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Deep Web ｜ From Hundred Regiments War, takeaway competition to present on all major platforms, how Meituan has gone through these 8 years？

　　Founded in 2010, Meituan finally knocked on the door of IPO after eight years. On June 22, Meituan submitted a listing application to the Hong Kong Stock Exchange. If the IPO is successful, Meituan will become the largest listed company in the O2O field in history.

　　According to the Meituan prospectus disclosed by the Hong Kong Stock Exchange today, the number of transactions completed by the company’s platform in 2017 exceeded 5.80 billion, and the transaction volume reached 357 billion yuan. The operating income from 2015 to 2017 was 4 billion yuan, 13 billion yuan and 33.90 billion yuan respectively, an increase of 223.2% and 161.2% respectively year-on-year, and the income increased by more than seven times in three years. Meituan’s adjusted net loss continued to narrow, from – 5.90 billion yuan in 2015 to – 5.40 billion yuan in 2016, and further narrowed to – 2.85 billion yuan in 2017, and the loss was halved within three years.

　　Among the many start-up companies in the O2O field, Meituan should be regarded as a lucky "outlier". From imitating Groupon’s group buying business earlier, to expanding its business scope with the Amazon model as a reference in the later stage, Meituan has been reclassified into the team of Internet Tech Giants.

　　Make another Meituan

　　Meituan’s most recent financing was in October 2017, when it received a $4 billion round of F financing led by Tencent, with a post-money valuation of $30 billion. If calculated at the valuation of $60 billion listed on the market, it means that Meituan’s valuation has doubled in less than a year.

　　In the past few years, Meituan has shown extremely strong ambitions in its field and has become a force to be reckoned with on China’s internet landscape.

　　Starting from group buying, but not ending with group buying. Meituan has its own logic and considerations, starting from a single group buying business and gradually expanding to local life service related fields including Internet takeout, online travel, fresh food e-commerce, online car-hailing, shared bicycles, etc.

　　2015 was an important watershed since Meituan was established. At that time, it completed the acquisition with Dianping, which enriched Dianping’s store-to-store service in addition to the original group buying and takeaway business. It was a year when Meituan focused on building a platform and an ecosystem. After winning the war in the era of group buying and O2O, Meituan began to open up a new battlefield.

　　The intensive organizational restructuring witnessed the expansion of Meituan’s size.

　　In 2015, Meituan established a total of four business groups, including the takeaway delivery business group, the hotel tourism business group, and the store business group, and established a wholly-owned subsidiary, Maoyan Culture Media Co., Ltd. (later spun off and acquired by Guangguang Media).

　　The latest adjustment is after the completion of 4 billion US dollars financing in December last year, Meituan will build a new store business group, large retail business group, hotel tourism business group and travel business unit four business systems, and establish Strategy and Investment platform.

　　"Looking to the future, the opportunities and challenges are great," said Wang Xing, Meituan’s chief executive, in an internal email at the time. The opportunity is that the new business will hopefully help Meituan achieve faster growth, but at the same time, the challenges from peer competitors should not be underestimated.

　　According to the prospectus, Meituan has maintained partnerships with approximately 339,200 hotels in China as of December 31, 2017. In 2017, the number of domestic hotel room nights booked on Meituan’s platform totaled about 205 million, an increase of 56% over 2016, and set a record for 1.57 million domestic hotel room nights in a single day.

　　Online domestic attractions and excursion package booking service, as of December 31, 2017, Meituan covers about 330 cities and about 16,500 attractions across the country. Meituan provides consumers with a convenient, safe and cheap way to buy national attractions and excursion packages. In 2017, Meituan sold approximately 97 million domestic attraction tickets.

　　In terms of numbers, Meituan’s wine travel business has ample confidence to fight against Ctrip, and it has also begun to attack Ctrip’s core business, high-star hotels.

　　Not only the wine travel industry. Since February last year, Meituan has been operating a low-key online car-hailing business in Nanjing. At 0:00 on March 21, 2018, Meituan took a taxi and officially landed in Shanghai. At about 22:00 that night, Meituan announced that Shanghai had completed the first day of breaking through 150,000 orders. Obviously, Meituan extended its competitive tentacles to the Internet travel giant Didi, and caused the latter to respond violently.

　　These later diversified businesses provided Meituan with sufficient foundation to enhance its own value.

