After the "broken arm", Meituan has still not climbed out of the quagmire of losses

Meituan is becoming more focused.

Deng Shuanglin, reporter of "China Entrepreneur"

Editor|Li Wei

Head photo photography|Shi Xiaobing

Meituan delivered a mixed annual report over the weekend: for the whole year of 2022, Meituan's revenue was 220 billion yuan, a year-on-year increase of 22.8%; Operating loss was RMB5.82 billion, down 74.8% year-on-year, and adjusted profit was RMB2.8 billion, compared with a loss of RMB15.57 billion in the same period in 2021.

The "gratifying" is that the basic business is still strong, and the benefits of cost reduction and efficiency increase are obvious.

In 2022, the operating income of Meituan's core local commercial segment increased by 17.6% year-on-year to RMB160.8 billion, and operating profit increased by 56.8% from RMB18.8 billion in 2021 to RMB29.5 billion in 2022. Even though the epidemic was greatly affected last year, Meituan's instant delivery orders related to food delivery business still increased by 14% to 17.7 billion yuan, the average number of user transactions reached 40.8, an increase of 14% year-on-year, and the number of active merchants reached 9.3 million.

In addition, the operating loss of new businesses (Meituan Youxuan, Kuaide, ride-hailing, shared bicycles, power banks, restaurant management systems, etc.) also narrowed significantly, from 35.9 billion yuan in 2021 to 28.4 billion yuan in 2022, and the operating loss ratio improved to 47.9%. This is due to Meituan's optimization and contraction of new businesses in the past year: optimizing Meituan's preferred business, on the one hand, it withdrew from some cities with serious losses, and on the other hand, optimized some personnel through business line structure adjustment.

The ride-hailing business has also gradually slowed down, and in March this year, Meituan stopped self-operated taxi hailing and fully switched to the aggregation model. In addition, Meituan said that due to the surge in demand, Meituan Grocery recorded strong growth in the fourth quarter of 2022 and improved operational efficiency.

It can be seen that Meituan is becoming more focused - in the high-frequency business of takeaway, flash sale, and grocery shopping, which is based on instant delivery, the moat is getting stronger and stronger; The asset-heavy "burning money" business that continues to lose money will "break the arm" and lose weight.

The worry is that Meituan is still struggling with losses, and profits are still uncertain. And the clarion call of the main battlefield is becoming more and more dense: old opponents Ali and Didi are in front, and Douyin, Kuaishou, and Jingdong invade local life in the back, and the pressure of Meituan is self-evident.

Soldiers came to the city. Obviously, in 2023, Meituan has to face a difficult problem about "attack and defense": should it continue to reduce costs and shrink and save money, or take the initiative to reproduce the "subsidy" war?

Choice

"Save money" has become Meituan's annual keyword in 2022.

Wang Xing, the founder of Meituan, has a famous "infinite game theory" - "finite games are played within the boundary, but the infinite game is playing with the boundary, that is, with the 'rules', exploring and changing the boundary itself." In the past, as long as it was O2O local life services, Meituan almost had to participate, and Wang Xing believed that Meituan's business should not set boundaries.

However, the new business has become Meituan's "biggest loss" since 2018, especially in 2020 and 2021, with annual losses of more than 10 billion yuan for two consecutive years, which has a great impact on Meituan's cash flow. Meituan had to change its strategy and become more focused.

In 2022, Meituan's internal changes have begun, and the community group buying business has continued to shrink in the city, and after gradually replacing it with self-operated grocery shopping in high-tier cities, Meituan's preferred revenue has entered a stable period. This also means that Meituan's "drainage strategy through sinking market" began in 2020 has come to an end.

Meituan's self-operated ride-hailing business has also officially become history.

Source: Visual China

On March 6, Meituan founder Wang Xing released an internal email announcing the adjustment of the ride-hailing business and the transfer to the Meituan platform, and Zhang Xingyuan, the person in charge of the ride-hailing service, reported to Li Shubin, the head of the Meituan platform. At the same time, Meituan Taxi abandoned self-operation and fully switched to the aggregation model.

According to the email, Meituan will reduce its resources and manpower investment in the ride-hailing business, while part of the current team will continue to stay in the ride-hailing business, and the rest will be deployed to other business lines.

According to a late LatePost report, a person close to Meituan said that the background of this adjustment is that Meituan's main business is facing greater pressure this year, and the main tone of non-core business is to reduce costs and increase efficiency. As an asset-light model, the aggregation model will obviously be more in line with the development needs of Meituan.

At present, the daily order volume of Meituan taxi is about 1 million, of which self-operated orders account for about 40%. Meituan Taxi set an annual goal at the beginning of this year - not only to reduce losses, from 15% in 2022 to less than 8%; It is also necessary to seek growth, and the average daily order volume has increased from 1 million to 1.5 million. At that time, Meituan's investment ceiling for taxi planning in 2023 was 1 billion yuan.

