Meituan, there is not much time left for optimization

Text|Blue Hole Business Yu Weilin.

Edit|Lisa Jiao.

There are sharp-eyed netizens who left a message, This is Liujiayu Beishan. That's right, this is Liujiayu Village, Zibo City, Shandong Province, located in a mountainous area with a permanent population of only 800 people.

The preferred flag is planted in a more remote sinking market, reflecting the difficulty of finding increments and the best competition. From the big factory in 2020 to the hot entry into the game, all the way to the present only Xingsheng Preferred regional players, as well as Meituan Preferred and Duoduo Grocery two national players, the community's ** to the mountains and countryside has not stopped.

But what the little Tang who went deep into the mountains to find increments did not know was that in Beijing, 500 kilometers away from Liujiayu, a storm was brewing at Meituan's headquarters.

Blue Hole Commercial learned from a number of people close to Meituan that Optimal has become the biggest controversy within the group, and everyone is arguing over one issue - should Meituan give up Preferential Selection? 」

Bulls believe that Meituan defines itself as a technology + retail company, and preferably the retail e-commerce market has only a few incremental markets left; The point of doubt of the bears is whether the needs of the community** are large enough to purchase power? Is it Meituan's next growth turbo, or is it a burden on the group's interests?

Such discussions spread to the entire company after the release of the third-quarter earnings report. In 2023, Optimal has undoubtedly become the biggest non-consensus within Meituan. And the year 2024 seems to be Meituan's last chance for optimization.

The capabilities that Meituan has accumulated in the past have not played their due strength on the battlefield of the community. Meituan seems to be in the position of Ele.me in the food delivery competition, a Meituan person said, At that time, Meituan invested less resources than Ele.me in all aspects, but we were not entangled, because we had our own methods, and we could get good results in the end. 」

Meituan, which did not regard Ele.me as an opponent in the takeaway battlefield, took Duoduo grocery shopping as a key object in the community ** battlefield. Behind the crossing of the river by feeling Duoduo grocery shopping, it is the failure of Meituan's style of play and the effectiveness of Pinduoduo's style of play.

Worryingly, however, even the latter has so far failed to turn an overall profit. After Meituan withdrew from the northwest region, Duoduo did not fully harvest its GMV, and 80% of its customers eventually returned to offline supermarkets and wet markets. This is a subtle indication of the dilemma of the business model of community** itself. And if the direction is wrong, no amount of investment will just go in the opposite direction?

Today, there is no good battle in China's Internet world, and it is unknown whether the community is a must for Meituan. But what can be seen is that more and more people who are fighting on the front line are waiting for the Meituan headquarters to sound the rallying cry for retreat.

Yang Shu (pseudonym), who has crossed the river by touching Duoduo to buy groceries and rotate through multiple businesses in Meituan, said that he has experienced a long period of confusion in Preferred, which is the most serious around 2021, and from the perspective of assessment, he looks more at short-term KPIs than long-term OKRs. The two years of being confused were spent in researching and buying groceries.

Duoduo has been teaching Meituan how to make a community** Zhang Fang (pseudonym), who has worked hard in the community** industry for many years, half-jokingly said, Without Pinduoduo rolling together in this market, Meituan would have withdrawn a long time ago. 」

In the eyes of the outside world, the flexible Duoduo is obviously more suitable for this low-margin business than Meituan, which attaches great importance to the user's feelings. Each of Meituan's returns is neatly placed in a small box, and it must be accounted for, but this is impossible in Duoduo Grocery Shopping, and the excess service is a cost, and it is the extreme cost compression of each chain that contributes to Duoduo's gross profit being higher than that of Meituan. Zhang Fang said.

According to QuestMobile data, the DAU of Meituan's main site in July 2023 is about 1 3 of Pinduoduo, and traditional e-commerce has more advantages than Meituan in terms of distribution traffic; The second is Pinduoduo, which started with fresh purchases, and has an obvious reusable ** chain system.

However, industry insiders believe that many of Meituan's key data lag behind Duoduo Buygrocery more because of its own organizational efficiency.

You rarely see a retail business that comes out of the centralized system, Wal-Mart is also a local purchase, Yang Shu said, compared with Pinduoduo's provincial autonomy, Meituan prefers to follow the management mode of headquarters management + regional partial autonomy + vertical line, which brings a decline in decision-making efficiency, which is considered fatal in the new business with strong competition.

