On December 19, 2023, Meituan's share price fell nearly 10% after the opening of the Hong Kong Stock Exchange, and its market capitalization fell below HK$500 billion, hitting a 52-week low. It was Meituan's biggest one-day drop since it went public in April 2021 and nearly half of its market capitalization. Meituan's market capitalization** has attracted a lot of attention from the market, what is the reason for Meituan's market performance to be so dismal? What does the future hold for Meituan?
Market capitalization**
Meituan's market capitalization** is mainly affected by the following aspects:
Regulatory pressures
On February 18, 2022, 14 departments including the state jointly issued a notice on "Several Policies on Promoting the Recovery of Difficult Industries in the Service Industry", which requires guiding Internet platform enterprises such as takeaway to further reduce the service fee standards of catering merchants and reduce the operating costs of relevant catering enterprises. This policy has directly affected Meituan's core revenue** – commissions, raising concerns about Meituan's profitability. The promulgation of this policy is also one of a series of regulatory measures imposed by the state on Internet platform enterprises, which aims to regulate the business conduct of Internet platform enterprises, protect fair competition in the market, and safeguard the legitimate rights and interests of consumers and practitioners. As a representative of an internet platform company, Meituan must comply with national regulatory requirements and adjust its business model to adapt to the new market environment.
Loss in performance
In 2021, Meituan suffered a full-year loss of more than 23.5 billion yuan, mainly due to the continuous expansion of new businesses. Meituan's new businesses, including retail businesses such as Meituan grocery shopping and Meituan flash sales, as well as ride-sharing services, have contributed to higher revenue growth, but have also brought huge losses. The loss of these new businesses is mainly due to Meituan's large-scale subsidies and investments in order to seize market share, which has led to an increase in costs and a decrease in profits. Meituan's new business is also facing stiff challenges from competitors such as Alibaba, Tencent, and Didi, and it needs to continuously improve the quality of its products and services to attract and retain users.
Growth slowed
Meituan's diversified business layout has not yet been perfected, and it still relies on the support of the food delivery business. However, the growth rate of the food delivery business has slowed down significantly, and in the fourth quarter of 2021, the transaction value of Meituan food delivery increased by 28% year-on-year8%, down from 34 in the previous quarter8%。The slowdown in the growth of the food delivery business is mainly due to the saturation of the market and the intensification of competition, which has led to a decline in the growth of users and the growth of orders. The slowdown in the growth of the food delivery business also reflects that Meituan has limited growth space in the local life service sector and needs to find more growth points.
In summary, Meituan's market capitalization** is a combination of multiple factors, and also reflects the challenges and opportunities faced by Internet platform companies in the current market environment.
The future of Meituan
Continue to optimize the food delivery business: The food delivery business is Meituan's core business and its most competitive business. Meituan should continue to optimize the user experience, service quality, efficiency, and safety of its food delivery business to maintain its leading position in the field of local life services. At the same time, Meituan should also actively respond to regulatory requirements, reasonably adjust the commission structure, protect the legitimate rights and interests of merchants and riders, and maintain a good social image. Meituan should also use its data and technology advantages to provide merchants and users with more value-added services, such as intelligent recommendation, precision marketing, data analysis, etc., to improve the profit margin and user stickiness of the food delivery business.
Accelerate the profitability of new businesses: Meituan's new businesses, including retail businesses such as Meituan grocery shopping and Meituan flash sales, as well as ride-sharing services, are all businesses that Meituan has invested in to expand user scenarios and increase user stickiness. Although these businesses have huge market potential, they also face fierce competition and high costs. Meituan should accelerate the profitability of these new businesses and maximize the scale and revenue of these new businesses by increasing user conversion rates, reducing operating costs, and enhancing brand recognition. For example, in Meituan's grocery shopping business, Meituan can cooperate with more local farmers and merchants to provide fresher, better and cheaper products to build its core competitiveness.
Expand more growth points: As an Internet platform company, Meituan cannot be satisfied with its existing business, but must continue to look for more growth points. Meituan has already ventured into areas such as hospitality, tourism, and finance, but the competition in these areas is also fierce, and Meituan needs to find its differentiation in these areas and provide more valuable services. In addition, Meituan can also explore more vertical fields, such as education, healthcare, culture, etc., and use the traffic and data advantages of its platform to provide users with more convenience and choice. Meituan can also learn from some successful cases abroad, such as Airbnb and Uber in the United States, to develop more innovative services to meet the diversified needs of users.
In short, Meituan's market value does not mean that it has no hope for the future, as long as Meituan can insist on innovation, continuously optimize its business, and expand its growth points, it is possible to achieve market value and return to the first echelon of Internet platform companies.