87

A Decade of Meituan-Dianping’s
Development:
What Makes a Brand Stands Out from The Crowd?1

Guanxiu Lin, Shunshun Pang, Shuhan Wang, & Te-feng Chen2

Digitalization era offers a precious opportunity to the e-commerce industry, while it
also manifests strong competition between continuously emerging enterprises. Meituan-
Dianping is undoubtedly one of the fastest-growing IT companies in China. Within just
eight years, it has grown into the largest local life service e-commerce platform,
expanding its business margin from the initial group purchase to the “to C” (i.e. “to
Customer”) service in the areas of catering, entertainment, travel, traffic, retail and
related vertical “to B” (i.e. “to Business”) service. To explore the success secrets and
distinct Asian-business features for an Asian company to stand out from the crowd, this
study analyses Meituan-Dianping’s historical and current development strategies, which
results in its current leading position in China’s e-commerce market. Through this study,
we expect to provide applicable example for e-commerce startups, about the
ingredients of how to accurately positioning company’s profile and segmenting the
readily-saturated market. Meanwhile, the history of Meituan provides insights about the
future development trend of China’s O2O market, which we believe can served as a
reference for the companies under similar industry.
The structure of the paper includes four major parts. The first part (Section.1-3)
examines the transformation history and emphasizes the key turning points of Meituan-
Dianping. The strategies and subsequent performance in each kick points are
analyzed, including the competition at the beginning stage, the diversification during the
transition stage and the product upgrading at the booming stage. The second part
(Section.4) explores the success factors that Meituan-Dianping possessed in tough
times under the devastating competition period, and examines how Meituan-Dianping
exploited threats into opportunities during later stages. The comparison between Asian
characteristics and Western styles are analyzed in the context of the markets they
subordinate. The third part (Section.5) looks into the market conditions categorized in
terms of the macroenvironment and microenvironment, using PEST model and Porter’s
5-forces model respectively. In the last part (Section.6-7), this paper generates
recommendations for Meituan-Dianping’s future development, based on the previous
external environment analysis, aiming at enhancing Meituan-Dianping’s existing
competitive advantages.

Keywords: Meituan-Dianping, Digital Generation, Corporate Structure,

Fierce Competition, Developing Strategie

1
This case was selected as an award-winning case study at the World Asian Business Case
Competition (WACC) 2019.
2
Guanxiu Lin is a student, The Hong Kong Polytechnic University (16096495d@connect.polyu.hk)
Shunshun Pang is a student, The Hong Kong Polytechnic University (16097531d@connect.polyu.hk)
Shuhan Wang is a student, The Hong Kong Polytechnic University (shuhan.wang@connect.polyu.hk)
Chen Te-feng is Assistant Professor, School of Accounting & Finance, The Hong Kong Polytechnic
University (tfchen@polyu.edu.hk)

ACADEMY OF ASIAN BUSINESS REVIEW ISSN: 2384-3454 / 20 / $10.00

Vol. 6, No. 1. JUNE 2020 ⓒ Academy of Asian Business 2020
88 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

The e-commerce industry is now experiencing rapid development with

various opportunities created by technological progress in online payment
infrastructure. The boundaries of traditional industries become fuzzy, different
businesses start to integrate, and the “super app” becomes a clear mission for many
e-commerce enterprises. The new business pattern has permeated into wider
business areas, which provides both extensive marketplaces and violent
competition for the involved enterprises, and eventually more and more Asian
enterprises are undergoing the pains of transformation.
This case study analyzes how Meituan-Dianping (“Meituan” hereinafter) stands
out from numerous competitors at China’s early-stage of digitalization and
eventually become a leading brand in the industry. This case study expects to serve
as an applicable example for similar Asian enterprises, and further contributes to
the prosperous of the Asian O2O market. Meanwhile, under the digitalization era,
this study especially targets those startups that are struggling to earn an edge
throughout the readily-saturated market, hoping to provide them the inspirations
like how to segment the market, as well as determine the developing pace by
accurate positioning. The uniqueness of this case study is that it is not solely
focuses on the business model to evaluate the Meituan’s corporate structure or
competitive advantages. Instead, this paper leverages more on elaborating
Meituan’s history and key turning points to emphasize how Meituan stand-out
under several strategic phrases, trying to link Meituan’s past and current strategies
with the corresponding turning points. We believe this approach could illustrate a
more detailed and comprehensive picture for audience instead of only using
academic analysis. Meanwhile, from a narrowly defined perspective, this study
also provides career insights for younger generation from Wang Xing, the founder
of Meituan, about the tactical planning ability and the sobriety to standing away
from “being stereotype”.
By firstly introducing the background and history of the company, this paper
discusses Meituan’s countermeasures at each major turning point and listed out
several key success factors that make it become the market leader nowadays. In
later sections, the macro and microenvironment are analyzed based on the PEST
and Porter’s 5-force model, serving as the foundation for the future
recommendations generated in the last part. It is important to note at last that since
the market is always dynamic, the recommendations are tentative and subject to
modifications regarding the market movements.
 Meituan-Dianping 89

Background of Meituan-Dianping

Meituan was originally two separate firms (i.e. “Meituan” and “Dianping”).
Meituan was founded in 2010 by Wang Xing in Beijing, and Dianping was
founded in 2003 by Zhang Tao in Shanghai. Both Meituan and Dianping provided
location-based services (LBS) initially, while Meituan focused on group buying
business, and Dianping mainly provided restaurant reviews services (DeGennaro,
2019). Regarding the popularity, Meituan was most well-known in second-tier and
third-tier cities in China, Dianping was more popular in first-tier cities (Perez,
2018).
After Meituan and Dianping strategically merged in 2015, Meituan-Dianping
(“Meituan”) was established as a rival to Groupon and Yelp as a one-stop e-
commerce service platform. The company’s primary business includes food
delivery, in-store hotel and travel, and new business such as hailing, shared-bicycle,
and fresh food (Meituan-Dianping, 2017). Apps such as Meituan (group
buying/coupons), Dazhong Dianping (restaurant reviewing), Meituan Waimai
(food delivery) and Maoyan (movie tickets) are offered to users for different
functions. After the merger, the company has undergone a revolutionary process of
reform, expansion, and soar.

