Source: Visual China
Author 丨Lius
Editor 丨 Kang Xiao
Produced | Shenzhen Network Tencent News Xiaoman Studio
On the one hand, the policy and public opinion pressure facing the platform, on the other hand, the growth fatigue of China's Internet industry, Wang Xing and the local life service giant Meituan he single-handedly built have been in trouble in the past year, but the latest release of meituan's 2021 financial report has unlocked the most questioned part of its business model.
On March 25, in the 2021 annual report released by Meituan, the disclosure method of catering takeaway revenue was adjusted for the first time, which was subdivided into catering takeaway delivery service fees and commissions (technical service fees). According to the 2021 Meituan transaction volume of 702.1 billion yuan, commission income of 28.5 billion yuan, the annual commission rate is about 4.1%.
Meituan CEO Wang Xing later said in a conference call that "the revenue of the delivery service business contributed by merchants and consumers still cannot cover the cost of delivery fees we pay to couriers."
In the fourth quarter of 2021, Meituan's delivery service revenue was RMB14.3 billion, which was lower than the related cost of RMB18.3 billion, equivalent to a loss of RMB 1 per order. "We use commission income to offset this part of the loss, mainly to pay for food delivery workers." Wang Xing explains.
After the release of the earnings report, the US group rebounded at the opening of the market on Monday morning. Hong Kong stocks rose 11.56% on the day to close at HK$150.6 per share.
Previously, meituan has been criticized by public opinion many times, especially after the epidemic, the difficulty of small shop operation has pushed the enterprise platform to the cusp of the storm again. Capital markets are becoming particularly sensitive today. Previously, the National Development and Reform Commission and other 14 departments issued the "Several Policies on Promoting the Recovery and Development of Difficult Industries in the Service Industry", which mentioned that "to guide Internet platform enterprises such as takeaway to further reduce the service fee standards of merchants in the catering industry and reduce the operating costs of relevant catering enterprises". Meituan's stock price fell 14% on the day.
Subsequently, meituan adjusted the commission rate on March 1 to implement preferential commission support for small and medium-sized catering merchants that have been seriously affected by the epidemic and have operational difficulties.
Looking back at the listing of Meituan on the Hong Kong Stock Exchange in 2018, when Wang Xing wrote down the bold words of "I don't wish you smooth sailing, I wish you to ride the wind and waves", he did not expect that Meituan would fall into such a predicament.
Last year, Meituan had a headache about how to deal with the negative public opinion that fermented from time to time, such as how to avoid letting riders "get trapped in the system", how to improve their welfare system, and how to reduce the burden on businesses. An insider told the Deep Web that these problems are very tricky, whether to respond, how to respond, it is difficult.
Looking back at wang xing and meituan once again among the entrepreneurial tide, few people predicted that he would create a giant of local life services in China, sitting at the same chess table as Ali and Pinduoduo. It is a rising entrepreneur and a capital darling, with a market capitalization of nearly HK$2.8 trillion at the beginning of 2021, but now it is only HK$924.248 billion (as of the close of Hong Kong stocks on March 28), down about 67% from its peak.
Behind the shrinkage of market value, there are multiple factors such as the stalemate of Russian-Ukrainian relations in the general environment, the sale of Chinese stocks by foreign investors, the delisting storm, the epidemic and other factors, but they are also unable to ignore their own difficulties. For example, the slowdown in business growth, the sinking market pinning on the second growth point has become the last treasure, but with the addition of Pinduoduo and Ali, meituan has to face the reality of "more monks and less meat" and exchange losses for traffic; external policies, with the increasing supervision of Internet platforms from 2021 onwards, the crisis of meituan platform monopoly and commission rates is in the shadows.
It is undeniable that the 12-year-old Meituan has experienced fighting, mergers, expansion, and sinking, and it has full wings, stepping on the cusp of the rise of the Internet to establish a huge business empire and a mature management system. Along the way, Wang Xing thought very carefully about every step, and he believed that "the high realm of chess is a complete and unskillful hand, and it is necessary to think very well."
