Meituan local life behind ＂high certainty＂ finds ＂low price＂ breakthrough point
In the past six months, Meituan has rebuilt its offensive and defensive systems, and has also entered a new narrative stage: its core local business has achieved steady development, and at the same time, the synergy effect between various businesses has begun to emerge, driving the first quarter’s performance.
As more traffic players enter the local life field, Meituan is also constantly breaking through and seeking new breakthrough points. This quarter, Meituan went deep into the industry value chain, focusing more on building long-term competitiveness and improving user experience rather than market share while promoting the development of merchants. Behind this, Meituan is constantly improving supply and iterating products to meet consumers’ demand for product diversity, high quality and high cost performance.
With the adjustment of the organizational structure, Meituan has been optimized in terms of quality service, operational efficiency, and reshaping price power, which has also allowed Meituan to achieve good results in the first quarter. On June 6, Meituan released its first-quarter financial report, revenue was 73.28 billion, an increase of 25% year-on-year. The core local business contributed 54.63 billion revenue, an increase of 27.4% year-on-year, accounting for 74.5% of total revenue.
Revenue and profit both grew, implementing the "retail + technology" strategy
At a time when the competition in the local life track was becoming more intense, Meituan, who participated in the battle, walked more calmly in this quarter. Overall, Meituan achieved solid growth and handed over a financial report of both revenue and profit growth.
From the surface, Meituan seized the opportunity of consumption recovery in 2024, effectively grasping the rebound of the industry on the basis of the continuous and steady growth of China’s local commercial industry. But a closer look at the reasons behind it shows that the first quarter is a low season, and theoretically the Spring Festival holiday will reduce transactions, but the financial report data shows that Meituan’s stability in the basic market can cope with the cyclical fluctuations caused by seasonal consumer demand and reduce the impact on performance.
Data show that in the first quarter of 2024, Meituan’s total revenue increased by 25% year-on-year to RMB 73.30 billion. Adjusted net profit increased by 36.4% year-on-year to RMB 7.50 billion. Under the situation of double growth in revenue and profit, both beat market expectations, which also shows that Meituan’s basic market remains solid.
In terms of user scale and merchant scale, Meituan has accelerated growth for four consecutive quarters. In the first quarter, Meituan’s platform users and merchants both accelerated growth and hit a record high. Driven by this, the annual transaction user transaction frequency (ATU) has also steadily increased to more than 50 times, and high-frequency transactions also mean that users’ stickiness to Meituan has gradually strengthened.
In the first quarter, Meituan continued to focus on the "Retail + Technology" strategy, investing 5 billion yuan to deeply cultivate the Chinese consumer market and local service fields, and continued to promote the efficiency of the retail industry through technological innovation.
In fact, the second half of the Internet should be driven not only by user requests, but also by core technologies. In order to build a user-centric moat, Meituan has been continuously exploring in the field of technology since the announcement of the "Retail + Technology" strategy in 2021. Whether it is in hardware, software or AI exploration, it shows Meituan’s determination to improve operational efficiency and optimize user experience.
"As a beneficiary of the growth of the industry, Meituan will continue to firmly fulfill the mission of’helping everyone eat better and live better ‘, actively lead the digital transformation and upgrading of the retail industry, and believe that in the future, there will be more synergy effects between various businesses, and continue to create greater value for all industry participants."
Core local business seeks innovation while maintaining stability, and business synergies amplify the effect
Driven by digitalization, Meituan’s core local business revenue increased by 27% year-on-year to 54.60 billion yuan, a figure that not only broke a historical record, but also demonstrated the strength of Meituan’s core moat.
In this wave of growth, Meituan’s takeaway business has contributed to it, continuing to maintain high-quality growth. Annual active users have increased to nearly 500 million, and the transaction frequency of medium and high-frequency users has further increased year-on-year. This huge user base has provided more impetus for Meituan, and the number of instant delivery orders on the platform has increased by 28% year-on-year to 5.46 billion in the quarter.
It is worth noting that the concept of "everything at home" that can be bought in anything has been continuously proven in Meituan’s performance in recent quarters. Under the rapid development, more and more food delivery users have been converted into Meituan flash sale users. In the first quarter, Meituan flash sale had an average daily order volume of 8.40 million, and the number of annual active users and transaction frequency achieved a high year-on-year growth.