Figure 1
Financial Performance of Meituan
90 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

Figure 2
Revenue Components of Meituan

Meituan is currently one of the world’s largest e-commerce service platforms of

local service, obtaining the first place among the global service e-commerce
companies (Meituan-Dianping, 2017). It is now serving more than 320 million
annual active buyers and more than 4 million annual active local merchants across
2800 cities in China (Meituan-Dianping, 2018).

Figure 3
Active Merchant and Users Trend of Meituan
 Meituan-Dianping 91

With the mission: “To help people eat better, live better”, Meituan strategically
focuses on the “Food plus Platform” to build a multi-level technology service
platform, covering the whole value chain in the foodservice industry in people’s
daily lives. The series of reforms are deemed attributable to Meituan’s current
prosperity: within a decade, Meituan evolved from a food service provider to a
multi-category e-commerce service platform and expanded from big cities to small
towns across China, creating a real “O2O” business pattern with nationwide
coverage. Until 2018, Meituan has occupied 59.1% market share in China’s e-
commerce market, with the figure being expected to see a continuous increase in
the following years (Meituan-Dianping, 2017).

Figure 4
Meituan’s Business Evolution, from 2003-2019
92 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

History and Key Turning Points

Though Meituan-Dianping is constituted of two separate companies which

superior in different sectors before merging, the history in the following section
leverage more on Meituan before their merging, as its commercial strategies are
considered more universally-applicable and inspirational (Ye, 2019). 3 key turning
points have been identified for Meituan: Automatic Refund strategic adopted in
2011, by which Meituan affirmed its enterprise reputation through sacrificing parts
of the vested benefits, thus got rid of drastic competition with homogenous
companies; Followed by the T-type strategy in 2013, Meituan obtained its tactical
advantages by reinforcing the competitiveness in catering industry, and further
expanded its business coverage into horizontal complementary industries;
Correspondingly, the third key turning point occurred in 2017, in which Meituan
developed its own “ecosystem” by fully utilizing the T-type strategy, and prompted
the Super App to further enlarge its consumer basis. The details of each turning
point are summarized in below chart (Figure.5).

Figure 5
Meituan’s Key Turning Points, from 2003-2019

Automatic Refund: Meituan’s Survival from the Blooming Industry

(2010-2011)
In 2010, Zhongguancun, Beijing, Wang Xing founded Meituan in a 120-square-
meter private house, and in the following months, it expanded rapidly and landed
in more than ten cities including Shanghai, Wuhan, and Xi'an. 2010 is not only a
start point for Meituan, it is also an important point for China. The digitalization
process in that year progressed rapidly: Taking advantage of this golden time,
various group-buying websites were established, through which a cruel cyberwar
 Meituan-Dianping 93

between these companies, called “Thousand Regiments War” today, was gaining
momentum silently.
At the beginning of 2011, the group-buying market ushered in a blowout. In that
year, China’s group-buying websites once exceeded 5,000, not only the start-ups
but many IT giants such as Sina, Netease, Sohu, and Baidu that had previously
survived from the Internet bubble also attended the group-buying battlefield. To
cope with the violent competition, Meituan held the first city manager meeting. At
that meeting, Wang Xing defines Meituan as a “market”, while users and
merchants as “customers”. He also denoted that users are always the top priority of
Meituan, and customers' benefit is always higher than Meituan’s interests. This
meeting laid the “customers first” idea of Meituan, which proved to be one of the
important factors for its later strategy of “Automatic Refund Scheme”.
The Automatic Refund scheme was launch on March 4, 2011. Under this scheme,
all the Groupon coupon purchased in Meituan will be fully refunded when expired.
This announcement is very unexpected and was considered unwise by many
contenders at that time: As the group-buying market is saturated and gaining very
thin margin, expired coupon was the major income for many enterprises, and
Meituan’s move made it “threw” 10 million CNY at that moment. However, the
final outcome actually reversed the situation. Meituan reached over 250 million
monthly sales at the end of the year and ranked as the top enterprise in the market.
The “automatic refund scheme” was a hazardous but audacious move for
Meituan, because it posed great risks in the deposit capital and free cash flows of a
newly established company. However, this diametrically opposite approach worked
as the perfect substitution for mass advertising, achieved a long-term and solid
word-of-mouth reputation. On the contrary, advertising or massive business
expansion may be effective in the short run, but once the capital became
insufficient, the business will turn into a disaster. Therefore, surrendering profits to
a proper degree for customer relation helped Meituan survived during the initial
fierce competition stage, and rewarded it a long-term reputation for the carry-on
businesses in the transforming stage.

T-type Strategy: Meituan Sailing Towards Diversity (2012-2015)

After the Spring Festival of 2013, the upsurge of group-buying gradually cooled
down, many enterprises exited the market due to the capital chain ruptured. The
number of Chinese group-buying websites has dropped from the 5,058 peaks to
943, which means almost 80% of them have been deprecated after the competition.
After this “Thousand Regiments War”, Meituan established a solid footing in the
field of life services and gradually become a leading power.
94 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

On December 23, 2013, Wang Xing interpreted the values of the Meituan. He re-
emphasized the importance of "customer-centric", put it at the top layer of
Meituan’s value pyramid. Followed is the second layer, “embrace change”. At that
time, Wang Xing commented,
“If we do not embrace change, we are hard to be customer-centric”.

