A new commission system for Meituan food delivery has lowered the platform’s cut of short-distance orders, but raised fees for long-distance, merchants told the leading food delivery platform.
Why it matters: Meituan has been criticized for charging excessive commissions to small merchants. The company is trying to ease public frustration and bring more transparency to the company’s operations amid a wider regulatory crackdown on Chinese tech firms.
- Since May, Meituan has moved away from a fixed commission fee to one that charges restaurants different rates based on factors including store exposure, IT services, delivery distance, order price, and delivery time.
- Meituan came under the spotlight of China’s antitrust crackdown in April, shortly after Alibaba was hit with a record-breaking $2.8 billion fine.
Details: Under the new system, merchants say, fees for orders within a three-kilometer delivery distance are lowered, but that they are paying more on longer-distance orders, according to a notice (in Chinese) published by the company after a meeting with merchants held May 20.
- Many merchants asked during the meeting why they have adapt to a new and complicated system rather than take a flat cut on commission rates, according to the notice.
- Meituan argued that the thins margins of food delivery would make lower commissions across the board unsustainable. “Structural adjustments for the fee system can help the entire food delivery ecosystem to develop in a more profitable and healthier direction,” the company wrote.
- Delivery costs represent around 83.1% of commission revenues, and Meituan records a profit of just RMB 0.28 ($0.04) per order, according to data from the company’s 2020 annual financial results.
- The company also wrote that it plans to expand its food delivery business development team by around 30% this year in order to better address the demand of merchants.
Context: In an open letter published April last year, the Guangdong Restaurant Association accused Meituan of exploiting merchants by charging excessive commission rates that “most restaurants can’t endure.”
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