In addition, in the first quarter, offline consumer demand continued to be strong, and Meituan’s wine and hospitality business also achieved solid growth. GTV grew by more than 60% year-on-year, and the number of annual transaction users increased by more than 37% year-on-year. The number of transaction users, merchants, and annual active merchants all hit record highs.
Behind the solid development of core local business is a series of adjustments made by Meituan at the beginning of this year. For example, one core adjustment is that the in-store and in-home business are no longer distinct and belong to the core local business sector. Wang Puzhong, senior vice-president of Meituan, is responsible for it.
Similar adjustments have promoted the synergy effect between various businesses. Taking the close bundling of home-to-home and in-store businesses as an example, diverting the huge traffic of home-to-home high frequency and high stickiness to the in-store business can motivate users to use the in-store wine and hotel business more frequently. From mid-May, Meituan membership benefits have been further expanded, expanding from the previous retail to in-store, hotel and travel businesses.
This means that users can be effectively promoted to achieve more cross-consumption, promoting the conversion of users from one business to another.
This program is an upgrade and innovation based on the instant delivery membership program that Meituan has accumulated over the past few years. Through the expansion of membership rights, Meituan will also strengthen cooperation with merchants in order to integrate and provide more products and services, including a large number of discounts. It is foreseeable that Meituan will improve future revenue growth and profitability through more synergy effects.
Mr. Wang said that all core local business departments would work together in this direction in the future to explore new approaches and create synergies. But he also stressed that "it is too early to talk about these". Meituan was still in the process of restructuring its organisation to better support and integrate core local business sectors, he said.
In the second half of local life, cost-effectiveness is a key word
According to iResearch data, the size of the local living market is expected to grow to 35.30 trillion yuan in 2025. QuestMobile report shows that the local living comprehensive service industry has a network penetration rate of 38.4% in April 2023. Overall, the local living market is a relatively high-frequency and stable consumption scene, and it is one of the few tracks where there is still a large growth space.
Looking around, local life has become a battleground for Internet Tech Giants. At a time when the competition in the local life track is heating up, multiple platforms have entered the local life track strongly. It is not difficult to find that in the second half of the Internet, many platforms have begun to use content as the carrier and low prices as the driving force, trying to break through in the track.
As a technology retail enterprise rooted in the local consumer sector, Meituan also responds to the evolution of consumer demand, actively adjusts business strategies, continuously iterates, improves products, increases marketing and supply, and provides consumers with more cost-effective choices. Layout around low-cost takeaway group buying is the direction Meituan has found after hundreds of battles. From the financial report, this area includes "good meal", "god hot" and "brand satellite store".
From 2020, Meituan began to pilot the business of Pin Haofan, which involves multiple people buying low-priced takeaway food. Originally positioned as a low-priced takeaway product for the lower-tier market, Pin Haofan has now entered most markets in the country, including first- and second-tier cities. By the first quarter of this year, the peak daily order volume of "Pin Haofan" reached a new high.
"God Snatch" was hatched by Meituan from the home scene, and penetrated low prices into all Meituan order scenes in the form of coupons in the live stream and at the independent entrance. It strengthens marketing solutions for merchants, and also conducts marketing activities on holidays to further stimulate consumer demand, thereby helping merchants acquire customers more efficiently.
In addition, Meituan launched a "brand satellite store" for well-known chain restaurant brands. In this model, merchants do not provide dine-in food, but only provide high-quality and cost-effective food delivery services, allowing merchants to operate at a more streamlined cost and provide consumers with lower prices under the premise of ensuring homogeneity. In the first quarter, Meituan brand satellite stores launched a 10,000-store rebate plan to help merchants and further enrich high-quality supply. As of the end of May this year, 45 brands have opened more than 560 brand satellite stores.
While seizing market opportunities, Meituan also actively innovates marketing methods to meet the diverse needs of consumers. Holiday consumption, family dinners, etc. have become the focus of the following scenarios. Through innovative means such as live broadcast and () joint promotion, Meituan not only meets the needs of local residents, but also covers the needs of tourists and returnees to find local stores and discounts, further deepening consumers’ mentality for Meituan to provide cost-effective supplies.
At present, "low price" has become the main theme of the Internet. In this context, Meituan’s excellent report card in the first quarter is not accidental, but the inevitable result of "retail + technology" long-term deep cultivation of the local life service market, insisting on user request-oriented, low price-oriented, and continuous integration of scenarios for innovation. In the future, Meituan will explore how to achieve better business synergy effect when expanding its basic market competitive advantage, which will also bring more imagination to Meituan.