With core businesses in food delivery, hotel booking, and various ticketing services, Meituan Dianping is predominantly a consumer platform in the eyes of Chinese users. However, the Chinese super app is expanding beyond its core strengths and trying to build a foothold with business customers in a bid to find new sources of growth.
With a massive user base of 435.8 million, the company’s shift to address the needs of vendors in its ecosystem is a logical next step. It is an area that the company has significant expertise in, has thousands of potential customers already within its ecosystem, and completes a business loop for its core revenue stream.
Branching into various fronts quickly to test out emerging business opportunities, or what Meituan refers to as “borderless competition,” has long been an expansion tactic. This approach has helped the firm to grow beyond just a Groupon and Yelp copycat over the past decade.
Meituan’s early enterprise tech forays
Starting off in 2010 as China’s Groupon, Meituan gained momentum after expanding to on-demand food delivery in 2013, though it faced competition from Ele.me and Baidu Waimai. The app merged with then 12-year-old rival Dianping in 2015 to form the lifestyle mega platform.
In 2016, Wang Xing, Meitan’s founder known for his shrewdness, proposed that the company, the online-to-offline (O2O) industry, and China was entering a new growth stage, or the second-half era, to use Wang’s term.
After its 2018 IPO, the company doubled down on the shift to enterprise-facing businesses. As part of its food+platform structural reshuffle in October 2018, the firm upgraded the B2B (business-to-business) unit Kuailv unit it had created in 2016 to a business department.
In addition to self-developed services, the company has been beefing up its enterprise offerings through investment over the past few years.
- March 2018: Meituan and its investor Tencent led a $200 million D round in B2B online liquor selling startup Yijiupi.
- May 2018: Meituan acquired PassionTec, a SaaS solution provider for restaurants after investing in the company in 2016.
- October 2018: The firm rolled out micro-loan services for small and medium-sized enterprises (SMEs).
Company co-founder and vice president Wang Huiwen told Chinese media in September 2018 that it would focus on high-yield businesses—for example, IT solutions for merchants and supply chain solutions for enterprises—after the 2018 IPO.
Wang said in 2018 that China’s internet had reached the end of growth driven by demographic dividend, but the benefits brought by improving efficiency using the internet as a tool was just beginning.
To aid the transition, Meituan pledged in January 2019 to invest RMB 11 billion to help merchants upgrade their operations and drive the growth of China’s “delivery economy,” a term referring to the country’s on-demand services boom.
Core enterprise tech business lines
China’s business-to-business market is expected to worth RMB 2.59 trillion (around $375.13 billion) in 2019, up from RMB 2.14 trillion in 2018, according to data from iResearch.
Thanks to its robust consumer-facing business, Meituan is in a good position to make the shift with annual active merchants of 5.9 million as of Sep. 30.
Meituan’s cloud-based ERP systems include software solutions that integrate table booking, digital menus, order placement, customer wait time management, takeout and delivery orders, multiple payment methods, as well as inventory, payroll, and customer relationship management into one system.
To complement its software, a variety of hardware with its ERP systems pre-installed are on offer, including touch screen monitors, cash drawers, cash registers, barcode scanners, and others.
While market domination may help the food delivery giant to with first-time clients, the key will be to retain customers by adding value. We talked to a number of stores and restaurants, most of which listed a number of complaints when using services either Meituan or its rival Ele.me.
April Gourmet is a Beijing-based convenience store and supermarket chain that sells imported goods, groceries, and fresh produce. The business uses both Ele.me and Meituan’s food delivery service, but a larger percentage of its orders come from Ele.me, according to the operator.
“We received a complaint from a customer that chocolate popsicles arrived damaged. It was clear to us that it happened on the way to the customer. We called the platform afterward but received no assistance from them whatsoever,” the store manager told TechNode, recalling one incident. “Whenever there’s an issue, platforms like Ele.me and Meituan are often very slow to respond.”
Cai, 28, operator of a Shanghai branch of fruit chain Fresh Fruit, echoed April Gourmet’s complaint. “Compared with offline buyers who could choose the products before they buy, online buyers, who usually place orders through delivery platforms, have more complaints. The platforms are responding slowly to addressing disputes.” he said.
In addition, Cai says the store makes very little money from orders processed by the online platforms due to rising commission. “For us, online orders are a means to boost turnover rather than generating profits.”
In Beijing, another fruit store chain, Lehuo Fruit, stopped using Meituan’s delivery service because it wasn’t worth the money, according to the store owner. “If a customer is dissatisfied with the product and would like to return it, the delivery platform doesn’t handle the process for us,” the owner added. This further complicates the return process and might cause more damage to the products, he said. “That’s why we don’t use it anymore.”
Meituan is nevertheless pressing ahead with constructing its infrastructure for merchant digitalization. It significantly increased registered capital for cloud computing subsidiaries from RMB 10 million to RMB 87 million last year.In an effort to move up the supply chain, Meituan is providing business-to-business services to the restaurant industry through its app Kuailv. The app allows restaurants to order raw materials, food ingredients, and disposable restaurant supplies from a large variety of vendors, and provides delivery services. The service is now operates in 42 cities and more than 300 districts and counties, Chinese media has reported.
In order to address loan unavailability common to SMEs, Meituan obtained a micro-loan license in November 2016 for its credit arm Meituan Xiaodai to provide financing to users and merchants on the platform without the need for collateral. The company evaluates the borrower’s creditworthiness by leveraging big data using user profile and behavioral history.