In order to control losses, since the beginning of this year, Meituan Taxi has stopped subsidizing drivers on the self-operated side. In December last year, Meituan's self-operated taxi business had about 120,000 daily active drivers, mainly concentrated in Shanghai, Nanjing, Chengdu and other cities, and had lost nearly 50% as of February this year.

Min Zhijian, executive director of Shenzhen Shuoguo Investment Management Company, analyzed that Meituan's cut of the ride-hailing business was a timely stop-loss, "This new business consumed a lot of Meituan's cash flow, but it did not achieve the expected goal." Stop loss is a highlight. ”

However, for Meituan, shared bicycles still need to be reserved, because the frequency of opening is very high. But don't expect bike-sharing to be very profitable – "because the unit price is too low and the maintenance cost is high." Min Zhijian said.

"Even if Meituan's ride-hailing platform shifts to the aggregation platform, it will be difficult to surpass AutoNavi and there will be great competition pressure in the future." Min Zhijian said bluntly. As a travel platform with 120 million daily active activities, AutoNavi will steadily provide a total of more than 5 million orders per day for its large and small platforms in 2022, and Meituan is still far from this data.

In addition, Tencent and Huawei also entered the ride-hailing market in an aggregation mode last year. At the end of the year, Douyin also quietly opened the qualification of platform service providers of transportation services, and platforms such as T3 Travel, Yifu Hitchhiker, and Fast Dog Taxi have been settled.

Meituan management explained on the conference call: "All of our investment in new business is based on the expectation of achieving independent financial profitability in the medium to long term. When we find that the growth model of a business is inconsistent with our previous judgment for a significant period of time, or that the strategic value of the business is limited and cannot be independently profitable for a long time, we will make necessary adjustments. ”

At the same time, Meituan's management emphasized that its goal for new business in the future is to significantly reduce operating losses and significantly improve operating profit margin for the whole year of 2023.

Strong enemies around

How much trouble has Douyin's "disruption" in local life caused to Meituan? This is perhaps the biggest concern for the outside world at the moment, and four analysts raised this concern on the earnings call.

Source: Visual China

In this regard, Meituan management said: "Compared with other platforms, Meituan has differentiated value. In 2023, Meituan's focus is on food delivery and in-store business synergy and consolidating existing advantages. ”

But the effects of competition are already emerging.

Financial report data shows that in the fourth quarter of 2022, Meituan's commission income was 14.6 billion yuan, a year-on-year increase of 13.7%, and the growth rate basically matched the growth of orders. However, the performance of advertising and marketing revenue (mainly from in-store visits and wine hotels) was not optimistic, with revenue of only 7.74 billion yuan, down 4.8% year-on-year. Despite the impact of the epidemic, Meituan's advertising revenue also increased by 1.4% in the second quarter of last year, also facing the national epidemic.

Advertising and marketing revenue reflects traffic distribution and promotion capabilities, which means that in terms of grabbing merchants' budgets, Douyin's diversion to Meituan merchants has become an indisputable fact.

According to media reports, a number of merchants have previously said that due to the competitive pressure of Douyin, since the fourth quarter of last year, Meituan has begun to rebate commissions for some merchants and give certain discounts on advertising prices.

This is also reflected in the financial report - in the fourth quarter of last year, Meituan's marketing expenses reached 10.77 billion yuan, significantly higher than the market expectation of 8.9 billion yuan, compared with 9 billion yuan in the second quarter of the epidemic, and the expenditure was also significantly higher.

The competition around Meituan's main battlefield continues to increase.

Recently, Alibaba's local life platform Koubei was merged into AutoNavi and plans to further promote the development of local life services through AutoNavi drainage. The food delivery business cooperated between Douyin and Ele.me has been carried out in some pilot cities.

Min Zhijian believes that Meituan still has strong competitiveness in its core business. As the largest player in the real-time retail battlefield, Meituan's most powerful barrier is that it has a bilateral network effect, connecting ordinary users on the demand side, and connecting millions of offline catering enterprises and various retail enterprises on the supply side.

Although competition has intensified, the recovery of "eating, drinking, living and traveling" in 2023 may also become a turning point for Meituan to turn a profit.

Meituan CFO Chen Shaohui revealed in the earnings call that with the recovery of consumption, Meituan will take business recovery and growth as the top priority of core local business, and "this year will gradually increase marketing investment in in-store and wine and hotel business to further consolidate market share."

Resources:

"Danger Imminent: When Merchants Move Advertising Budgets Out of Meituan|Future Focus", 36Kr