According to a report by LatePost, in 2022, in order to study the question of where the Guangzhou central warehouse should be relocated to the most cost-effective, Meituan selected three teams of business people to study for half a year without a conclusion.

In contrast, Duoduo Grocery follows the flat structure of the main station, Li Qiang (pseudonym), who once worked in Duoduo Grocery Shopping, told us that Duoduo Grocery is a horse racing system internally, and the regional managers of 33 provinces are in a group, and Abu (Gu Huanhuan) is also there, pulling data every day, ranking behind, Abu will point the regional manager When will it be solved? 」

And when we asked Li Qiang how much decision-making power the front-line employees have in specific businesses, he said that depending on the situation, sometimes it is 100 percent.

Duoduo buys groceries and coordinates resources quickly, and the manager of this district reports to his superiors, and it can be solved on the same day, while Meituan needs at least three reports, Yang said. In fact, so far the preferred structure has not been aligned, for example, the sales side is based on the province, but the procurement side is based on the business volume, and Guangzhou Province, which has the largest business volume, has seven or eight teams.

The reduction of organizational efficiency has brought about an increase in decision-making costs, but also brought about an increase in operating costs, Meituan's preferred labor cost is about twice that of Duoduo, Li Qiang said, the cost of each link of Meituan is higher than Duoduo, and this statement has also been recognized by Meituan.

What's even more serious is that Meituan Optimal has failed to hand over decision-making power to those on the front line who hear the fire.

Although starting from 2023, Preferential has learned some of the experience of Duoduo Grocery in its structure, and is developing in the direction of decentralized management, so that each province and region will be responsible for its own profits and losses. Including the abolition of the customer experience department in April, the heads of the four departments of regional operation, logistics, commodity management, and business division were adjusted; In May, the provincial system was replaced by the regional system, and so on.

But the strange thing is that internally, although the cost of procurement, logistics, warehousing, and sales is lower than that of Duoduo Food, the overall data is still at least 8 percentage points lower than that of Meituan.

The local optimal does not represent the global optimum, Yang said, and there is a lot of loss in the middle, and the upstream will pass on the cost to the downstream, which is sometimes not visible. 」

The genetic loss of geographical advantages and the loss of human efficiency caused repeated swings in decision-making, which eventually led to Meituan's preferred, which entered the game a month earlier than Duoduo Grocery Shopping, did not hold the "time" and delayed the fighter.

According to a number of people familiar with the matter from Duoduo Grocery and Meituan Preferred, also in the initial stage of Kaicheng, Duoduo Maicai sent many veteran employees, and Li Qiang's province alone came to many employees with a work number of 100; On the other hand, Meituan Preferential opened an internal channel at the beginning, and the transfer of preferred jobs did not require the consent of the original superiors, which brought the result that there were not many elites who really joined from the beginning.

At the decision-making level, Meituan has rarely made a back-of-the-box decision on the preferred business. A typical example is the official launch of the Morning Delivery service starting in August 2023, which will advance the preferred pick-up time from 4 p.m. to 11 a.m.

It was revealed that this service was subsequently abandoned by the preferred part, and the high-tier cities were retained while the lower-tier cities were not assessed, and then changed back to the subsequently. I dare not say how much the growth of the business is advanced to 11 o'clock, but the decline in regional business that is not done well at 11 o'clock is very serious, people familiar with the matter said that although the timeliness is not the decisive factor in the community, but to a certain extent, it determines that the best will not lose market share.

Wang Xing did not regard Ele.me as an opponent at the time, and an industry source close to Meituan said that it was tactically valued but strategically despised if Meituan's products were at least a generation ahead of Ele.me at the time.

But in contrast, Meituan Optimal now studies and learns from Duoduo as a competitor.

Meituan's once proud business analysis system and front-line discovery of problems, and the way of thinking above the strategy are facing failure in the battlefield of the community. On the other hand, the model of letting the market test the results and let the frontline take on more day by day has been certified as effective and copied to overseas temu, including the tempered front-line managers.

There is not much time left for Preferred So far, Meituan has continued to invest in Preferred Business 35 years, and the internal believes that this huge investment may usher in a turning point in 2024.

A supplier revealed that in the process of communicating with preferred internal personnel, both parties have the same intuition, that is, 2024 will be a critical year, and 2024 will be feasible, and if it can't, the business will be yellow. 」

Preference certainly has its strategic value. The most obvious thing is that it has found an incision for the sinking market that has not been able to be attacked for a long time.