This comment is of great time value. In 2013, not only the online group-buying
industry was changing, but the entire Internet is undergoing the mass reform: At
that year, mobile payment standard was introduced to China’s market, and the trial
of the three-network integration was finished. The 4G license was a starting point,
signaling the coming “mobile wave” that hit the surface. Numerous IT big names
turn into the mobile payment field: Alibaba strategically invested 294 million USD
to Gaode, Tencent injected 448 million USD into Sogou, Baidu former president Li
Mingyuan bet 1.9 billion USD to buy 91 Wireless, a wireless internet company,
pushing Baidu's mobile transformation.
Meituan quickly adjusts its strategic focuses at this time: In February 2013,
Meituan’s mobile phone orders accounted for only 35% of the transaction volume,
and Wang Xing set the target for this data at 50%. The focuses on mobile payment
brought striking effects: according to Meituan’s annual report of 2013, the daily
trading volume exceeded 100 million CNY, which brought sufficient cash flow to
this IT company at that time.
At the same time, Meituan started forming its T-type strategy (Figure.6). T-type
strategy refers to the business integration and expansion under the mobile era: The
“vertical group” is the complete set of food-service industrial chain, which includes
food-delivery, food supply chain, restaurant ERP system and catering service,
while “horizontal group” involves various life-service functions, such as hotel
booking, films, spot ticks and education. The development in mobile payments
attribute to the business expansion of Meituan, as more and more users are turning
to mobile phones, and an integrated application is urgently needed.
After two years of preparing, the T-type strategy was formally implemented in
early 2015, the time when the O2O business pattern started heated in China.
According to <2015 O2O Industry Report>, Meituan ranked the first in China’s
O2O application coverage, showing by a 17.1% market coverage. To further
expand the business coverage, in October 2015, Meituan and Dianping jointly
issued a statement, announcing the establishment of strategic cooperation and
merged into Meituan-Dianping.
 Meituan-Dianping 95

Figure 6
Demonstration of T-type strategy

The mobilization and T-type strategy in this period offered Meituan a valuable
chance to stretch into a bigger market scope. After a period of T-type strategy,
Meituan expanded its business to more than 100 cities across the country, which
subsequently led to a larger and more comprehensive management team. To
maintain a healthy corporate culture, Meituan adopted flexible hierarchical
management structure, and Wang Xing tried to exchange opinions face-to-face
with the principal management staffs parodically, he also emphasized the
“customer-centric” concept once again in one employee meeting, stressing that this
corporate value will never be outdated in Meituan. This corporate value is of great
importance for Meituan’s current success, which significance will be further
discussed in Section.4.

“Food Plus Platform”:

Striving Towards “Super App” (2016-Present)

After the initial development of T-strategy in 2015, Meituan reflected and

restructured its service range, closed down several unprofitable businesses, such as
O2O door-to-door service due to the low transaction volume and meager margins.
96 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

At this time, Meituan reformulated its future direction by setting the business
coverage “starts from eating”. Wang Xing stated that:

“The strategically business decision is a matter of “What” and “How”. “What” refers to the mission
of the company, ‘Eat Better, Live Better’. We need to start from the consumers’ needs, and consider
participating in the issues related to eating and lives.”

Following this principle, Meituan continuously adjusts its corporate structure. In

late 2015, it reclassified the existing business into 5 main business areas, and
further reorganized it in early 2017 to “4 LBS groups”: Shop, Home, Travel and
Transportation.
This is also the time when Meituan started massive expansion: On February
2018, Meituan implemented its own taxi business, which cut the 30% market share
of the existing major player, Didi Chuxing, in Shanghai city; In March 2018, the
Meituan Hotel had total orders of 22.7 million rooms in a single month, surpassing
the sum of the big names under this field: Ctrip, Qunar and Tongcheng Yilong. In
the first quarter of 2018, the total number of orders of Meituan Hotel reached 57.7
million CNY, ranking the first in the industry; On July 2018, the Meituan opened a
Fresh food test shop, which was operated for less than one year and was fully
upgraded to “Small Elephant Fresh Food”.
The attempt in “Food plus platform” resulted in a huge success: At the end of
2018, Meituan has 3.57 hundred million users, and it had established a robust
distribution network based on the food-delivery service. Supported by group-
buying and delivery business that had already become the pioneer in the market,
Meituan has strong competitive advantages with regards to the consumer loyalty to
pursue an integrated “Super App” ecosystem in the coming stage.

Secrets of Stand Out from The Crowd:

Success Factors

Favorable Market Climate and Appropriate Entrance Time

The digital generation provided a precious opportunity for e-commerce
platforms. Above all, the Online to Offline (O2O) business pattern become
irresistible under the digitalization trend in China around 2010, which brings larger
user streams and new high-frequency transaction patterns. The soaring rental and
operational expenses added additional barriers to physical stores, yelling for a new
 Meituan-Dianping 97

business model that highlighted “dynamic” and “flexibility”. Meituan, along with a
crowd of other e-commerce platforms, first entered China’s O2O market and got
the reward of huge consumer flows, and gradually cultivated new purchasing
behaviors for the coming generation.
Nevertheless, “good timing” is not enough for Meituan’s current success. The
previous section already talked about the fierce competition resulted from the
favorable market climate in 2010, which to some extent breeds Meituan’s first
standing-out strategy of “automatic refund scheme” that mentioned in first key
turning point. The following sections will further discuss Meituan’s developing
strategies and missions to figure out its core competitive advantages that make it
stand out from the crowd.

From Edge to Center: Unique Development Strategies

During the mass competition period from 2010 to 2011, which is the first key
turning point of Meituan, it wisely selected peripheral cities to expand the early-
stage business. Different from competitors who tried to insinuate as many business
areas as possible, Meituan had a distinctive strategy of only entering 95 cities in
China in 2011, compared with an average number of 150~300 cities of other
competitors. Though didn’t display a definite pattern in selecting the business areas,
Meituan did reveal its preference in choosing middle- or small-scale cities rather
than metropolis in China, and the users from the second-tier cities or below
occupied 80% of Meituan’s user pools (Figure.7).

