Meituan hit the growth ceiling and used Pinduoduo's method to make takeout

Late LatePost

2024-05-17 07:22Posted on the official account of Beijing LatePost

Meituan further explores low-cost takeaways.

Text丨Shen Fangwei

Editor丨Guan Yiwen

We learned that the average daily order volume of Meituan's new business "Pinhaofan" in the first quarter of this year was close to 5 million, which is almost 10% of the average daily order volume of 57 million orders in the fourth quarter of 2023. People close to Meituan judge that Pinhaofan will become bigger, and the proportion of takeaway orders in the long term is expected to reach 20%.

Meituan began piloting the Pinhao Fan business in 2020, initially positioned as a low-cost takeaway product for lower-tier markets, and has now entered most markets across the country, including first- and second-tier cities.

The idea of spelling good rice is that the platform intervenes in the supply link, negotiates the price with the merchants, and allows users, merchants, and riders to place orders, deliver meals, and deliver them in a centralized manner through the method of "popular meal recommendation + single order + unified delivery", so as to reduce the cost of the three parties in the way of "fighting".

Spelling good rice is Meituan's most important attempt at low-cost takeaway. In the fourth quarter of 2021, Meituan's takeaway had a unit price of about 50 yuan (excluding delivery fees), while Pinhaofan, which began to be promoted the following year, offered meals with an average price of less than 15 yuan and zero delivery fees.

Behind the attempt at low-cost takeaways, Meituan realized that the growth rate of food delivery orders was slowing down and approaching the ceiling; The changes in the environment have also increased the number of people ordering cheap takeout.

Meituan's approach to making takeaway prices 15 yuan or even lower is much like that of its old rival Pinduoduo. Pinhao Fan recommends a set menu, not like Meituan Takeaway recommends restaurants, just like Taobao once attached importance to the difference between stores and Pinduoduo recommended products. Fewer options ensure that each item can gather high sales, allowing restaurants to drive down costs and riders to accept lower unit prices through economies of scale.

Meituan takeaway and Pinhao rice recommended in the same place in Beijing.

People close to Meituan believe that Pinhaofan's 5 million daily orders already means that the attempt at low-cost takeaway has been initially successful.

How does Meituan do low-cost takeaways?

In 2022, Meituan Takeaway began to promote Pinhaofan. Previously, the average unit price of Meituan's catering takeaway was about 50 yuan, and the average delivery cost was about 7.5 yuan. Pinhaofan is aimed at the market with a unit price of less than 15 yuan, and they used to account for about 20% of Meituan's takeaways, and it is the norm to give away one order and lose one order.

Meituan hopes to improve the loss of low-priced orders by finding more low-cost supply and reducing delivery costs.

The supply model of Pinhaofan is that the platform decides which low-cost meals to sell, attracts investment in a targeted manner, and negotiates with merchants to set a supply price with low gross margin, which can be cheaper than the past price.

Meituan uses subsidies and traffic to help them acquire customers, while merchants need to cooperate with Meituan to make low-cost products, exchange price for volume, and rely on higher turnover to make profits.

In terms of delivery, the Chang Run model adopted by Pinhao Fan was launched by Meituan Takeaway in 2021. Meituan's delivery system will prioritize orders placed at the same merchant with similar addresses to Changpao riders, and the number of orders completed by Changpao riders in the same time period is usually 2-3 times that of ordinary riders, and the income of the two is basically the same.

The Chang Run mode effectively controls the distribution cost of Pinhaofan, and Pinhaofan has grown rapidly. Since 2022, Meituan's delivery fees have undergone multiple rounds of adjustments. In the same year, the daily order volume of Pinhao Fan reached one million, and in 2023, it will successively enter first- and second-tier cities such as Beijing, Shanghai, Shenzhen, and Chengdu, and the daily order volume will exceed 3 million.

In terms of product presentation, Pinhao Fan emphasizes single products, which is different from the store logic of Meituan Takeaway.

Meituan Takeaway operates on a merchant's store basis, similar to Taobao, where merchants want to gain more exposure in addition to the comprehensive ranking based on factors such as price, quality, and delivery efficiency, and need to increase advertising investment, and some merchants pass on advertising spending to consumers, and the price per order of takeaway also increases.

Pinhaofan presents products with SKU logic, similar to Pinduoduo, merchants do not need to participate in various advertising promotions, and the platform provides more traffic to the lowest-priced products after limiting the maximum price and the minimum specifications of the meal, so as to ensure the cost performance of the user.

However, it is difficult to standardize meal products, and small and medium-sized businesses may use worse raw materials in order to reduce costs, and the platform needs to increase control in the future.

In the early days of Pinhaofan's launch, due to low gross margins, merchants were not highly motivated to participate, but Meituan allowed the sales of merchants to accumulate to the sales of takeaway stores to help them increase the weight of traffic, and this strategy attracted many merchants to settle in. This year, Pinhao Fan has shifted from the sinking market to some first- and second-tier cities, and some brand chain restaurants have also launched special meals to join Pinhaofan.