Don Jr.'s story at the beginning of the article is a typical case. According to public information, many consumers in the sinking market are because they have preferred Meituan, and none of Meituan's many businesses, including takeaway, in-store, taxi, etc., have sunk below the county level.

For Wang Xing, who is obsessed with the dream of retail e-commerce, it is urgent to find a new growth point that is big enough, and looking around the entire retail market, there is the e-commerce logistics that Ali and Pinduoduo have established in the past, and Meituan's own instant delivery empire, and the community was once regarded as the next new retail opportunity between the two forms.

Last year, Meituan's cross-border business, Keeta, successfully covered the whole of Hong Kong and was revealed to be about to enter overseas markets, but the industry believes that it has missed the opportunity in internationalization. Meituan wants to grow, and the community has become one of the few options left.

An unmentioned reason has also surfaced recently, and offense is also a form of defense.

In mid-December 2023, it was revealed that Duoduo Grocery had launched the investment promotion work of the local life to store business, and led by Zhao Jiazhen, co-CEO of Pinduoduo, although it announced a suspension two weeks later, it is unknown when it will restart, and Meituan's core hinterland may face a second Douyin attack at any time.

However, the controversy around preference has never been about growth, but about the balance between growth, profit and loss, and competitive dynamics.

According to Meituan's financial report, in the three years from 2020 to 2022, its new business segment has accumulated losses of 77.7 billion yuan, and among the three major businesses of Kuaimaiyou, Optimal is a well-deserved loss, with a single-quarter loss of 5.1 billion yuan in the past Q3 financial report. In return, the growth was less than expected, and the growth of the new business was even lower than that of the old business Meituan Takeaway, which is believed to have indirectly exacerbated the sharp drop in Meituan's stock price of more than 10% on the day after the earnings release.

Externally, since the second quarter of 2022, Meituan has lagged behind Duoduo in multiple dimensions such as average daily order volume, market share, and unit economic level.

Takeaway is the most commonly compared business internally, and this business, known as "bending down to pick up steel hammers", has tempered Meituan's extremely capable fulfillment system and built a strong moat.

In 2016, there were also questions about whether Meituan could make a profit from a 30-yuan takeaway order, but the business model proved to be viable.

Today's communities** are more marginally marginal than takeaways. Walking on thin ice, a community practitioner told Blue Hole Business that if you raise a dime a dozen in a can of Coke, the GMV will come down immediately.

But in terms of business model, there is no more similarity between community** and takeaway. Because there is no need for home delivery, the strong fulfillment system built by Meituan Takeaway does not bring more efficiency conversions, which is actually a new business from the ground up.

In this new business, Meituan's law of "coming from behind" seems to have failed. I often hear colleagues mention that the food delivery business will have a very clear strategy to convey to you, long-term, medium-term, and short-term, and everyone is familiar with supply, fulfillment, and traffic. Yang Shu said, I can't even say the barriers to the preferred business model. This can also be very dangerous.

This is the fuse of non-consensus, that is, the concern about the underlying logic of optimization: can optimization support Meituan's next growth?

The reality is that not to mention Meituan, which ranked second, even Duoduo Food, which ranked first, failed to achieve overall profitability. According to LatePost, a core management of Pinduoduo expressed dissatisfaction with the development of Duoduo in an internal meeting, which has always been a low-unit price and low-gross profit business under the huge consumption of resources.

According to the information obtained by Blue Hole Commercial, Meituan's core team believes that the preferred business has value qualitatively, but has not yet made a clear estimate of the input-output ratio quantitatively.

In June 2023, a late latepost report mentioned that Guo Wanhuai, vice president of Meituan, had said internally that for Meituan Preferred, the company would continue to invest in this business until it wins. Half a year later, this military order is no longer mentioned.

Since 2022, the preferred business logic and rhythm have indeed gradually become clear, and some good patterns have accumulated in the toolbox, Yang Shu said, but such a clear logic seems to come too late, and his view is the same as that of the above-mentioned suppliers, If 2024 is not even, this business may not be done, and it has reached the limit of the group's bearing. 」

Is community e-commerce a real proposition? If you do not win over yourself, but win over the enemy, and if you study the opponent thoroughly, you will create an opportunity to catch up from behind. But is the opponent you are facing just to buy more groceries?

I would venture to say that I think Meituan's preferred opponent should be a local supermarket, Yang Shu gave such an answer, and the data given by Li Qiang also confirmed this view.