But the will of the individual cannot influence changes in the macro environment. The aftermath of the Internet is still surging, but the real wave has passed, the traffic dividend has become a thing of the past, and the cost reduction and efficiency increase, optimization and adjustment are regarded by the Internet manufacturers as a new saying of "layoffs" and "reduction of unprofitable business".
Wang Xing is good at layout and wins in stability, but is not good at surprises. In the face of the meituan dilemma, Wang Xing's solution is simple and direct, on the one hand, he is determined to give up the possibility of generating income through high commissions, on the other hand, he develops new business to reduce his dependence on the main business of takeaway, but at the same time, he also pays the price of loss expansion.
Drop: The management structure has just grown
After ten years, Wang Xing left the most important chess piece for the US group: management.
In September 2011, during the hottest time of the year in Hangzhou, Wang Xing traveled to Hangzhou to attend a regional exchange meeting. There is also an important purpose of this trip, to meet Gan Jiawei, known as "Agan". After in-depth contact with the US group, Gan Jiawei's first reaction was "very similar to Ali ten years ago." Although now their relationship has become delicate. He believes that the company itself is genetically healthy, and although the management is relatively rough, its basic appearance is there.
In the early days, the Internet play was simple and rough, and it was especially true that it was necessary to expand the local life of merchants offline. The ground push iron army established by the US regiment helped it stand out in the Battle of the Thousand Regiments to a large extent, and the growth method accumulated in this process was sorted out as the management law that the US regiment later believed in.
Since the group buying business covers a large number of catering merchants, when the Meituan launched the takeaway business later, the strategic play of the group purchase can be directly reused, which is an important reason for the rapid rooting and volume of the Meituan takeaway later.
From the outsider's point of view, the ground push iron army "fights chicken blood and shouts slogans", but the real manager understands that it is necessary to understand the essence of the business, and then dismantle the playing style and finally achieve the expected results.
For example, an important adjustment pushed by Meituan is from "marketing path" (such as Groupon, which gives traffic to limited supply to make explosive orders) to "supply path".
Specific dismantling down, since 2012, the Meituan push team "crazy visit, crazy on the order", sales every day to complete 6 effective visits, 2 new effective, and regardless of the industry, as long as it is your division of the area, whether it is catering or hotel, go in and talk;
Meituan canceled the original department responsible for collecting business licenses and making shelves packages, and directly handed these over to sales to do, greatly improving the timeliness and order volume of orders;
At the same time, adjust the commission ratio according to different market conditions, the high commission in the area with high market share is responsible for making money, the fiercely competitive area maintains a balance in expanding market share and commission proportion, and the non-dominant one abandons the commission to do the scale;
Reduce the commission of sales, use the money saved to buy traffic, thereby increasing sales, increasing market share, and forming a positive cycle. After this series of playing styles, the result is that the market share of the US group was 10% at the beginning of 2011, and the market share rose to 18% at the end of the year.
In terms of management, Wang Xing is a fan of Ram Charan's "Leadership Echelon", and he has personally invited dr. Xu Zhong, the translator of the book, to train the management of meituan twice, and he feels that he has benefited a lot. Wang Xing agrees with the book, "In this era, the leadership of leaders at all levels of enterprises is the key to determining the competitiveness of enterprises. He even included this book in the must-read list of Meituan employees.
Among the meituan employees who came into contact with the "Deep Net" in the later stage, many of them had read this book. In 2020, Wang Xing also launched the "Leadership Echelon Plan" with this as a reference to realize talent inventory, rotation training, and succession plan, and provide organizational and institutional guarantees for the cultivation of talent echelons in the next decade.