Figure 7
Distribution of Meituan’s Users

(Source: Trustdata, 2018)

98 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

The underneath rationale is that it is almost impossible to monopolize in a

center city, while a preemptive position in small-scale city implies monopoly. In
practice, Meituan listed out the volumes of the preselected cities, and ranked them
after a trade-off which involves advertising, management, operation costs and
expected market shares, etc. It later selected the higher-ranking cities as core
focuses and gave up the lower-ranked ones. The reason behind is that the lower-
ranking cities still require continuous capital and human resources inputs, which
the overall returns cannot meet the end-meet. With the unique development
strategies at the expanding stage, Meituan not only avoided severe conflicts with
homogenous companies, but also escaped from the trap of investing a large amount
of capital in advertising and marketing with only meager returns (He & Huang,
2013).
In a broader term, China’s high population density also contributes to the
success of these factors. This argument could be extended to the continental
perspective: It is indicated in Figure.8 that eastern countries generally have higher
population density compared with western ones, which implies that the general
demands will be higher regarding the daily necessity. This population feature
coincides with Meituan’s strategy to select the peripheral cities first, since even
small-scale cities would have the potential to yield sufficient demands.
Figure 8
Population World Density Map, 2019

(Source: Wikipedia)
 Meituan-Dianping 99

Most Robust Distribution Network

A real-time distribution network greatly improves Meituan’s efficiency. In 2013,
which is the second key turning period, Meituan ushered the important decision to
enter the food delivery industry. The catering industry is fragmented in China, and
the average domestic rent pressure is much higher than that of Europe and the
United States, coupled with the large gap between urban and rural areas and
between the rich and the poor, the perennial existence of large low-income class
has made the use of cheap manpower errands to ease the sale of expensive rents
(HuanYing International, 2018). Thus, food delivery has always been an important
part of the Chinese catering industry, along with the rapid spread of mobile
terminals, the take-out O2O market was broken out.
At the same time, JD, SF Express, “Four Tong One Da” (i.e. YTO Express, STO
Express, BEST Express and Yunda Express) have established a distribution
network that can deliver goods within 24 hours (Wang, 2018). Standing on the
shoulders of giants, Meituan has built the world's largest real-time distribution
network which is countered in hours in the fierce food delivery competition in
China. The dedicated rider runs the main operation of the network, and part-time
riders are also hired to supplement the busy hours. The number of daily active
distribution riders increased from approximately 14,000 to 172,000 in the fourth
quarter of 2015 to 2016 (HuanYing International, 2018). In the fourth quarter of
2017, Meituan’s total riders had reached 531,000. In terms of market share,
Meituan’s food delivery business accounted for 32%, 47%, and 56% for the time
period from 2015 to 2017 respectively, and rose to 59% in the first quarter of 2018,
holding the top spot in the field of food delivery. As a result, Meituan has increased
its efficiency and was able to expand its business in the eat, entertainment, live, and
traffic fields based on its real-time distribution network and stand out in the SAAS
war.

Solid User Basis Results in Prominent Matthew Effects

Meituan’s solid consumer basis generates a benign business model. The
interaction between Meituan’s huge consumer basis and good reputation lead to its
oligopoly position, and Matthew effects become prominence in this context:
“For to every one who has will more be given, and he will have abundance; but from
him who has not, even what he has will be taken away.
– Matthew 25:29 RSV”
As a readily-established company that had already obtained over 50% of the
online food delivery market shares in China (Trustdata, 2018), Meituan effectively
form a beneficial circulation between merchants and consumers: The existing
100 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

consumer basis attracts more merchants under myriad industries, which in return
absorb more consumers due to the “versatile” of service functions. Meanwhile, a
huge consumer basis also contributes a lot of valuable resources in this big-data era,
by which Meituan could facilitate the decision-making process through related
technologies.

High Consumer Loyalty of Applications Shows Extending Benefits.

Meituan has shown prominent performance in both consumer retention rate and
consumer stickiness in the food delivery sector (the sector which contributes to the
largest user basis of Meituan), compared with two major competitors in China,
Ele.me and Baidu delivery (Trustdata, 2018). The superiority of Meituan’s product
to ensure the “new-to-service” customer to become the repeated customer. Though
the food delivery sector only contributes minor parts to the operating income due to
its meager margins, it is still considered as an important element to Meituan’s
success. Food sector is as the “primary source” for Meituan to acquire new users, a
high consumer loyalty of certain function should have a positive correlation with
the usage of other functions provided by Meituan, due to the inherited reputation,
habit and trust of consumers, and a “good value” is expected under high loyalty
(Bolton, Kannan & Bramlett, 2000). With this higher customer loyalty can Meituan
further diverse the existing consumer to other service segment, which resonates
with Meituan’s second key turning points of applying T-type strategy.

Figure 9
Comparison of Consumer Retention Rate and Stickiness

(Source: Trustdata, 2018)

Focus on Users’ Experience: A Worthy Long-Term Investment

Corresponding to section 4.4, the emphasis on consumer experience contributes
to Meituan’s high user stickiness. Meituan’s practice on improving consumer
experience includes various aspects: Firstly, Meituan is one of the few companies
 Meituan-Dianping 101

that implement the “automatic refund scheme”, which was regarded as the main
source of income for the group-on industry. Meanwhile, Meituan offered
allowances for relative higher-end merchants who rarely cooperate with group-on
business at the early phase, such as Starbucks and Haagen-Dazs, to attract and
retain consumers that have different purchasing levels. Secondly, Meituan has high
standard on its application design, which has both strict requirements on the user-
interactive-interface and user-generated-content (UGC). Lastly, Meituan adopts
advanced technologies to reduce response time. It adopts several techniques to
determine the consumer’s instantaneous needs and automatically generates
recommendations through AI. According to Sun Yuan, the vice president of
Meituan, average 76% of service requests are accepted online in 2018, and 80% of
them are solved by AI (Zhao, 2019).
In return, a good user experience results in higher user stickiness, and
consequently more frequent transactions. According to Ling and Tam (2018), the
longer a user stays in Meituan’s platform, the more transactions it makes per year
(Figure.10). The increase in transaction frequency partially attributes to the high-
quality service and broadening the array of functions that focus on mass-market. In
short, Meituan seizes the market shares in the first round by surrendering parts of
its profits in both merchant-cooperation and technology-development aspects,
which is considered as an advisable strategy to maintain long-term growth at the
expense of short-term profits.
Figure 10
Users Transaction Frequency of Meituan

(Source: Bloomberg, 2018)