　　Benchmarking Amazon, but more than that

　　While bringing innovation impetus to the industry, Meituan is also inevitably involved in multi-dimensional chaos.

　　This is not unrelated to the ultimate goal of Wang Xing and Meituan. A person close to Meituan’s senior management once revealed Wang Xing’s thinking to "Deep Web": Wang Xing’s strategic thinking and goal has always been to be a super platform for life services, and new businesses including taxi-hailing are in line with such strategic goals in his opinion. In this way, it can not only acquire more new traffic for the super platform by continuously launching new businesses, but also find more channels to monetize the huge users and traffic gathered by the super platform, so as to continuously enhance Meituan’s value and valuation.

　　Mr. Wang has mentioned Amazon on many occasions and it is often compared to the tech giant, but Meituan does not seem content to stop at the Chinese version of Amazon.

　　In an interview with The Information, a Silicon Valley technology news outlet, Mr. Wang said: "Users can buy a lot of things on Amazon or Taobao, but both are just e-commerce platforms for physical goods, while Meituan is an e-commerce platform for services." He added, "What kind of e-commerce platform can have millions or even billions of transactions?"

　　In fact, in the past year, 320 million users have made at least one purchase on Meituan. Meituan says that about 90% of user traffic comes from its own app, which greatly reduces the cost of users trying new services.

　　Meituan is not satisfied with this. It has bigger ambitions. Wang Xing believes that Meituan will serve the middle class 650 million China in the future, and smartphones are almost all ubiquitous among this group.

　　Among all Meituan’s businesses, high-frequency takeaway business is the core of the core, and Meituan’s "let everyone eat better and live better" just illustrates this point.

　　The prospectus disclosed that Meituan’s takeaway transaction volume in 2017 was 171 billion yuan, and Meituan’s transaction volume in 2017 reached 357 billion yuan, which means that the takeaway business accounted for 47.8% of Meituan’s overall transaction volume.

　　In May this year, Meituan Takeaway announced that it completed more than 20 million orders per day, becoming the first takeaway platform in the world to reach such a scale. Looking back at past data, Meituan Takeaway has reached 10 million daily orders in more than 3 years since its establishment, and it took just one year to break through 20 million daily orders.

　　Compete with the giants

　　While food delivery data is growing wildly, Meituan’s competitors in the food delivery market are also escalating.

　　Since the establishment of Meituan takeaway, the takeaway market has evolved a new pattern with new retail as the core. If it was a one-on-one showdown between Meituan and Ele.me before, then after Ali acquired Ele.me at the beginning of this year, Meituan needs to face the coordinated battle between Ele.me, Baidu takeaway, word-of-mouth and Ali.

　　In dealing with the relationship with Ali, Wang Xing is very firm, and he even publicly pointed out the dispute with Ali: "The reason why it sold our old shares last year was to interfere with our financing. If you are not optimistic about this company, you can just sell it out. We have already helped them find a buyer. But he refused to sell it out. He must keep some, maybe in order to continue to cause us some trouble in the future."

　　According to iResearch, Meituan was the world’s largest food delivery service provider in 2017, with its market share in China increasing from 31.7% in 2015 to 56% in 2017 and 59.1% in Quarter 1 of 2018.

　　The difference is that Meituan is heading in a completely different direction from Ele.me, with diverse coverage centering on local services.

　　On the one hand, there is Ele.me, the earliest player in the takeaway market, and on the other hand, Meituan, who is backed by Tencent and the late mover, will eventually become a player in the harvest market. It is still a question in the short term. However, it is foreseeable that Ali, who is up the ante layout of new retail, and Meituan, who has just established a new retail business group, are bound to ignite the war again.

　　In the new travel war, Meitu also started a listing race with Didi. According to the "Hong Kong Economic Daily" report, Didi will start listing as soon as the second half of this year, initially decided to settle in Hong Kong, China, and consider different listing structures, not excluding the listing of the same shares and different rights. It is expected that the market value of Didi will reach 70 billion – 80 billion US dollars when it goes public.

　　Obviously, Meituan has taken the starting line one step earlier than Didi, but it remains doubtful whether it can shake up Didi, the transportation giant.

　　potential threat

　　Wang Xing’s goal of unlimited boundaries has allowed Meituan to step into some of the most expensive battlefields of the Chinese internet in a short period of time. But when it tries to raise more capital from domestic investors to expand its business, it has few options.

