Meituan ventures into the Middle East

Photon Star Sphere

2024-05-01 08:01Posted on the official account of Beijing Photon Planet

"Meituan's business of 'bowing its head and picking up steel hammers' has made the capital side lack interest, and it is another matter if it goes overseas. ”

One investor mentioned that Meituan is trying to tell a new story to the market - operating an international business separately in order to spin off and go public independently when it matures, so as to change the capital's unimaginative stereotype of the platform.

On February 2 this year, after the adjustment of Meituan's organizational structure, international business was placed in a very special position, on the one hand, Wang Xing "personally commanded, personally deployed", on the other hand, the frequency of senior management team visits to the Middle East has increased significantly, and a set of management team has begun to take shape - the head of international business is Qiu Guangyu (Tony), who has participated in Didi and Kuaishou to go overseas earlier.

On April 24, Meituan posted job postings on Linkedln and the Middle East recruitment platform Baye.com, and its overseas food delivery platform KeeTa opened a number of job openings in Riyadh. This means that after the first year of Hong Kong's training, Meituan will officially go overseas.

People seem to believe so much in the giant's ability to "replicate success" that many people are optimistic about going to Saudi Arabia next after Meituan became the No. 1 market share in the first year of entering the port.

There is a view that no matter how much the takeaway market in Saudi Arabia rolls up, it can't be rolled up in China, and no matter how difficult it is, it can't compare to Ele.me.

Photon Planet has learned that due to the sparsely populated territory of Saudi Arabia, the population is concentrated in several large cities such as Riyadh, Jeddah, and Mecca, resulting in a high degree of industry concentration and refined operation, and there are at least 20 platforms and chain merchants engaged in food delivery services. It is worth noting that it not only provides food and beverage delivery, but also provides non-food and beverage delivery services such as medicines and flowers.

We learned that the main members of the KeeTa Saudi team are from the Hong Kong team, all of whom are currently based in China, and a small team visited Saudi Arabia in mid-April to continue the preliminary research, and it is expected to be in the fourth quarter of this year to really make the takeaway run.

A series of issues, including language, regulations, algorithms, service providers, etc., are interrelated, and the problems faced by Meituan are quite thorny, which objectively leads to the slow progress of Meituan's Saudi project, which is very not "Meituan".

Hong Kong's success is hard to replicate in Saudi Arabia

In less than a year, Meituan's international brand KeeTa has successfully sat in the position of Hong Kong's first food delivery brother by relying on subsidies, performance efficiency, algorithms and operational advantages.

As we mentioned in the article "Meituan's entry into Hong Kong, there is no new story", for Meituan, the commercial value of entering the port is not as good as the strategic value. KeeTa tested the strength of Delivery Hero and Deliveroo in Hong Kong, and accumulated excellent practical experience for them to go overseas.

However, the environment in Hong Kong is very different from that of Saudi Arabia.

After three years of baptism, Hong Kong users still retain many habits of picking up food in stores. The ordering habits of Saudi users are very different from those of the mainland and Hong Kong. A local Chinese-funded institution told Photon Planet that Saudi users order less frequently per week, about 2-3 times, and the frequency of white-collar workers is relatively higher.

In terms of user consumption habits, most of them are family orders, the portion is high, and the unit price is generally high, with an average of 60-80 Saudi riyals (equivalent to 116-155 yuan).

In order to familiarize themselves with the Saudi market, Meituan executives have visited the Middle East several times since 2022. On the other hand, they also learned from many local Chinese-funded institutions, and it is understood that the person in charge of the group's legal department has a special understanding of local laws and solutions to solve compliance. One shortcut is to get investment from Saudi sovereign funds, which is a stepping stone to the local market – a financier that Meituan has not yet attracted to the owner.

At the same time, Meituan's KeeTa team also found another way: in the name of acquisition, to explore the "enemy situation".

According to a person familiar with the matter, during a survey, KeeTa expressed its intention to acquire a leading local food delivery platform, and the other party was very enthusiastic about the company's business and the local market. When the offer of one billion yuan was obtained, KeeTa stopped contacting.

Rather than take the path of acquisition, Meituan needs to have a deep understanding of the local market and stand on its own.