102 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

Accurate Market Positioning: Expanding Business Under Rational

Trade-offs
In 2009, after three failed startups, Wang Xing established Meituan with his own
“Four Row Three Column” theory to help find the pyramid of profit model
(Figure.11). In 2013, Meituan concluded “T-type strategy”, which helped the
company to expand its business margin in profitable markets such as hotel
reservations and food delivery.
After the market positioning and competition analysis, Meituan skipped
profitably but oligopoly market. Though pursuing a multifunctional platform,
Meituan still shows its cautious by not stepping into a certain profitable market.
For instance, Meituan didn’t launch physical e-commerce service until 2017, the
time it had become one of the dominant enterprises in the market. The underlying
rationale is because though physical e-commerce brings abundant cash flows, it has
already been dominated by Taobao (Alibaba), the other magnate of physical e-
commerce. Wang Xing, comments that:
“To conduct physical e-commerce business, we need to be superior in both quality and
price, and currently we are nothing compared with Taobao… Short-term income growth
doesn’t necessarily mean a long-term competitive advantage.”
Figure 11
Matrix of Meituan’s “Four-Row-Three-Column” Theory
 Meituan-Dianping 103

This factor is of key importance for Meituan’s survive throughout second and
third key turning points, as an accurately positioning not only avoid foreseeable
severe competition by averting inefficient investments and retained the growing
sustainability, but also restructure a healthier cash flow for the next phrase’s
development. Therefore, this strategy is considered as one of the most crucial
factors that make Meituan survive during the most hotly competitive periods of e-
commerce.

Sustaining Innovation under Big-data Era

At the third key turning point, which is the “Super app” period, Meituan try to
keep up with the trend of times by adopting advanced technology: With the
exponential growth of consumer data under the digital era, Meituan complies with
the digital transformation age by stressing the importance of digital techniques: It
increased 93.9% of the research and development inputs from 2017 to 2018, and
was listed as the top “most innovative company globally” in 2019 (Fast Company,
2019).
For instance, Meituan emphasizes the research of big-data technology, launches
its self-developed cloud system and comprehensively introduces on-line analytical
processing (OLAP) into practice, which aims at monitoring the real-time
movement of dynamic data to satisfy different business requirements. Through this,
Meituan reached 2.77 billion transactions only in the food delivery section in the
first half of 2018, which implies 178 transactions every second (Fast Company,
2019). Another successful example is the increment in coupon recovery rate: By
analyzing daily consumer data using self-developed OLAP, and using the data
mining techniques to discover the geographical and demographical features of its
consumers, Meituan-Dianping distributes coupons to targeted consumers according
to its user portrait. This eventually increased its coupon recovery rate from 4% to
9%. In short, the standardization and innovation of data management and
processing procedure help Meituan-Dianping to reduce the collaboration costs
between departments, prompts the efficiency of resource utilization and capital
allocation of the company.

External and Internal Environment Analysis

E-commerce is regarded as the force to be reckoned. It is estimated to grow

continuously within the decade, and accumulates over $335 billion revenue
worldwide by 2025 (FTC, 2016). Among this, Meituan was listed as the top ten
104 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

most valuable venture-backed private companies according to Wall Street Journal,

estimated at $30 billion in July 2018, and seven out of ten enterprises in the list
belong to e-commerce industry (Chen et al, 2018). This could be a side-proof that
the contemporary business expedites the development process of the industry,
which provides both great upside potential and severe intra-industrial competitions.

The following analysis intends to evaluate the competitive environment of the

industry, with reference to Porter’s 5 forces and PEST model. The analysis aims to
provide a general view of the weaknesses and strengths of the industry, as well as
the advantages and threats that Meituan exposes, which would eventually serve as
the foundation for future forecasts and recommendations in the later sections.

Porter’s 5 Forces Analysis: Overview about Industry

From the perspective of merchant, bargaining power has experienced a “strong
to weak” transform during the past decade. At the initial stage of establishment, to
increase the market share and attract more merchants, most e-commerce platforms
charged little commission fee from merchants, or even provides subsidies to obtain
exclusive rights of heated ones. At this stage, the merchants had strong bargaining
power, since the platforms need them to operate and raise popularity. However, the
situation reverses at the current stage: The existing “winning” platforms have
accumulated massive users and merchants — Namely, the situation that the
platform desperately needs the merchants no longer exist. On the contrary, many
merchants rely on platforms to attract customers and boost sales. At this time, the
industry has entered a period of stable development, and user experience has
become the key to competition. In addition, many e-commerce platforms launched
strict requirements regarding the products’ safety and quality, which further raise
the entrance barrier for merchants. The platforms also start to charge different
levels of commission fees from the merchants based on their sales, which jointly
result in rather weak bargaining power of merchants at this stage.
However, users are still in dominance regarding their bargaining power. Though
a great mass of platforms dropped after the competition, the competition between
the oligopoly food market remains fierce. Since the current services and products
provided by various platforms do not have essential differences in terms of variety
and prices, one of the main methods for the platforms to attract users and carve out
market share is still providing attractive discounts and coupons to users. It is simple
for the users to switch from one platform to the other without additional cost. Also,
it is not an easy task for a platform to cultivate strong consumer loyalty. As a
result, the users have strong bargaining power at the current stage. The platforms
 Meituan-Dianping 105

still need to develop strategies to create competitive advantage and increase the
user’s retention rate and loyalty.
The customer demand for physical restaurants (substitution) remains huge and
irreplaceable. Although both the traditional catering and food delivery service deal
with the needs for food, they are fundamentally different regarding the match
between customer requirements and the costs serving the customers. When
choosing the food delivery service, a customer may focus more on the taste and
delivery speed, while he may emphasize more on other aspects when choosing the
traditional catering, such as the reliability of menu, staffs’ attitude, atmosphere and
privacy (Ladhari, Brun & Morales, 2008; Yeo, Goh & Rezaei, 2017). From this
aspect, two types of dining services have their own focuses and merits, and
consequently there is no clear dominance position between them. However, the
stress of food safety recently drags the balance towards the traditional catering
service: Some of the online restaurants are not eligible to obtain the qualification to
provide catering service, while they may successfully sell the products due to the
wittingly or unwittingly negligence of the e-commerce platform. While, for the
traditional catering, the food quality and tidiness of the store are inspected on a
regular basis, and the customers can easily find the certificates hanging on the
walls of the restaurants. In conclusion, dining in the restaurant is still the
mainstream of the catering industry at present. The customer demand for the
physical restaurants remains huge and it remains irreplaceable.
Regarding the rivalry, the current food delivery market is mainly dominated by
Meituan and Ele.me. According to Trustdata (2019), by 2019Q1 Meituan-Dianping
obtains the market share of 63.4% and Ele.me occupies 27.5% of the market. Also,
Star.ele.me obtains 6.3% of the market share (Star.ele.me is the former Baidu Food
Delivery which merged with Ele.me in Aug 2017 and formally changed its name to
Star.ele.me in Oct 2018). Thus, together with Star.ele.me, Ele.me holds 33.8% of
the market share. Though there are very limited competitors in this market, the
market is still growing and the competition between the big names remains intense.
As a result, the food delivery platforms used to invest heavily in their services to
compete for users. customers were offered great discounts and even free meals by
the platforms in an effort to carve out market share in the fiercely contested food
delivery industry. However, this type of competition is only suitable for giant
companies and poses threats to small businesses. Although the giants have solid
capital foundation, it is still less possible to carry out this kind of cash-burning
strategy in the long-run. The problem behinds is obvious: It is difficult for the
platforms to “win the most” and “get the most from the customers” simultaneously.
After years of development, the food delivery industry has entered a mature and
106 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

