Meituan labor strikes underscore profitability pressures

2 min read
Image credit: Zhenhua Youshiceping

Chinese food delivery giant Meituan Dianping faces pushback as its delivery fleet staged a series of strikes in several major cities across the country this past week in protest of recently lowered wages.

A picture featuring a row of scooters bearing signs reading “Stop taking orders” parked on a university campus in Jinan, the capital of eastern Shandong province, was posted Sunday by Weibo user, Zhenhua Youshiceping. At least two other strikes by delivery fleets contracted to Meituan have taken place since last week – one in Linyi, a city in the southern part of Shandong province, and another in Dongguan, a manufacturing hub in southern Guangdong province, according to CLB’s Strike Map.

The conflict has become physical at times, according to local media, with confrontations breaking out between striking workers and merchants who continue to use the platform as well as striking workers sabotaging deliveries for peers that continue to take orders from the platform.

Meituan Dianping deliverymen complain that rates for single journeys have been lowered and delivery times are shorter than transit times calculated on popular map apps. These differences leave little profit once overhead costs like gas, scooter repairs, and phone bills are accounted for.

Financial pressures have been mounting for Meituan Dianping to turn a profit after recording a net loss of RMB 4.2 billion ($626 million) during the first half of 2018, and the company appears to be redoubling money-making efforts. In addition to lowering pay for its delivery fleet, the company hiked its commission fees earlier this year, resulting in complaints from many small and mid-sized merchants in particular.

Rising commission rates add pressure on smaller merchants that are already struggling amid a cooling economy, said Zhu Congyang, a manager of a hotpot restaurant in Shanghai.

Friction between on-demand platforms and delivery workers have been a recurring issue in the industry. The majority of the protests have been directed against Meituan Dianping, which has seen the majority of delivery fleet protests beginning last year. However, competitors Ele.me and Didi, which is scaling back its food delivery service after launching last year, are not immune to the problem.

Help may be on the way, however, as the government begins introducing regulations to protect working conditions for deliverymen. Beijing’s municipal government released a set of policies on Wednesday prodding companies to provide formal employment contracts for gig employees that include health insurance, housing, and better job security.

Following rumors of a restructuring at the end of October in which Dianping, which merged with Meituan in 2015, was portrayed as losing a power struggle between the two, the company  stated that the restructuring was merely an “internal upgrade of its User Platform,” not a sign of internal discord or financial woes.