changed significantly, and the profit per order in Q4 reached 0.44 yuan, which is much higher than the 0.22 yuan / order in Q3.
According to Meituan's financial report, the improvement in the operating profit margin of the catering takeaway business is mainly due to the increase in the proportion of online marketing service revenue and the reduction of seasonal subsidies for riders.
In May 2021, Meituan launched a new rate policy, which divides the fees charged to merchants into technical service fees (i.e. commissions) and catering takeaway delivery service fees. In the latest financial report, Meituan separately disclosed the revenue of catering takeaway delivery services for the first time.
In Meituan's catering takeaway business, delivery service fees account for the majority of the business's revenue.
Q4, the delivery service fee was 14.255 billion yuan, accounting for 54.56% of the current catering takeaway revenue; followed by commission income, accounting for 29.74%; online marketing service revenue accounted for 12.34%.
In the whole year of 2021, delivery service fee revenue accounted for 56.28% of catering takeaway revenue.
It is worth mentioning the commission rate charged by Meituan to catering merchants. According to the data disclosed in the financial report, the commission rate of Q4 Meituan catering takeaway is 4.12%, higher than the 4.1% of Q3 and 3.96% of Q3. The commission rate for the full year 2021 was 4.07%, up from 3.78% in 2020.
It can be said that Meituan's catering takeaway commission rate showed a slight upward trend in the second half of 2021. However, this data is far lower than previous speculation.
According to the calculation of Haitong Securities, meituan's takeaway commission rate in 2020 is 12.0%. After the implementation of the "rate transparency" reform, the takeaway commission rates for Q2 and Q3 in 2021 are 11.7% and 11.8%.
In March 2021, the All-China Federation of Industry and Commerce mentioned in the proposal that "the commission drawn by takeaway platforms is acceptable to catering enterprises in the range of 10%-15%". Judging from the data disclosed by Meituan, the commission rates in 2021 and 2020 did not exceed this range.
Meituan's in-store, hotel and travel business is the largest profit cow, accounting for the smallest proportion of revenue, but contributing the most operating profit.
In 2021, the revenue of this business reached 32.53 billion yuan, an increase of 53.1% year-on-year, accounting for 18.16% of the total revenue; the operating profit was 14.093 billion yuan, the highest of the three businesses.
Overall, in 2021, Meituan's two mature businesses will emphasize the quality of growth: while revenue growth is slowing, operating margins are improving year-on-year.
The operating margin of food and beverage takeaway increased to 6.4% from 4.3% in 2020, while the operating margin of the in-store, hotel and tourism business increased to 43.3% from 38.5% in the same period last year.
What is the next step of Meituan Retail?
In Q4 2021, Meituan clearly showed a change from speed and scale to cost reduction and efficiency improvement in the community e-commerce business. In 2022, cost reduction and efficiency increases may be the main tone of this business.
In February this year, Meituan Preferred exposed the news of layoffs, including the agent side and the direct sales department have carried out personnel optimization. Some internal employees told Good LookIng Business that the main purpose of this optimization is to reduce costs and increase efficiency and improve profitability.
Looking at the entire community group buying industry, personnel optimization, cost reduction and efficiency increase have almost become the standard actions of the whole industry.
In March, JD.com's Jingxi was exposed to lay off 10%-15% of employees, and Jingxi Washi was the hardest hit area.
36Kr reported that since the end of last year, Ali has laid off many businesses. The life service sector is the hardest hit area, among which the proportion of layoffs in the community group buying business taocai vegetables is about 20%, and the layoff ratio of Hema will reach 20%.
Hema CEO Hou Yi said in an internal letter in January this year that it is necessary to temporarily "tighten the belt of the pants" and strive to achieve profitability from the current single store to full profitability in 2022.
After the early stage of horse racing, the scale of community group buying, and even the entire community e-commerce scale battle has basically ended. Coupled with the current economic environment, companies must improve efficiency and pursue higher quality of development.
In fact, the community group buying with the low-line market as the main position is facing a group of user groups that are price sensitive, the purchasing power is not strong enough, and the transaction is not active enough. It determines that the business itself is a bitter business.
Taking Meituan as an example, as of the end of the fourth quarter of 2021, its annual trading users reached 690 million, an increase of 35% year-on-year; but in the same period, the average number of transactions per transaction user per year was 35.8, a year-on-year growth rate of only 27%. In other words, the new users attracted by Meituan's high investment still need to be further converted into more businesses and increase their transaction frequency.
In addition, for Meituan, extending from service e-commerce to commodity e-commerce is equivalent to another business, and it is also a heavier business. It requires the follow-up of organizational structure, supply chain, warehousing, logistics and other supporting capabilities. These are also different from the previous ability requirements, and the US group needs to make up for the shortcomings as soon as possible.
Technology is seen by various Internet platforms as a key element in leveraging retail. In 2019, JD.com launched the transformation from technology retail to retail technology. Alibaba began reinventing the retail industry with technology and digitalization earlier.
In September 2021, Wang Xing proposed a new strategy of "technology + retail". From which angle will Meituan's technology be cut into? Wang Xing once mentioned in a conference call: In the past few years, when we explore and study cutting-edge technologies, autonomous delivery is a key focus area and has an important direction for us.
In recent years, Meituan has indeed increased its investment and exploration of cutting-edge technologies such as unmanned vehicles and drone distribution.
From the perspective of R& D investment, Meituan's research and development expenses in the past two years have grown rapidly. In Q4 2021, it reached 4.582 billion yuan, an increase of 45% year-on-year; the annual R&D investment was 16.675 billion yuan, an increase of 53% year-on-year, and the R&D expense rate in 2021 was 9.3%.
Although every step of the retail business is not easy, retail is the business that Meituan has to do.
In recent years, the boundaries between physical e-commerce and service e-commerce have become increasingly blurred, and Ali and JD.com are extending to service e-commerce. Even short video platforms such as Kuaishou and Douyin have also set their sights on physical + service e-commerce, and the scale has grown rapidly.
In the face of the new pattern, it is not surprising that Meituan, which has always believed in "borderless" expansion, has cut into physical retail in reverse.
Meituan said in its 2021 earnings report that we firmly believe that the end game of the retail industry is "everything is home", and we will continue to use our strengths and capabilities to promote industry transformation.
There is no turning back from the bow. One of Wang Xing's favorite words to the inside is - "The past is not in love, indulge in moving forward." This time, where can he take Meituan's retail business?