The largest takeaway subsidy war in history is raging. There was JD.com’s 10 billion subsidy before, and then Taobao flash sale portable 50 billion subsidy entered the game strongly, and Douyin, Pinduoduo, etc. were also eyeing it, and many forces gathered. As a veteran player in the industry, Meituan is facing the challenge of market share changes.
While fighting, learning at the same time
The hottest month of the year is usually July. In July this year, along with the scorching heat, there was also a continuous heating up takeaway subsidy war: after JD.com’s 10 billion subsidies, the market ushered in Taobao’s flash sale subsidy of 50 billion.
The largest takeaway subsidy war in history has begun. At a time when JD.com and Taobao are conducting a subsidized “arms race”, the outside world seems to be still waiting for Meituan to make a “big decision”.
However, in the 15 years since the founding of Meituan, Wang Xing is not a person who frequently makes major decisions.
As he said years ago: “I don’t like to make a lot of decisions all the time, I prefer to take a lot of information and then make a few big decisions.” ”
A Meituan insider told Snow Leopard Finance that since the end of April and the beginning of May, takeaway managers in some cities within Meituan have begun to be nervous, because if calculated from the rapidly expanding order volume of the industry, Meituan’s market share has declined significantly.
According to Snow Leopard Finance and Economics, since mid-June, Meituan’s average daily payment order for takeaway has remained above 90 million. In terms of order volume, Meituan’s share of major catering delivery platforms has dropped from more than 70% to less than 60%. Not because Meituan lost orders, but because its opponents grew faster.
“However, Meituan does not subsidize milk tea and coffee on a large scale, and milk coffee orders are ultra-low, resulting in ‘increasing orders without increasing revenue’, so from the perspective of transaction size (GMV), Meituan’s share is still close to 70%. A catering industry analyst close to Meituan said.
JD.com, which took the initiative to provoke the takeaway war, exceeded 25 million orders on catering takeaway days during the same period, which is equivalent to creating a new Ele.me volume.
On May 2, Taobao flash sale was officially launched, and in less than a month, the peak daily order peak was 40 million. On June 23, Taobao Flash Sale and Ele.me jointly announced that the daily order volume exceeded 60 million.
So far, this war from takeaway to instant retail has not only shown no signs of going out, but has intensified.
On July 2, Taobao Flash Sale announced that it would directly subsidize consumers and merchants by a total of 50 billion yuan within 12 months, which is higher than JD.com’s “10 billion subsidy”.
On July 5, Meituan announced information on the intranet that as of 22:54 on the same day, Meituan’s instant retail orders exceeded 120 million on the same day, of which more than 100 million catering orders had exceeded.
According to Snow Leopard Finance, Meituan’s subsidy strategy will be dynamically adjusted according to the situation of competitors, but this year it will add at least more than 10 billion yuan on the basis of last year, and if the competitive situation intensifies in the second half of the year, it will increase by 15 billion yuan to 20 billion yuan.
may passively burn 20 billion more
A Meituan insider told Snow Leopard Finance and Economics that some people currently believe that the battle will last at least one to two years. However, some Meituan insiders estimate that the end of this battle may be shorter than expected.
The biggest difference between Meituan and its competitors is that JD.com and Alibaba do not rely on the takeaway business to make money, but the local life business is Meituan’s main source of profit.
According to the financial report data, Meituan’s full-year operating profit in 2024 will be 36.8 billion yuan, excluding losses from new businesses, and the annual operating profit of core local businesses, including takeaway, in-store wine and tourism, and flash sales, will be 52.4 billion yuan. According to Goldman Sachs research reports, takeaway contributed about 32.5 billion yuan in profit, accounting for more than 60%.
Previously, Meituan had issued a profit warning on the Q1 earnings call, and it is expected that the revenue growth rate of core local businesses in Q2 this year will slow down, and operating profit will decline year-on-year.
According to Goldman Sachs’ previous estimates, in 2024, Meituan’s total takeaway subsidy will be about 30 billion yuan. As mentioned earlier, Meituan’s subsidies this year will increase by at least more than 10 billion yuan on the basis of last year, and if the competition intensifies in the second half of the year, it will increase by 15 billion yuan to 20 billion yuan. This means that Meituan’s subsidy expenditure on takeaway this year may reach 40 billion ~ 50 billion yuan.
Up to now, under the competition of the three companies, the total single-day peak of the market order volume has swelled to more than 180 million orders. Among these orders, tea and coffee accounted for most of the increments, but some changes in data were enough to attract Meituan’s attention.
Snow Leopard Finance and Economics learned that at present, the average unit price of JD.com’s foreign buyers has increased to more than 15 yuan, with an average loss of 8~9 yuan, and the proportion of tea and coffee has been less than 60%.
On the other hand, “Meituan underestimated the determination of its opponents in the early stage, and the biggest variable was the fate of Taobao flash sales.” A Meituan employee told Snow Leopard Finance and Economics.
On February 11 this year, JD.com officially announced the launch of catering merchant recruitment into takeaway. At that time, Meituan was relatively optimistic about winning this battle.
However, with the end of Taobao’s flash sale, the situation has evolved from an offensive and defensive battle between takeaway and instant retail to a tug-of-war for online retail incremental space.
Meituan insiders revealed that Meituan’s orders have not declined. JD.com is gradually reducing subsidies for coffee and tea, while Taobao is constantly increasing subsidies for tea and coffee. To a certain extent, Taobao took over some of the new market orders created by JD.com.
A sell-side analyst who has been following Meituan for a long time told Snow Leopard Finance that Meituan’s Q2 takeaway order growth rate is expected to be 8%~9% year-on-year. “But considering that June itself is the peak season and has the help of 618, combined with the data of April and May, Meituan’s Q2 order growth rate may be difficult to meet expectations.”
“At all costs”
Jiang Fan, who is in charge of Alibaba’s China e-commerce business group, said on the Q1 earnings call that Alibaba sees the possibility of combining far-field and near-field e-commerce, and will actively invest in the future to convert more Taobao users into instant retail users.
On June 23, Alibaba Group CEO Wu Yongming issued a letter to all employees, announcing the merger of Ele.me and Fliggy into Alibaba’s China e-commerce business group. Alibaba has comprehensively upgraded its strategy from an e-commerce platform to a large consumer platform. After the merger, Ele.me’s business decision-making and execution will focus on goals and unify with China’s e-commerce business group.
At this stage, Taobao flash sale has become Meituan’s number one rival.
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JD.com has also demonstrated its determination to invest firmly in the takeaway and instant retail business. Liu Qiangdong, founder of JD.com, said in a recent sharing that JD.com has invested a lot of money in making takeaways, but he thinks it is cost-effective. 40% of consumers who come to JD.com to buy catering takeaway will cross over to JD.com’s main site to buy e-commerce products, “the money we lose in takeaway is more cost-effective than going to Douyin and Tencent to buy traffic.”
This means that it is difficult to determine the winner of this war in a short period of time.
On the one hand, Meituan actively responds to the attacks of JD.com and Alibaba, and is also very interested in whether these two can truly run through the synergy between instant retail and e-commerce. There are two other major players who share the same mentality as Meituan: Douyin e-commerce and Pinduoduo.
According to Snow Leopard Finance and Economics, before Taobao flash sale and Ele.me entered the market, the potential opponents monitored by Meituan’s business team were Douyin and Pinduoduo, which were more important than JD.com.
Recently, Pinduoduo has taken action. According to LatePost, Duoduo has begun to test self-built commodity warehouses in first-tier cities such as Shanghai, and will launch instant delivery services as soon as August.
Another person close to Douyin told Snow Leopard Finance and Economics that Douyin e-commerce is combing through the pallets and paying close attention to the battle situation of instant retail. At the same time, Douyin Shengfu is applying for more resource support from the group and plans to increase subsidy investment in in-store business.
Between open and dark enemies and potential opportunities, they are put in front of Meituan.
This time, Meituan is faster and more resolute than ever in terms of reaction speed and determination to fight back.
In this year’s Q1 earnings call, Wang Xing said that Meituan will win the competition at all costs, and the original English text is Take whatever measure it takes to win the game. Wang Xing’s mention of “taking all necessary measures” clearly points to opposing low-price and low-quality involution competition.
In 2012, Mario Draghi, then president of the European Central Bank, made similar statements in a speech in London. At that time, the yields on government bonds of euro member countries soared, and the euro union was on the verge of survival. Draghi announced that within our mandate, the ECB is ready to do whatever it takes to preserve the euro. This means that the ECB will protect the euro at all costs.
This commitment, which reassured European investors and successfully lowered bond yields across the eurozone, saved the precarious euro union. “At all costs”, is considered the most powerful six words in the history of the ECB.
At present, Wang Xing needs to let this sentence bring the same confidence to the market.