stable stage, Burning money is not effective to compete with each other: The
competition gradually switches from the price war to the competition of the quality
and variety of services and user experience.
After many rounds of user competition, the food delivery service user group
become rather stable. Many users have established the habit of using at least one of
the food delivery platforms, and the industrial structure has thus stabilized. In the
future, the competition may be further upgraded. Zhu Xiaohu, an investor of
Ele.me call the future food delivery market “the war of three kingdoms” which is
referring to the market share competition among Meituan-Dianping, Ele.me, and
the entering DiDi Chuxing. While in the short-term, it will still be the competition
between the two giants. In addition, the competition in food delivery service is just
a starting point, Alibaba's acquisition of Ele.me in 2018 also reveals its
involvement in the competition between Alibaba and Tencent. The future
integration of the platforms and businesses under the two groups may push the
competition between Meituan and Ele.me to a higher level, rather than
concentrating on the food delivery service. The competition may eventually grow
to the competition of the whole “life service platform (ecosystem)”. The situation
of duopoly is predicted to continue during the next several years since the entry
barrier of the food delivery market is rising higher and higher. Other than the two
main companies, the other food delivery businesses only hold 2.8% of the market.
And the numbers show that the market share of the food delivery businesses other
than Meituan-Dianping, Ele.me, and Star.ele.me is shrinking throughout the years.
In conclusion, attributed to the mature management and operation structure,
professional service, high-quality staff, and the support of technology giants,
Meituan and Ele.me create a duopoly food delivery market, leaving only a small
share of the market to the other food delivery companies. In addition, though there
is still huge expansion capacity for the food delivery service, the existing market
appears high entrance barriers, such as user traffic, merchants and delivery staffs,
so it is hard for the new participants to enter the market. This implies that the
companies that do not have the previous foundation need to invest significant
capital to build a competitive food delivery platform. However, some companies
like DiDi Chuxing (a company provides ride-hailing service) that have existing
network platform with considerable user traffic and offline transportation networks
are still able to enter the food delivery market. While they will still face the
challenge of having to compete with the current two food delivery giants.

PEST Analysis: Overview about Macro-Economics

Favorable policies facilitate the integration of spreading markets. China
 Meituan-Dianping 107

published e-commerce <Industrial Electronic and Business 3-year Development

Plan> (“<3-year Plan>” hereinafter) in Sept.2017, which aims at promoting the in-
depth communication throughout the industrial circulation, as well as improving
the resource allocation efficiency. This provides a wide chance for Meituan to
expand the industrial chain to both upper and lower ends by integrating with the
remaining small-scale and medium-scale businesses. As a matter of facts, Meituan
revealed its resolution in combining industrial chain through past practices: In 2017,
Meituan restructured its business into 4 main business groups: in-store group,
retailing group, hotel and tourism group and traveling group, and each group is
planning its own expansion by mergers and acquiring other related enterprises.
Wang Xing, states the underlying rationale for the vast business integration of the
corporation:
“It seems that we try to do everything, while in fact, we are only focusing on one… It is
basically the same group of people who have the demands of dining-out, food delivery,
watching movies, traveling and renting online cars. Meituan-Dianping is an e-commerce
platform that provides vast selling service.”

It is apparent that Meituan’s business strategy is to form an omnibearing

enterprise that contains vast business segments. In this sense, it shall be agreed
that the policies that facilitate the business integration fit in exactly with its
developing plans. Additionally, <3-year plan> stresses the importance of
cooperation between East Asian countries, which yields a higher possibility for
Meituan to opening international markets.
From the perspective of demographic potential, consumption upgrading provides
a chance for product differentiation and company restructuring. It is estimated that
the consumption per person in China will see a compounded growth rate at about
8.0% from 2017 to 2023, which suggests that the purchasing type is gradually
switching from the commodity consumption to the service consumption (iResearch,
2018). Product differentiation is deemed necessary under the consumption
upgrading, as the excess capacity of manufacturing productivity might eventually
lead to severe homogeneity between different brands. Regarding the fact that
Meituan had already expanded its business into different fields, less adverse
impacts it might suffer due to the complex corporate structure through the past
years’ practice. However, continuous product upgrading and differentiation are still
of great importance for Meituan to grasp the shares of the upper-tier market.
108 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

Figure 12
China’s Consumption Type Between Physical & Service

(Source: iResearch, 2018)

Meanwhile, the general demand for e-commerce is expected to increase in the

following years, while the younger generation drives the major consumption
growth. According to Statista (2019), the expected users in Asia from 2017 to 2023
will continuously increase from 1798.1 million to 2526.4 million USD, and the
average revenue per user is expected to increase about 30%. Regarding the user age,
around 80% of users are under the age of 44, and around 60% are under age 34.
The growing population implies greater demographic potential, while the
increasing internet usage and purchasing power of younger generation drive higher
expansion possibility, also demand a variety of service lines, which directly propels
the upgrading of the industrial structure of e-commerce. In particular, the
progressing of internalization and urbanization in China (Figure.15) contributes to
e-commerce market penetration and consumer acquisition in the China market
(Meituan-Dianping, 2017).