Based on this as a benchmark, the structure is headed by Wang Xing, and the team is composed of the main responsible persons of each business and the heads of functional departments, who are the core senior management of Meituan Dianping. The team maintains communication with each other in the form of weekly meetings and monthly communication meetings; and after the overall strategy and budget are set, the autonomy of the leaders of each vertical section is very high. For example, Wang Huiwen (retired in 2020), Zhang Liang, Murong Jun, and Lai Binqiang (who left in 2017 to start a business) are all managers who can stand alone.
For another example, the more first-tier cities, the largest market volume and fierce competition areas, the shorter the reporting and response link, in order to control the management range of management.
This system ensures that each sector of the US group can flexibly respond to changes in market competition, and at the critical moment, the US group as a whole can make decisions and choices according to the current environment.
When CEO Zhou Yuan started his business in the early days, Wang Xing and Zhang Liang once came to chat with him, and when they saw that Zhou Yuan printed business cards for different positions in order to meet different people, Wang Xing told Zhou Yuan that "people with suitable positions should be recruited."
In the early days of the US group, it also mentioned "borrowing fakes to repair the truth", to the effect that the figures such as results and process indicators are "fake", and the talent and organizational development and improvement are "real". The ultimate goal of the manager is to make the subordinate become "himself", let him do things well spontaneously, and when the manager is gone, the company and the business can still grow healthily.
Winners and losers: Transformed into a takeaway super platform
After the Thousand Regiments War, another important strategy of Meituan was to acquire Dianping in 2015, which gave Meituan a further foundation for in-store dining.
For a long time in the past, in a market with scale potential, subsidies were exchanged for market ownership, and then burned into head companies, becoming the key for startups to seek rapid growth. This approach to creating value through subsidies and monopolies is undoubtedly effective, but it is too short-sighted and far removed from the nature of commerce.
Soon Wang Xing realized that the boundaries of "limited games" are blurred, competitive advantages will be dissolved, and opponents may even come from different industries. Therefore, in his "infinite game" thesis, it is necessary to consolidate the moat through new business expansion.
In 2015, Wang Xing decided to enter the takeaway industry. Prior to that, this business was low commissioned for two years. According to Wang Xing's logic, two years is enough to verify the feasibility of a market.
In fact, the timing of meituan's takeaway is not too early. At that time, Zhang Xuhao's Ele.me founded at Shanghai Jiaotong University had won the recognition of college student users, with daily active users approaching 4 million, and the main users began to turn to white-collar workers. In addition to Ele.me, platforms such as Food to Home Club and Baidu Takeaway occupy a corner of the chessboard due to the different target audiences and online restaurant types.
From a strategic point of view, the US group takeaway has come to this day, and there are two key nodes.
A key point is the decision to transform from the campus market to the white-collar market since 2015. Prior to this, although meituan takeaway accounted for a large market share, it was not as good as Baidu takeaway, which mainly attacked high-end Baidu takeaway in the white-collar market.
Since the first half of 2015, Meituan has entered the white-collar market with high income, high consumption frequency and high customer unit price; by the end of the year, Meituan takeaway ranked first in the white-collar market share, with a monthly transaction volume of Meituan takeaway exceeding 2.3 billion yuan and a daily order exceeding 3 million. Wang Xing personally announced the results.
Pulling the timeline to the long term, the breakthrough of the white-collar market has brought significant boosts to the overall market, with the meituan takeaway transaction volume of 47 billion yuan in the first half of 2015, and the transaction volume increased to 171 billion yuan in 2017.
Another key strategy is the confrontation between 2015 and 2018 with Ali-backed Ele.me.
Before the Spring Festival in 2016, when other platforms helped riders return to their hometowns for the New Year, the top management of the Meituan group did the opposite, deciding to use subsidies to retain riders to ensure the transportation capacity during and after the Spring Festival.
This allowed Meituan Takeaway to restore full capacity before the Lantern Festival, and the market share was once again distanced from Ele.me. Analysys data shows that in the first half of 2015, the Meituan takeaway market accounted for 41.24%, Ele.me 38.75%; at the end of 2017, meituan takeaway increased to 46.1%, Ele.me will reach 39.5%.