Different cultures shape different user habits, which makes the online economy very different. For example, during the fasting period, the evening after sunset will be the time when the takeaway will be released intensively. As we all know, believers need to do the "five exercises" for 20-30 minutes each time, and there is a "big one" on Friday. Religious reasons objectively reduced the efficiency of distribution, and also forced Meituan to adjust the algorithm.

Other obstacles to KeeTa's entry include strict labor policies and high fulfillment costs.

Hong Kong's takeaway capacity is mainly divided into cavalry and infantry, while the cost of transportation for takeaway in Saudi Arabia is much higher than that in Hong Kong. The main means of transportation for takeaway are motorcycles and cars, and most of the workers engaged in takeaway are foreign Indians and Pakistanis, so the requirements are much more stringent than those of locals.

Photon Planet learned from the rider requirements of local food delivery giant Jahez that since most of the carriers are foreign workers, foreign drivers need to meet the requirements of a valid driver's license, car registration, leasing or owning a registered vehicle after 2012, and a premium of 2,000 riyals (about 3,800 yuan).

Only if you have paid the premium to the company can you obtain a residence permit and work legally. If you change jobs during the year, the cost will increase by 2,000 riyals for each change of company. The high insurance premiums have kept the local labor costs high, which once caused headaches for many Chinese-funded institutions.

The high cost of labor does not seem to be solved by algorithms either. Local takeaway delivery can only receive one order and deliver one order, and cannot be delivered multiple times at a time. According to a local Chinese-funded institution, the reason may be due to the backwardness of the system and the formation of some deep-rooted customs.

What's worse is that the terminal mailing address in Saudi Arabia is extremely imperfect, which requires delivery personnel to communicate with users by phone or instant messaging software, so employees who are familiar with Arabic are needed.

Not only that, but the delivery person must also deliver the food to the user, and is never allowed to pick it up at the door like in China. In addition, the popularity of digital payment in the local area is not high, and it is often settled in cash, or rewarded by riders. A local food delivery platform has adopted the solution of taking orders from riders and withholding their meal fees.

Saudi takeaway, a red sea

What is surprising is that takeaway was born very early in Saudi Arabia, with a variety of platforms, and the business form is no longer limited to catering. To be precise, the market that KeeTa will go to is not a blue ocean at all, but a deeply integrated red ocean.

At the top of the market list is Jahez, a local food delivery platform founded in 2016. The platform relies on the advantages of a two-sided platform formed by low prices, merchant network coverage, and a membership system of 95 riyals (about 190 yuan) per month, with a market share of 30% as of 2021. In 2022, it also acquired another powerful local food delivery platform, The Chefz (chef).

The second is KeeTa's old rival in Hong Kong, Hunger Station, a Saudi subsidiary of German food delivery giant Deliver Hero. A local Chinese-funded institution has used the product, and it can be seen from the screenshot information on the app that Hunger Station has launched a "100-day free" membership policy, providing free shipping and the fastest delivery time of 15-25 minutes.

Screenshots provided by employees of local Chinese-funded institutions

The third is MRSOOL, a local retail distribution platform established in 2015, which is not limited to food and beverage, but is closer to domestic instant retail, so it has a high market share in the local terminal distribution market.

In addition, it also includes more than a dozen platforms that provide delivery services, such as Talabat, a 20-year-old big brother in the Middle East, Deliveroo, KeeTa's old rival in Hong Kong, and Wssel, an aggregation platform, as well as delivery services from international chain giants such as KFC and Burger King.

During the search process, we found that some platforms also have in-depth cooperation with Amazon, with the former bringing local service supply to the latter and the latter providing search traffic to the former.

Regardless of whether it is a new or old platform, or whether it is an aggregation or a chain brand, the local food delivery industry relies on third-party manpower companies. "The same pair of chopsticks" are used, which leads to the limitation of industry competition in price, traffic, and business operation. Considering that KeeTa has become the first in the industry in Hong Kong by relying on tactics such as free shipping, new customer subsidies, and algorithm optimization, these routines have already been played by Saudi counterparts.