Figure 13, 14
Asia E-commerce Users Amount, Average Revenue and Age, 2019
 Meituan-Dianping 109

Figure 15
Urbanization Population & Percentage in China, Meituan-Dianping, 2017

Technology advancement also reveals some good news: The network coverage
greatly prompts the utilization and service range of Meituan. In June 2015, mobile
coverage expanded to “ubiquitous level” by assessing 90% of the population of at
least 2G signal in Asia; by 2025, ASEAN is expected to experience 5.5 times
growth in online service economy and become the center of global online platform
economy that occupies over 40% of the market shares (Hatt, Okeleke & Meloan,
2015; Chen, 2017). This digital transformation process interacts with the expansion
of e-commerce enterprises, as demonstrated by Figure.16. Under this trend,
Meituan is guaranteed an extensive market space for business development:
According to the historical income statement, Meituan appeared a rapid growth
trend, realizing 7 times of increase in operating income from 2015 to 2017,
realizing an annual growth of 223.2% and 161.2% in 2016 and 2017 respectively
(Meituan-Dianping, 2018). Additionally, digitalization helps Meituan to penetrate
traditional industries by exploring to booming diversified demands from the
constant flow of new users. It is currently stepping into areas including
transportation, vacation planning, wedding service, household management service,
etc. This integrates the merchants which were originally highly dispersed in the
traditional markets and consolidates the consumer basis for Meituan by seizing the
first-mover advantage.
110 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

Figure 16
Asia E-commerce Revenue & Digitalization

(Source: Statista, 2019)

Current Challenges and Recommendations

By analyzing the opportunities and threats in section 5, Figure.17 summarizes

the general external environment that Meituan is exposed to. This paper considers
the current market condition generally favorable for Meituan’s future development.
However, it is important to note that “external environment” is applicable to almost
all the companies in industries. Namely, a favorable condition boosts all the
enterprises that sizing up the opportunity. In this context, Meituan should still be
cautious with the pace and direction of development, as a radical expansion
strategy suggests particular high operation and administrative costs, and the abuse
of capital in technology development may also diverse the main business.
Undertaking the previous analysis, this paper discusses some current challenges
that Meituan encountered, and provides recommendations correspondingly for
Meituan to conquer the challenges. The strategies emphases on enhancing
Meituan’s existing competitive advantages, such as versatility and large volume.
 Meituan-Dianping 111

Figure 17
Summary External Environment of E-commerce Platform

Dilemma in business coverage: Building own features in “Ecosystem”

The “T-strategy” mentioned in section.3 is regarded as one of the winning
factors that led to Meituan’s leading position. However, Meituan is now facing
challenges in the direction of “T-type” expansion, namely, it is becoming
increasingly difficult for Meituan to select the “new domain” in its ecosystem.
In fact, this is also the pain point of the entire E-commerce industry.
Empowerment by the Internet, this industry seems to have vast space that includes
many sectors, such as dining, rental, hotel, tourism…However, E-commerce
enterprises can only deploy their business model in a rather limited angle (i.e.
intermediary) in the industrial chain due to their inherited structure. Therefore,
though Meituan established its own ecosystem, it is still facing the essentials of
being an “agent” in most of its business area (excluding some prevalent areas such
as catering). This limited essence narrows Meituan’s competitiveness in the
corresponding sectors, implying that it cannot fully compete with those big names
112 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

in certain market segments.

Building an “Ecosystem” is an ambitious plan, while it also imposes a very high
demand on enterprise’s dynamic servicing capacity and underlying capital
foundation. The ecosystem is one of the key components in Meituan’s business
model to capture more consumers and increase their retention rate, and it has long
been known for the concept of “Super app” to offers an array of services (Perez,
2018). Users can get almost everything from Meituan’s one-stop app, from
ordering food delivery to booking the hotel and getting a taxi. Consumers spend
more time in an app per unit of time, and they don't have time to switch to other
applications (Liu, 2018). However, if Meituan cannot effectively select or manage
its new segments, persisting in its ecosystem is tantamount to “burning the benefits
of its profitable business area to unprofitable area”.
Facing this situation, this paper recommends Meituan to build its own features in
“Ecosystem”, which implies Meituan to take advantage on the demography and the
economics of scales to tamp the competitive advantages by increasing the user
engagement (i.e. DAU & duration) and reducing the logistics, distribution and
consumer costs. Meanwhile, Meituan can also leverage its core business area (i.e.
catering) to advertise and stabilize consumers, and gradually shift them to the other
functions through nudging.

Figure 18
Demonstration of “Super App”
 Meituan-Dianping 113

Disintermediation: Improve Application’s Convenience and

Friendliness
Though technology advancement brings new selling channels, it also carries
multi-dimension competition. E-commerce is not the patent of “IT enterprises”:
Traditional enterprises will also become the potential competitors under the digital-
transforming generation. For example, O2O is an effective weapon for traditional
merchants to resist high commission fee of e-commerce platform, since these
enterprises can build-up their own network without relying on the e-commerce
agent. Once the digital connection between heated merchants and consumers has
been established, the merchants no longer need the platforms and eventually the
“disintermediation” is achieved. Therefore, Meituan’s dominance position may
corrupt once heated merchants launched their own quick links in social media (e.g
Wechat applets) to provide online booking and delivery service, since this in return
evades the commission fee charged by Meituan. When more and more merchants
decide to launch their own O2O network, Meituan, being the intermediary, will
become the “obsoleted step” between consumers and merchants. Though one has to
admit that currently only big names have the necessity and ability to establish their
own network, yet no one could assure the transition pace under the snowballing
effect of the digitization.
As a counteract, Meituan shall put parts of the research focuses on the
application’s convenience and accessibility to increase user stickiness, since once
the consumer found it more convenient to order food through Meituan’s
application, they may not switch to the applet constructed by merchants. In the
shorter term, a proper amount of subsidy provided to most heated merchants is
expected in order to maintain the current volumes of the platform. Multi-function is
another approach for dealing disintermediation, from the perspective of user
experience. According to Hsu and Lin (2016), positive feelings (containing
utilization and hedonic value) increase users’ stickiness and value perception to a
mobile application. This suggests Meituan reconsiders the usability of its
application.