Source: Meituan Prospectus
It was also at this stage that Meituan takeaways started rapidly, with the average number of daily transactions increasing from 1.7 million in 2015 to 11.2 million in 2017, and the total number of active merchants increasing from 1.98 million in 2015 to 4.4 million in 2017.
Today, takeaway has become an important part of Meituan's revenue, accounting for more than 50%, accounting for a maximum of 58.47% in the third quarter of 2020.
But it has also become a double-edged sword, in the early days of the takeaway launch in 2015, in order to attract more merchants, Meituan's commission rate was only 1.1%, with the increase in the number of merchants, the platform discourse power became stronger, and the commission rate exceeded 11% since 2019 (before Q4 2021, the statistical dimension does not distinguish between delivery service fees and technical service fees). This laid the groundwork for the commission controversy in the later stage of the US group.
In addition to the establishment of the takeaway delivery division, Meituan has also established a hotel tourism business group, a store business group, and a wholly-owned subsidiary of Maoyan (spun off and listed in 2016). Wang Xing wants to achieve the linkage between various businesses through this architectural system: the low gross profit of takeaway is responsible for creating traffic entrance, and the high gross profit of wine tourism is responsible for making money.
Behind this adjustment is the underlying logic around the "T-shaped strategy", that is, to build a business platform in related fields, through the exploration of business models, around the business with the strongest profitable value in the platform, focusing on core resources - the horizontal in T is platform group buying, and the vertical is a new business in vertical segments that can be independent.
After the listing of Meituan in 2018, Meituan's T-shaped strategy focused on "Food+Platfrom" and became a super platform with "eating as the core".
"Good chess players usually know and accept that they are also pawns in a larger chess game," Wang Xing typed after the listing, and the US group is about to face more brutal and broader competition.
Dangerous chess: grab the trillion new retail market
The Internet entered the second half, with weak user growth, soaring customer acquisition costs, and invisible traffic anxiety spreading everywhere.
"Shenzhen Net" combed the meituan financial report and found that its annual trading users gradually slowed down compared with the year-on-year growth rate from 2020 to 2021, and the annual new trading users by the end of 2021 increased by 35.2% year-on-year to 6.905 million. After entering the stock competition, the sinking market with huge demand and trillion scale has become a new treasure of giants, and the confrontation between Meituan and Ali and Pinduoduo has become obviously fierce.
On the other hand, more than half of Meituan's revenue comes from takeaway, and the model of takeaway income mainly relying on commissions is not sustainable, and Meituan has also been trying to improve efficiency and create more value on the basis of existing distribution, such as errands business and flash sale business that riders can reuse.
For a long time in the past, Meituan was trapped in the takeaway commission controversy, and the outside world felt that catering merchants were too sad, and they were all earned by the platform before. But in fact, the takeaway business is not profitable, meituan takeaway did four years to the end of 2019 to achieve positive profitability, commission income of more than 80% to pay the cost of riders. As a super platform, Meituan must solve the commission dilemma of small and medium-sized merchants.
Under the superposition of the two factors, Meituan has invested a lot of manpower and financial resources to gamble on new retail businesses such as Meituan Preferred, Meituan Grocery Shopping, and Meituan Flash Purchase, and once again adjusted Meituan's strategy from "Food+Platform" to "retail + technology".
"Delay" reported that the three business departments of Meituan's preferred, grocery shopping and fast donkey set up a unified function middle office at the end of February, including human resources, finance, public affairs, etc., and each business is still developing independently. An Internet company community group buyer analyzed the "Deep Net" and said that this move is the best way for the US group to concentrate and reuse resources at present.
The battle of the sinking of the US regiment was led by Wang Xing himself.
In October 2020, Wang Xing said at an internal meeting that "the fresh retail business of Meituan Preferred and Meituan Grocery Shopping is a battle that must be won." Subsequently, the determination was continuously conveyed in the company's middle and high-level meetings, and it was positioned as a company-wide first-level strategy.
