Meituan is planning to merge its e-commerce business units and the group buying unit known as Meituan Select, Chinese media outlet Caijing reported on Wednesday.
Why it matters: Facing fierce competition in its core business, Meituan is combining two relatively weaker and similar units to concentrate on new growth points. In April, Meituan Select suspended operations in four loss-making western Chinese provinces and Beijing as the community group-buy sector continues to consolidate.
Details: Meituan Select and Meituan’s e-commerce unit both started operations in 2020. The two units are fighting an uphill battle to compete with more established players — Select competes with Pinduoduo, while the e-commerce unit faces giants like Alibaba and JD. The two businesses share some supply chains, the report said, and the merger could result in better collaboration.
- Meituan’s e-commerce offering is relatively weak compared to the company’s core life services and food delivery offerings. The unit brings in a small number of users, orders, and merchants, and hasn’t made much of a splash in the industry, according to Caijing’s report, citing several unnamed Meituan employees.
- Since 2021, Meituan has been expanding into “new initiatives,” including the group-buy unit Meituan Select, but so far the new units have been losing money. According to the company’s 2021 financial report, its aggregated operating profit of RMB 20.3 billion ($ 3.0 billion) from core businesses like food delivery and in-store, hotel and travel segments was completely offset by a loss of RMB 38.4 billion from these new initiatives.
- The company declined to comment when reached by TechNode on Friday.
Context: Meituan faces heated competition in its core business of offering on-demand life services. Moreover, Meituan’s food delivery business –one of its main income sources, accounting for more than half of total revenue – has a low operating margin, less than one-sixth the size of its in-store, hotel and travel business.
- In local life services, ByteDance’s Douyin has teamed up with Alibaba’s Ele.me to explore more scenarios, according to a statement released last Thursday. ByteDance has high hopes for its local life services, reportedly setting an annual target of RMB 50 billion for the business this year.