According to the observation of a number of Chinese-funded institutions working in the local area, Jahez and Hunger Station have relied on overwhelming online marketing and offline advertising to smash the current market awareness and share. "Jahez, in particular, relied heavily on marketing during his rise. "In addition, Saudi Arabia's dual-track governance model allows local platforms to enjoy more regulatory flexibility than foreign platforms.

We asked local market consulting companies and industry insiders whether KeeTa could build its own capacity locally, and the answer was no. In fact, after many investigations, KeeTa can only conduct business in the form of third-party fulfillment.

First of all, there needs to be industry access, and in the absence of sovereign fund stepping stones and licenses, the approval cycle is long and the uncertainty is high. Secondly, the cost does not support the domestic recruitment of riders to Saudi Arabia. Local delivery riders earn between 6,000 and 12,000 yuan a month, and in most cases rely on delivery income. Thirdly, language and cultural barriers hinder the importation of labor.

After all, Meituan's dozens of trips to the Middle East avoided Ramadan (the ninth month of the Islamic calendar) because it was difficult to adapt to its meal time.

When all competitors rely on third-party performance games, the value of the algorithm is infinitely amplified, which is the core reason why KeeTa has not been implemented in the local area. Algorithms need to obtain and use user information in a restrained manner within the limits permitted by local policies, and adapt the corresponding algorithm mechanisms based on local user habits and cultural traditions.

Compared with operation, it may be a more basic problem of how to attract merchants to settle in the multi-platform game.

Unlike China, there are well-established digital service providers, and Meituan and Ele.me can be integrated into one POS machine. In the Saudi market, there are often five or six pieces of equipment for various platforms in merchants' stores. Moreover, the digital foundation is relatively weak, and KeeTa lacks talents familiar with the Arabic language, so it is difficult for Meituan's local promotion strength to be fully released in the short term.

Fortunately, local merchants are open to new players, and the commission ratio and buying volume mentality are still undeveloped, which are two attractive factors among the many disadvantages.

It is understood that the commission ratio of local small and medium-sized catering businesses is relatively high, generally around 20%-30%. The bargaining power of the platform in the face of large chain merchants is weak, and the commission ratio is mostly around 5%, which is close to the domestic group purchase rate. The digital construction of small stores is blank, and most merchants lack mature online business thinking.

In addition to "art", Meituan lacks "Tao"

The Saudi market may not have as much room for KeeTa to play as in Hong Kong, and the space for merchants to operate exceeds the user side.

Of course, according to Meituan's style of acting, KeeTa will use subsidies to attract users in the early stage and hedge rigid performance costs with continuous investment, but this is not a long-term solution. What's more, Hunger Station has started to launch a membership-based free delivery policy. What is really lethal is actually to provide cost-effective supply, and the means are nothing more than subsidies and temporary commission-free for merchants and users, which is a time-consuming and laborious white-knuckle war.

Looking back at Meituan's development in China and Hong Kong, almost all of them need to fight a protracted battle to occupy a dominant position, and the core reason is that "art" is stronger than "Tao".

This includes technologies such as algorithms, or the creation of organizations that push teams, or subsidies and performance improvements, or even tricks such as allowing their employees to compete or recruiting competing employees for their own use, all of which do not ensure that Meituan can be replicated overseas.

Conversely, the decline of Deliver Hero and Deliveroo in Hong Kong does not prove that they are defenseless against KeeTa. The two platforms have been working in many different environments around the world for many years, and have accumulated a set of mature operation and implementation solutions.

The so-called "Tao" includes not only stepping stones such as sovereign wealth funds, but also building business and service capabilities with moats. These two items have not yet been revealed on KeeTa.

Although it is difficult to go to the Middle East, especially Saudi Arabia, it may be one of the few destinations for local life giants like Meituan, and the relatively friendly geographical relationship and fast-growing market do provide Meituan with full imagination.

And how far Meituan can do it may not depend on Qiu Guangyu, the head of international business, but on Wang Xing himself.

When Wang Xing was in middle school, he frantically played the computer game "Three Kingdoms", and this experience helped him establish a domestic spatial thinking. Now that he's expanding overseas, maybe he can spend a few all-nighters playing "Iron Ambition" on Station P, a game built on a world map.

All you have to do is arrange your troops, press the timeline, and the world moves.

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