In 2024, Meituan will adjust its strategy to stipulate that 90 days after merchants go online on Pinhaofan, data such as order sales and reviews will no longer be recorded in takeaway stores. People close to Meituan believe that the logic of the adjustment is to let the merchants who are mainly engaged in spelling rice increase sales and attract more merchants to make good meals.

In the third quarter of 2023, Meituan mentioned Pinhao Fan for the first time in its earnings report and conference call, and its management focused on cost-effective product selection and strengthened its strategy to meet consumers' needs for delivery efficiency. According to BOCOM International's analysis, the total number of orders for Pinhao Fan will reach 1.16 billion in 2023, accounting for 6% of Meituan's takeaway orders.

A number of takeaway businesses from Chengdu and Beijing said that in the past two years, their attitude towards Pinhao Fan has gone from explicit rejection to skepticism to having to follow up because consumers want to order more cost-effective takeaways.

After the merchant settles in and fights in the meal, it will maintain a low-profit operation for a long time.

For example, a fried chicken merchant in Chengdu costs 6.5 yuan per serving of his signature set meal "Fried Chicken + Coke", which used to cost 14 yuan in Meituan and Ele.me, and can earn 2-3 yuan per order excluding delivery fees and commissions. Now he supplies Pinhao for 7.5 yuan, earning only 1 yuan per order, and the platform sells it for 9.9 yuan.

Ele.me has also tried a similar low-cost takeaway product "Xiaobaotuan", but there has been no significant progress. A Ele.me person called Pinhao Rice "an additional question made by honor students", and he believes that there are two reasons why Ele.me failed to reproduce Pinhaofan: first, it lacks user data and cannot accurately define needs; Second, the market share is low and there is a lack of bargaining power for merchants.

People close to Meituan believe that Pinhao Fan will help cement Meituan's leadership position in the food delivery industry. Meituan currently has more than 70% of the market share, and doing a good job of low-cost food delivery can increase the frequency of consumption and reach new users, and it can also prevent other competitors from cutting into the food delivery market at low prices.

More, heavier business exploration

Over the past decade, the takeaway wars between Meituan and Ele.me have converted the majority of potential takeaway consumers in China online. If Meituan wants to continue to grow, it needs to let more people who used to order less takeout be, and those who didn't order takeout start ordering takeout. Low prices are one of the most effective options.

For reference, in 2020, CICC estimated the potential average daily order volume of Meituan Takeaway:

Assuming that the person with a monthly salary higher than the rider is a high-frequency user of food delivery, on the grounds that the user's time is more "valuable" than the rider, CICC calculated that the average monthly salary of Meituan riders in 2018 was 5,968 yuan, and Meituan dined an average of 1.2 people per order of food delivery, and users with a monthly salary of more than 4,973 yuan were more likely to become core users of food delivery.

Beijing Normal University in 2019 counted the distribution of per capita household income in China, of which 70 million people have a per capita monthly income of more than 5,000 yuan, taking into account the subsidy rate of about 21% of Meituan's takeaway, the monthly salary "threshold" of core takeaway users has been lowered to about 4,000 yuan, which corresponds to about 135 million people.

Assuming that 90% of them are core takeaway users and Meituan's takeaway market share is 70%, the target number of takeaways is expected to reach 85 million.

Based on the estimation that 85 million core people order 120 orders per year and 400 million non-core users order 30 orders per year, it is finally concluded that Meituan's average daily takeaway orders can reach 61 million.

Meituan's 2023 annual report shows that its average daily order volume of food delivery for the whole year is about 53 million, of which the average daily order volume in the third quarter is 59.42 million, which is close to CICC's estimate.

Meituan hopes to continue to grow, and in addition to launching low-cost takeaways, it is also expanding from food and beverage delivery to more categories.

In the past few years, Meituan has focused on instant retail flash sales and pharmaceuticals, both of which have brought new growth to Meituan.

In 2023, flash sales will average 7 million orders per day, and we understand that flash sales will target 9.8 million daily orders in 2024, a year-on-year increase of 40%; Meituan's peak daily order volume reached 5 million, ranking first in the field of instant retail and pharmaceutical instant retail, respectively.

In addition to connecting to more supermarkets and convenience stores, Meituan Flash Sale has developed a new supply - lightning warehouse, which only accepts online orders, has lower site selection costs, and can adjust the supply chain in a timely manner according to market demand to achieve lower selling prices of goods. In 2023, Meituan will open more than 6,000 lightning warehouses, and plans to add 2,000 in 2024. At present, the unit price of flash sales is 80 yuan, which is 1.6 times that of food takeaways.

We understand that Meituan is doing some heavier business exploration, and will intervene in the management of every meal taken out, sort out every aspect of the transaction, and help merchants improve the process to improve efficiency and reduce costs.

Meituan has made enough business attempts to break through the ceiling of the original in-store and rider business. Looking at it now, it is still the most effective to reduce the price.

Image source: Visual China

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