　　The Information reported in early June this year that Wang Xing had approached SoftBank for a capital injection, but was unsuccessful. Meituan had also intended to raise $3 billion from the Private Offering Fund at a valuation of $40 billion. Meituan later denied the news.

　　Meituan’s earnings pressure cannot be ignored. Although other businesses other than food delivery have achieved overall profitability, with the competition in the food delivery market "three into two" and the competition with Didi in the travel field, Meituan still needs a lot of capital investment.

　　According to the prospectus, Meituan’s adjusted net loss fell from 5.90 billion yuan in 2015 to 5.40 billion yuan in 2016, and fell to 2.85 billion yuan in 2017, halving the loss within three years.

　　In addition, the travel business is also the source of Meituan’s cost. Although it has experienced many close battles in the group buying and takeaway markets and achieved good results, Meituan is undoubtedly a new recruit in the travel industry, and there are still many variables in whether it can achieve a turnaround against the wind. Investment subsidies are obviously the best way to quickly gain market share.

　　According to the "deep net", Meituan taxi in Nanjing on the line when the single subsidy is about 20 yuan, if according to its announced in December 2017 the daily order volume exceeds 100,000 single calculation, its subsidy in Nanjing only one day reached 2 million.

　　36Kr also revealed the power of Meituan taxi investment, including Beijing and other cities on the line of taxi business, the company prepared 1 billion dollars (about 6.30 billion yuan), and not capped.

　　Meituan acquired Mobike in April for a total price of $3.70 billion, including 65% cash, 35% Meituan stock, and assumed Mobike’s debt between $500 million – $1 billion.

　　In an interview with foreign media, Wang Xing said, "In the past few years, we have been working hard to ensure that the company is always ready to go public at any time." In addition to financial considerations, another impetus for Meituan’s listing came from the many investors behind it. Data show that Meituan has raised a total of 8.30 billion US dollars since its establishment, and investors have reached the moment to reap the rewards.

　　In the eight years since its establishment, Meituan has experienced many variables in the market, and it can be said that it has come to this day through thorns. However, going public is obviously not the end of Meituan, and a competition with giants has really begun.

Meituan will turn from profit to loss in 2021, with higher expenses such as rider costs and R & D expenses

In the post-epidemic era, Meituan (3690.HK) revenue has risen steadily. On March 25, Meituan released the fourth quarter and full year results of 2021. In 2021, the company’s revenue was 179.128 billion yuan (RMB, the same below), an increase of 56% year-on-year; the company lost 23.536 billion yuan during the year and 4.708 billion yuan in profit in the same period last year; the company’s adjusted net loss was 15.572 billion yuan, and the profit in the same period last year was 3.121 billion yuan.

Food and beverage takeaway is an important revenue business of Meituan, and the operating profit of this business in 2021 is 6.175 billion yuan; however, the policy requirements of "reasonable reduction of merchant service fees" and the corporate responsibility to improve the protection of riders’ rights and interests have also increased Meituan’s operating costs. The restaurant and wine travel business is a major source of profit for Meituan. In 2021, the operating profit of this business is 14.20 billion yuan.

However, the operating profits of the above two major businesses cannot offset the losses caused by the expansion of Meituan’s new business. Meituan’s new business, which mainly focuses on community group buying, shared travel, and instant shopping, has an operating loss of 38.40 billion yuan in 2021. At the same time, Meituan also continues to increase the company’s R & D investment, and the R & D expenditure in 2021 will reach 16.70 billion yuan.

2021 was an extraordinary year for Meituan, with the company’s performance turning from profit to loss. At the same time, Meituan’s anti-monopoly penalty was also settled and fined 3.442 billion yuan. Affected by policies and the general environment, Meituan’s share price declined as a whole in 2021, peaking at HK $460/share that year, and then fell below HK $300/share twice in July and November of that year. On December 31, 2021, it closed at HK $225.4/share. As of the close on March 25, Meituan closed at HK $135/share, down 8.16%.

"In 2021, despite the impact of the epidemic, we will still overcome difficulties and strive to provide hundreds of millions of consumers with reliable and convenient life services, help merchants use digital means to expand online operations, and help more entrepreneurs and employees achieve stable income," said Wang Xing, CEO of Meituan. "Meituan will unswervingly fulfill its platform responsibilities, unswervingly increase investment in technology, unswervingly continue to expand its business, and focus on the’retail + technology ‘strategy to deepen the Chinese market and create more value for merchants, users, riders and other ecological partners."