"Deep Web" learned that the business leader of Meituan's grocery shopping will read 6 pieces of A3 paper every day.
In the same period, the Meituan e-commerce group purchase business is also low-key online, it quietly appeared on the home page of the Meituan App, the name of "Tuanhao" is difficult not to remind people of pinduoduo's predecessor "Pinduoduo", "Pinduoduo", the two are only one word difference.
An e-commerce industry insider told "Deep Net" that the real enemy of the US group is not Ali, but Pinduoduo. The birth of Tuanhao goods is to some extent considered to be the sword of Pinduoduo - in the fourth quarter of 2020, the scale of Pinduoduo users surpassed Ali for the first time and became the largest e-commerce platform in China.
At the same time, Huang Zheng's fellow disciple Abu personally led the team to buy more vegetables and fired the first shot. Before that, he and several other colleagues spent two months in Wuhan and Nanchang trying to get the market through. At the end of October 2020, Duoduo has entered 120 cities.
On the side of the Meituan, Wang Xing assigned Senior Vice President Chen Liang to be in charge. The U.S. group preferred to quickly station in Jinan and then radiate to Wuhan, Guangzhou, and Foshan, and their plan was rolled out nationwide by the end of the year.
In the first half of 2020, Chen Liang's footprints spread across Shandong, Hubei and Sichuan. Select old employees who are skilled in the business to form a "Flying Tiger Team" to go to the new city to "take a trip", build a good supply chain, warehousing, and distribution of the entire system, so that the supply of goods is rich enough, and then bring out the new employees, and then go to the next new city to repeat the above operations - this is the same as the "sales crown copy method" in the group buying period.
The community group purchase that is optimistic about Meituan, Ali and Pinduoduo may be one of the few gold mines to be mined, which aims at local consumption in the sinking market, and the market size will exceed 100 billion in 2022. More importantly, it is likely to set off a major change in new retail.
A Meituan insider analyzed the "Deep Net" and said that in the sinking strategy of the Meituan, community group buying is the basic disk, and the good goods of the group are another key to accelerating the sinking.
"Different from the one-hour delivery service of the main first-tier cities, Meituan buys vegetables, and the community group buying has to explore to China's sinking cities and towns, but Ali, Pinduoduo, and Jingdong are all doing it, and meituan needs a 'winger' who can play auxiliary, and the Pinduoduo model is obviously the best choice."
Turning the rudder to "retail + technology" is behind Meituan's urgent desire for new growth. But there is a price to pay in order to get something better. Meituan paid for this is a decline in profits, and even returned to losses in the fourth quarter of 2020. But losses narrowed in the fourth quarter of 2021.
According to the financial report, Meituan's revenue in the fourth quarter of 2020 was 37.9 billion yuan, an increase of 34.7% from 28.2 billion yuan in the same period last year; but the adjusted loss was 1.4 billion yuan, compared with 2.3 billion yuan in the same period last year. In the following quarters, the loss continued to widen to 5.5 billion yuan in the third quarter of 2021, and then narrowed to 3.94 billion yuan in the fourth quarter.
The loss was due to the impact of the epidemic on the one hand, and to the impact of new business investment on the other hand. However, in the latest fourth quarter of 2021, Meituan narrowed its loss to 3.94 billion yuan under the contraction of subsidies and the emphasis on operational efficiency adjustment.
The slowdown in business growth is comprehensive. Among the main revenues of Meituan, catering takeaway, hotel tourism and new business are the three important components, and the year-on-year growth rate of revenue has slowed down.
Food and beverage takeaway revenue increased by 21.3% year-on-year to 26.13 billion yuan in the fourth quarter of 2021, although the year-on-year growth rate of revenue slowed down, but the operating profit margin increased by 6.6% from 4.1% in the same period last year, and the ring increased by 3.3 percentage points compared with 3.3% in the previous quarter. This was mainly due to the increase in the share of revenue from online marketing services and the reduction in seasonal subsidies for riders.