Li Qiang said, It stands to reason that at that time, we were divided into two parts of the world, Meituan Preferred withdrew, and the GMV of Duoduo Grocery should have doubled, but in fact it did not, only a short-term increase of 20%, and then gradually went back. 」

Where have the people gone? Local supermarkets and wet markets.

On the one hand, Preferred and Duoduo do not coincide in terms of strong categories, Meituan has a higher demand for paper, chopsticks and rice noodles because of its local life background, Li Qiang said, and Duoduo users buy more small items, vegetables and alcoholic milk drinks. Another fact is that no matter which platform, their customers are extremely sensitive to **, and even the slightest fluctuation will have a direct impact on sales.

This is reminiscent of what Wang Huiwen said when talking about the boundaries of Meituan before, how Meituan chooses to do new business is to see the rigid needs of users, whether there are companies on the market to meet them, and if not, they can do it.

Jumping out of Meituan itself, is this a real market with rigid demand?

As summarized internally by Meituan, qualitatively valuable, industry insiders said that the community** has brought positive contributions to the source in terms of consumer goods in the C-end sinking market, as well as in the B-end centralized procurement, sales and payment settlement, and has also achieved efficiency improvement in the logistics system. However, as with the previous conclusions, there is still a lot of room for quantitative growth in this business.

A number of interviewees said that the preferred business No. 1 position is replaced by a more capable leader to lead the team, which may be tied with Duoduo Buying, but it is not an overall profit, because they cannot change the industry. 」

From the perspective of business model, the community is more suitable to be a regional leader. As mentioned in the interview of "China Entrepreneur", Xingsheng Preferred, which had rejected Meituan's $10 billion acquisition, has withdrawn from many provinces across the country in recent years and developed towards a small and beautiful regional e-commerce, only operating in Hunan, Hubei and Jiangxi provinces, but according to its relevant person in charge, Xingsheng has achieved profitability in its base camp Hunan in 2023.

From the perspective of the essence of the industry, the current business model operated by Meituan Optimal and Duoduo Grocery is no longer part of the community**, to be precise, it should be called community e-commerce.

The real community must meet two elements, one is pre-control, and the other is private domain sharing, Li Qiang said, but today, no matter how much grocery shopping or Meituan preferred, the head of the group has very little role in sharing, and the commission obtained is also decreasing year by year. 」

Before going to press, Blue Hole Commercial tried to buy groceries with Duoduo and placed an order for about 30 yuan, including fruits and mixed drinks. When picking up the goods, the head of the community told us, I will earn a few cents on your order, and I don't know how they calculate the commission.

The benefit of private domain sharing is that people's attention to the category and the trust of the head of the group will take precedence over the consideration of the group, an industry person in the Northeast told us that there is a regional community platform in Daqing Jiubai Street, which has always been profitable, and the most popular category is the rare local durian.

Yang Shu also mentioned that many of the leaders of Meituan's preferred group are reversing Meituan's wool, absorbing Meituan's users and making their own private domains. If you do well, you can also make a lot of money. 」

along these lines. Not long ago, Meituan launched the community**Tuanmaimai, which is benchmarked against Pinduoduo's Kuaituantuan, and the main body behind it is Meituan Preferred, which is seen as a new attempt to return to its growth route.

And the community e-commerce itself seems to have become a tasteless and discarded chicken rib product.

In the past three years, Meituan and Pinduoduo have worked together to reach 800 million users of this business, and in 2023, it will basically not rise, Li Qiang said, Everyone knows that 3 out of 100 people may buy here, fixed, will not become 2, will not become 4, the transaction has matured to this point. 」

Between positive profits and GMV, internet platforms can't give up scale. Their route is to scale up and amortize costs to reduce logistics costs and make the first chain form a centralized procurement advantage.

But in this war of attrition, both Meituan and Pinduoduo are facing the limit of what they can bear, and many industry insiders said that the core goal of Duoduo Grocery in 2024 is to pursue gross profits, to tie and go ashore. Whether it is to preferably enter the community** or buy more groceries and be active in local students, it is an inevitable change and breakthrough in the style of play.

Before talking about genes on the Internet, I didn't think so, and only after I made the optimization did I realize that genes are really too important, Yang Shu concluded.

In Yangshu's view, in the new business, whether it is Tob's Kuaidon or Meituan's grocery renamed Little Elephant Supermarket, it is significantly better than Meituan Optimal in terms of input-output ratio and growth trend, and it is also facing competitors that are far smaller than itself.

Clearly, time is running out for non-consensus preferred.