The profit of catering takeaway operation is 6.175 billion yuan, which enhances the protection of riders’ rights and interests

Under the pressure of repeated epidemics, Meituan’s food and beverage takeaway business continued to grow. The number of annual transaction users and the per capita transaction frequency in 2021 reached a record high. The peak of single-day orders broke through 50 million in August 2021 and reached a new high in December of that year. The number of transactions in the whole year reached 14.40 billion, an increase of 41.6% year-on-year.

In 2021, Meituan’s catering takeaway business will see significant growth in categories such as nighttime, milk tea, salad and light food. Supply growth effectively drove an increase in orders from medium and high-frequency users. Therefore, the number of annual transaction users of catering takeaway increased by 13% year-on-year, and the average transaction frequency of annual transaction users increased by 25% year-on-year.

In 2021, Meituan’s catering takeaway business transaction amount was 702.10 billion yuan, an increase of 43.6% year-on-year; revenue was 96.30 billion yuan, an increase of 45.3% year-on-year. Operating profit increased from 2.833 billion yuan in 2020 to 6.175 billion yuan in 2021, while operating profit margin increased from 4.3% to 6.4%.

The topic of takeaway merchant commissions has attracted much attention. In 2021, Meituan takeaway’s commission income (technical service fee) obtained through merchants was 28.547 billion yuan, 18.503 billion yuan in the same period of the previous year, an increase of 54.3% year-on-year; compared with the company’s catering takeaway transaction amount in 2021, the takeaway platform commission rate was about 4.1%.

However, the 2021 government work report proposed to "guide platform enterprises to reasonably reduce merchant service fees." Subsequently, the National Development and Reform Commission and other departments also issued the "Implementation Plan for Accelerating the Cultivation of New Consumption", proposing to guide online platforms such as takeout to rationally optimize the use of small and medium-sized enterprises. Merchants and individuals use the platform to operate commissions, commissions and other expenses, and use technology to empower operators to reduce costs and increase efficiency within the platform.

In 2021, Meituan takeaway and other platforms took the initiative to optimize the platform charging model and implement a pilot "rate transparency". At the same time, the protection of rider rights and interests is also a major responsibility of Meituan. In July of that year, Meituan established a takeaway rider service department. In 2021, Meituan held 136 rider talks.

The financial report shows that the vast majority of Meituan takeaway’s total revenue is rider delivery costs. In 2021, there are about 5.27 million riders who earn income on the Meituan platform. Meituan takeaway rider delivery costs were 68.183 billion, an increase of 38.3% year-on-year, accounting for 71% of Meituan’s total takeaway revenue.

In addition, the breakdown data of the financial report shows that in 2021, Meituan’s food and beverage distribution service revenue collected from merchants and users was 54.204 billion yuan, while the annual rider delivery cost was 68.183 billion yuan. The above data shows that Meituan’s annual direct subsidy for riders cost nearly 14 billion yuan.

The operating profit of the hotel is 14.20 billion yuan, and the operating loss of the new business is 38.40 billion yuan

In the post-epidemic era, Meituan’s store, hotel and tourism business has achieved steady growth. In 2021, Meituan’s store, hotel and tourism business revenue was 32.50 billion yuan, an increase of 53.1% year-on-year; operating profit increased from 8.181 billion yuan in 2020 to 14.193 billion yuan in 2021, while operating profit margin increased from 38.5% to 43.3%.

According to the financial report, Meituan’s 2021 store-to-store business transactions, transaction amounts and annual active merchants all hit record highs. Meituan has strengthened its penetration into lower-tier cities across the country. Categories such as leisure entertainment, fitness, elderly care services, medical care and pet services are growing strongly; while categories such as manual activities, recording studios, light and shadow interactive halls, and stress relief experience halls have become new consumer trends.

In terms of hotels and tourism, the number of hotel room nights in China will increase by 34.5% in 2021. In addition, Meituan has consolidated its competitive advantage in the low-star hotel sector, diverting offline users to online platforms to help more hotel merchants operate digitally. In the high-star hotel sector, high-star hotel room nights will account for more than 16.5% in 2021.

In 2021, Meituan continued to expand its investment in new businesses, especially commodity retail. In 2021, Meituan’s new business and other business revenue was 50.30 billion yuan, an increase of 84.4% year-on-year. The operating loss expanded from 10.90 billion yuan in 2020 to 38.40 billion yuan in 2021, and the operating loss ratio increased by 36.6 percentage points year-on-year.