Wang Xing explained the slowdown in the growth rate of food and beverage takeaway in the fourth quarter of 2021 earnings call. The main reason is the strict epidemic prevention measures, and the current macro environment has also had a certain adverse impact on the business.
"Overall, given the current short-term headwinds, our work is currently focused primarily on high-quality growth and operational efficiency improvements."
The arrival, hotel and tourism revenue is still Meituan's cash cattle business. Revenue from the business grew 22.2% year-on-year to $8.72 billion in the fourth quarter of 2021, slowing year-on-year and slightly increasing operating margin to 44.7%.
New business and other revenue slowed for the third consecutive quarter of 2021, up 58.7% year-on-year to 14.67 billion. And with the optimization and adjustment of subsidies for businesses such as Meituan Preferred, the operating loss narrowed to 10.2 billion yuan, and the operating loss ratio narrowed to 69.5%.
Break: Commission from 1.1% to 12% to 4.1%
According to the financial report, the Meituan takeaway commission rate soared from 1.1% in 2015 to more than 11% in 2019; then in the fourth quarter of 2021, after splitting the rider's delivery fee and technical service fee for the first time, it fell to 4.12%, and the commission income per order also fell to 1.99 yuan.
Note: From Q4 of 2021, the commission income in meituan's financial report no longer includes the cost of takeaway catering delivery service
After the takeaway business was launched in 2015, with the growing strength of the US group, the platform discourse power has also become higher and higher. Chain catering enterprises with high brand value can attract more users for the platform through the brand effect, so they have higher bargaining power and the corresponding commission rate is also lower; while more small and medium-sized catering merchants rely on the traffic brought by the platform to obtain their takeaway users, the right to speak is small, and the commission rate is relatively high.
"Deep Web" has done a relevant survey, the lowest commission is the self-delivery merchants, usually in 5%; the large chain with large brand influence is 15-18%, and the small chain with limited brand influence is 18-20%; from the regional point of view, the commission is often higher than that of the self-operated area in the area where the agent is responsible.
These factors lead to large differences in commission rates for different types of individual catering merchants. When the epidemic hit catering enterprises hard, the contradictions between small and medium-sized restaurants that originally had to rely on online traffic to make up for the loss of in-store (they accounted for more than 80% of the Meituan takeaway platform) finally broke out when there was little profit left after removing costs and commissions.
It's time for Meituan to make a change.
In May 2021, Meituan Takeaway implemented the transparent rate, calculating the technical service fee (actual commission) and the performance service fee (delivery service fee) separately, and the delivery service fee will only be generated when the merchant chooses the platform delivery, and the three factors of time period, distance and unit price will change.
For the first time, Meituan made a corresponding disclosure in the fourth quarter of 2021 financial report, and the actual commission rate of the platform was 4.12%.
As a result, the US group has taken a key step in breaking the policy situation. Next, it also depends on how to get the rider out of the "system" and how to refine and land the corresponding welfare security system.
The other thing that the US group needs to break is competition from multiple fields.
Behind it is the change of the general environment, the rise of video is changing the consumption model, vibrato, Kuaishou e-commerce has become an important part of revenue, representing more possibilities in the future, they are trying the possibility of local life service transaction conversion, which was originally the base camp of the MEituan.
At the end of 2021, Meituan formed an alliance with Kuaishou and launched the Meituan Mini Program on the Kuaishou Open Platform, providing Meituan merchants with service capabilities such as packages, vouchers, reservations and other commodity displays, online transactions and after-sales service. According to the logic of Meituan, Kuaishou's advantages in the sinking market and massive traffic have the opportunity to help Meituan drive core business growth.
There is no doubt that the situation in the local life services industry is more complicated than before. But the most difficult part for Wang Xing is still how to define the boundaries of the US group: ability and responsibility, imagination and ceiling.
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