Increasing Privacy Concerns: Emphasize Users’ Security and Privacy

Rising securities and privacy concerns indicate higher supervision and
regulatory costs. Under the era of big data, massive consumer information becomes
important resources, which is of great importance to the accuracy of the decision-
making process. The growing consumer basis and digital operation imply a greater
temptation for hackers, while the potential data leak may easily breakdown the
social reputation of this enterprise. Theoretically speaking, Meituan-Dianping’s
114 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

complex operation model is prone to the data breach, as not only the cyber attack
but also the offline third parties (e.g. merchants, delivery staffs) could obtain users’
privacy. In April 2018, it is revealed that over a million of its users’ personal
information has been sold online, and it is occasionally reported by individuals that
they are receiving harassing phone calls after using Meituan. Therefore, the
development of digitalization also suggests Meituan improve the encryption
methods, as well as input higher supervision and monitoring costs to lessen the
frequency of data leakage.
Considering the fact that Meituan has experienced an information leak crisis that
weakened users' confidence in 2018, it is recommended that Meituan should strive
for more comprehensive methods to maintain and protect its database. One of the
intentions of this approach is to help Meituan better serve the users and built better
trust between the platform and the consumers. The rewards of this approach is
more than just building up a good image and reputation. It will also reduce the
potential costs of compensation to the users for information leak and the potential
revenue loss due to customer churn.

Diminishing Margin Under Domestic Expansion: “Going Global” with

Prudence
Under the current stage, domestic expansion will yield diminishing margin. The
preliminary reason is that the domestic duopoly market is becoming saturated:
Though China’s food delivery market is prosperous now, the growth rate is
expected to slow down within a decade, as shown in Figure.19 (Statista, 2019).
Meanwhile, in the domestic market, Meituan has already occupied adequately
enough consumer base, the essence of its business has already switched from
“getting more consumers” to “fully utilizing the consumers”. If Meituan persists to
expand domestically, both management and controlling costs are expected to be
higher with very limited increase in return, since the increasing complexity of
organizational structure and industry segments may offset or outweigh the benefits
caused by network expansion. The popularization of e-commerce also expedites
stringent compliance requirements that imply higher supervision and controlling
costs.
Therefore, Meituan needs to seek another yet-to-develop market for higher
margins. Various aspects support the global expansion as well: For instance, the
increment of Chinese residents and travelers overseas these years (Poston Jr &
Wong, 2016) has demonstrated the potential of the oversea food delivery market.
Seizing the proper time of entering the foreign markets would give Meituan enough
time to adapt to the new market and develop its own customer base. Also, more
 Meituan-Dianping 115

active participation in the foreign markets would help Meituan to gain a better
knowledge of foreign purchasing habits and help it develop its business in hotel &
travel to pave the way for its development of full business chain and become a
multifunctional “life service platform”. However, Meituan should be meticulous
when going global, as powerful international competitors such as UK-based
“Deliveroo” and Germany-based “FoodPanda” have already set branches in many
developed regions. Thus, it is recommended to select unexplored East Asia regions
for first-step global expansion and enter other developed markets after accumulated
relevant experience or, at least reach enough capital strength and technology
highlights to attract consumers from giant competitors. While on the other hand,
Meituan’s global competitors have been competing for the global market share
both in developing countries and developed countries fiercely. The rapid expanding
of Deliveroo and Foodpanda has made a deep impression on the whole industry.
Late entry into the global markets would at the same time mean that there would be
little space for Meituan and the competition would also be tougher for Meituan. It
is also recommended for Meituan to learn from the expanding strategies of its
competitors. Merges and acquisitions of the small food delivery companies that
have already existed in the target markets may be an easier way for Meituan to
enter the global markets. M&A may also help Meituan to adapt to foreign customer
behaviors and preferences. In the journey of expanding to the global markets,
Meituan still has a long and tough way to go. Meituan needs to take its steps
carefully and wisely.

Figure 19
China’s Food Delivery Market Revenue & Growth Rate

(Scoure: Statista, 2019)

116 ACADEMY OF ASIAN BUSINESS REVIEW, JUNE 2020

Conclusion

Meituan, as one of the leading companies that survived after “Thousands

Regiments Wars” in 2011, became the leading figure in China’s duopoly e-
commerce market nowadays, listed as one of the most valuable enterprises that
highlighted by “technology advancement”. Going through several kick points,
Meituan experienced continuously position adjustments: During the emerging
period from 2010, it served as a location-based information platform, wisely
expanded its business by selecting peripheral cities and evaded from the trap of
inefficient investments. The emerging of food delivery service in 2015 provided a
valuable development opportunity for the e-commerce industry, at which Meituan
adopted T-strategy and stretched into different business areas to form an integrated
business chain. The continuous cash flows brought by the successful diversification
grants Meituan the capital foundation to pursue the “super app” in the coming stage.
Regarding future development opportunities, the competition within the
microenvironment of Meituan is fierce though there are unlikely to be new entrants
in the market. As the leading company in the market, Meituan can face a relatively
relaxed situation. The macroenvironment is generally favorable for Meituan’s
future development, especially under the circumstance that it has already been the
leader power in China’s e-commerce market. Under the supportive policies,
Meituan is expected to grasp the opportunity of demographic potential to expand
the consumer basis and carry products’ differentiation. Meanwhile, the rapid
technology development grants it greater competence to accommodate and process
more new users, which eventually leads to economics return to scale.
Lastly, the success of Meituan also lies in the entrepreneurial experience of
Wang Xing, Meituan’s founder, is inspirational as he never gives up and is always
longing for learning. He observes and explores the world around him with an open
mind and absorbs the nutrients like a sponge which should be the attitude for young
people stepping into society. As the only certain thing is uncertainties, planning
head, adapting to the changes and acting flexibly could help with the problems in
business and future career.

(Received June 26, 2019; Revised December 25, 2019; Accepted May 27, 2020)
 Meituan-Dianping 117

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