Community group buying is the exploration direction of Meituan’s new business. In the second half of 2020, community group buying began a new round of industry competition. At that time, Internet companies such as Didi, Meituan, Pinduoduo, JD.com and others invested in the ante one after another. However, with the development of policies and markets, the community group buying industry will experience ups and downs in 2021. Orange Heart is preferred to face business shrinkage, and Jingxi is also reported to reduce staff and withdraw from the city.

At present, Meituan Preferred is relatively stable. According to the financial report, Meituan Preferred has achieved healthy growth thanks to clear policy guidance and a good market competition environment. The "next day pick-up" three-tier warehouse distribution logistics network system has covered most communities and rural areas in 30 provinces across the country. In the future, strict compliance with regulatory regulations will be the top priority, and we will continue to focus on balanced and high-quality growth.

Meituan flash sale exceeded 6.30 million in single-day orders in December 2021. On the supply side, it has expanded its product categories and established cooperation with more high-quality local stores. Flowers, supermarkets and convenience stores continue to maintain a high growth momentum. At the beginning of this year, 24-hour drug delivery service was launched. In 2021, Meituan market users and transaction amounts continue to increase.

High revenue and high investment, R & D expenses of 16.70 billion yuan

High revenue and high expenditure are the characteristics of Meituan’s performance in 2021. The company’s revenue hit a record high, and the operating profit turned from profit to loss, which also laid the foundation for future sustainable development to a certain extent. According to the financial report, Meituan’s R & D expenditure increased from 10.90 billion yuan in 2020 to 16.70 billion yuan in 2021, an increase of 53.1% year-on-year. The increase in employee welfare expenses was mainly due to business expansion.

On the other hand, Meituan has also increased investment in unmanned logistics research and development. Meituan drone has been in normal trial operation in Shenzhen for nearly a year, and has covered more than 8,000 households so far, completing 30,000 orders for real users. Meituan City Low-altitude Logistics Operation Demonstration Center has landed in Shanghai and will gradually cover the "3 km 15 minutes" low-altitude smart logistics network in East China.

In addition, Meituan automatic delivery has launched a low-speed instant delivery solution for outdoor scenes. As of December 2021, Meituan automatic delivery vehicle service has expanded to 20 communities in Shunyi District, Beijing, delivering nearly 190,000 orders, autonomous driving mileage over 700,000 kilometers, and daily delivery of more than 1,000 orders.

At the same time, the company’s overall operating costs also increased significantly. The cost of sales increased by 69.2% from 80.70 billion yuan in 2020 to 136.70 billion yuan in 2021, while the percentage of revenue increased by 6.0 percentage points to 76.3% year-on-year from 70.3%. The main reason is the increase in food delivery related costs, as well as the development and exploration of retail business and other new businesses.

In addition, the company’s sales and marketing expenses increased by 94.8% from $20.90 billion in 2020 to $40.70 billion in 2021, while the percentage of revenue increased by 4.5 percentage points year-on-year from 18.2% to 22.7%. Mainly due to the increase in promotion, advertising and user incentive expenses and employee benefits expenses. In addition, more employees were recruited to support the rapid growth of new businesses.

"Meituan’s development is closely related to the general environment of China’s economy, and it is also inseparable from the joint efforts of small and medium-sized businesses and related workers such as riders. We will continue to take high-quality and sustainable development as the company’s goal, and strive to drive consumption and industry transformation and upgrading, so that all relevant parties can benefit from it." Chen Shaohui, Meituan CFO, said: "Meituan will make long-term investment around the strategy of’retail + technology ‘, and through innovation and technology-driven, help more entrepreneurs and employees share the dividends of the digital economy."

Beijing News Shell Financial Reporter, Chen Weicheng, Editor, Song Yuting, Proofreader, Lu Qian

How ＂fickle＂ is the Great Wall Gun？ N kinds of modifications, as needed!

How many transformations can a pickup truck have? The answer of the Great Wall Gun is, N kinds! At the fiery Guangzhou International Auto Show, the trailer version of the off-road pickup truck, the rescue gun and the travel gun of the Great Wall Gun showed the audience how "fickle" the Great Wall Gun was. In fact, this is not the first time that the Great Wall Gun has "transformed". The rich modification scheme makes the ever-changing Great Wall Gun more attractive.