Food-Delivery Tycoon Adds $2.4 Billion To Fortune By Beating Out Alibaba

In the battle for China’s massive food-delivery market, Alibaba is in the unfamiliar position of falling behind its rival. The behemoth that’s feeding more of the country’s hundreds of millions of hungry customers is Meituan Dianping.
Led by billionaire founder Wang Xing, Beijing-based Meituan recently solidified its share of the country’s $84 billion food delivery market at a record 65%, well ahead of Alibaba’s Ele.me at 27.4%, according to consultancy and data provider Trustdata. The company’s Hong Kong-listed shares have soared 80% this year after it reported a surprise profit in the second quarter.
The stock defied the broader market decline in the city’s benchmark Hang Seng Index, which tumbled 9% since July amid ongoing anti-government protests in the city over the now suspended extradition bill. Wang, who derives the bulk of his fortune from his stake in Meituan, saw his net worth increase from $3.8 billion in the beginning of 2019 to $6.2 billion.
“A lot of people are now positive on Meituan, because they have proven that there is money to be made in the food delivery business,” says Wang Xiaoyan, a Shanghai-based analyst at 86 Research. “There will be fluctuations in its profitability margin, but it won’t bleed as much money as before.”
The company’s results were attributed to its ability to provide better services and the effectiveness of its subsidy strategy. It’s been more aggressive than Alibaba in inking exclusive delivery partnerships with restaurants, while boosting delivery time and reducing costs by matching order data and grouping more deliveries in one trip.
This has allowed users to stick to Meituan’s platform, even though Alibaba has tried to convince them to switch by doling out hundreds of millions of dollars in coupons and meal subsidies. David Dai, a Hong Kong-based analyst at Bernstein Research, says Meituan’s user loyalty is much stronger than Alibaba had initially expected.
“People may say that they are price sensitive, but not everyone would open two apps and compare prices before ordering a meal,” he says. “Meituan has more restaurants, more users and higher delivery efficiency, and this has formed a positive cycle.”

Now, in the face of reduced competition, Meituan is seeking to generate revenue from advertising on its platform, which boasts of 422.6 million annual active users. Restaurants can now pay to place banner ads, or have their offers displayed higher up in users’ search results.
More On Forbes: Alibaba Buys NetEase’s Kaola In $2 Billion Deal, Caixin Say
Although Meituan’s market leadership will be hard to displace, Alibaba has already signaled that it won’t give up easily. Analysts say the e-commerce giant views food delivery as essential to its wider strategy, because it’s a high-frequency service that can be embedded in the Alibaba ecosystem to promote complimentary services like online payments. To chip away its rival’s dominance, Alibaba has been focusing on lower-tier cities, which are Meituan’s traditional strongholds.
“If Ele.me is determined to launch another price war, then Meituan has no choice but to follow up,” says Steven Zhu, a Shanghai-based analyst at research firm Pacific Epoch.
And this may well be the case towards year end, when the e-commerce giant launches its Singles Day shopping bonanza and uses discounts to attract shoppers. What’s more, Meituan may also have to pay more to couriers at that time, because cold weather in the winter season usually leads to increased delivery fees. Still, analysts say it has enough room for growth, which could lead to sustained margin improvements.
“Profitability improvement will come more from revenue growth instead of cost reductions,” says Bernstein Research’s Dai. “They can boost their take rate and improve advertising, and the space for revenue growth is still pretty big.”

Yue Wang

I am a Beijing-based writer covering China’s technology sector. I contribute to Forbes, and previously I freelanced for SCMP and Nikkei. Prior to Beijing, I spent six months as an intern at TIME magazine’s Hong Kong office. I am a graduate of the Medill School of Journalism, Northwestern University. Email: ywywyuewang@gmail.com Twitter: @yueyueyuewang
Source: Food-Delivery Tycoon Adds $2.4 Billion To Fortune By Beating Out Alibaba

My life changed when I discovered food delivery in China – mainly, I got a bit lazier, but it’s just so easier and there’s a ton of tasty western and Chinese food available. Some of the food isn’t even possible to get unless you order it through one of China’s food delivery apps. Right now, there are 2 that are very popular: ele.me and Mei Tuan Wai Mai. I prefer Meituan Waimai, and I breakdown how to use it in this video. I’ll show you how to setup a profile, how to order food, and I’ll even attempt to follow the delivery driver from the restaurant to my home. This is the video you need to watch if you want to learn how to get food delivered in China. Mei Tuan Wai Mai can be downloaded here: http://waimai.meituan.com/mobile/down… Once installed, follow the instructions in the video to setup a profile that includes your address for quick delivery. Tune in Tuesdays and Thursdays at around 3PM EST for new videos, including my series Chengdu: City of Gastronomy (https://goo.gl/kSSxw2), where I randomly pick a card that has a Sichuan dish on it and I hit the city to find it and try it. There’s so much good food in Chengdu, Asia’s first ever city to be named a UNESCO City of Gastronomy. —/// ABOUT ME \\\— I live in China and am constantly exploring and traveling the country and other parts of Asia. Subscribe to my channel to watch more adventures… and to learn a bit about food, cultures, and more. If you’re looking for more videos about living in China: https://goo.gl/e2kSVz —————————————————————————————– \\ Subscribe: http://bit.ly/2e8BCZv \\ Website: http://itchyfeetonthecheap.com/ \\ Email: itchyfeetonthecheap@gmail.com \\ Instagram: http://instagram.com/itchyfeetonthecheap \\ Facebook: https://www.facebook.com/itchyfeetont… \\ Twitter: https://twitter.com/itchyfeetcheap —————————————————————————————– MUSIC Music by Andrew Rothschild Youtube: https://www.youtube.com/channel/UCgkz… Bandcamp: https://andrewrothschild.bandcamp.com/ Itunes: https://itunes.apple.com/us/artist/an… Instagram: https://www.instagram.com/arothsmusic/

Category
Travel & Events

    Category: