The core of Meituan's steady growth: Ecological win-win.
In Goldman Sachs' recently released "2025 China Equity Market Outlook", an overweight evaluation is given to the consumer industry, especially the online retail market. Morgan Stanley also points out that the service consumption and the retail field of discretionary consumer goods dominated by e-commerce will become an important investment direction in the coming year.
Investment institutions are optimistic about service consumption and online retail, mainly due to their strong growth resilience. From January to September this year, the online retail sales of physical goods in China increased by 7.9% year-on-year, and the service retail increased by 6.7% year-on-year, far outpacing the overall consumption market.
Meituan, which is rooted in the local retail business, has presented a steadily growing performance curve. On November 29, Meituan released its third-quarter 2024 performance report. According to the financial report, the company achieved operating income of 93.577 billion yuan in the third quarter, with a year-on-year growth of 22%.
In fact, due to the slightly pressured growth rate of the overall consumption market in 24Q3, investment institutions generally hold a cautious attitude towards Meituan's performance forecast. However, Meituan's performance in this quarter is not bad. This is mainly due to two aspects: First, the synergy effect between the company's various businesses is gradually emerging; second, the losses in the new business segments have been significantly reduced.
01
Enhanced Synergy Effect of Core Local Business
This year, Meituan has carried out several organizational structure adjustments. The more important ones are to merge Meituan Platform, In-store Business Group, Home Delivery Business Group, and Basic R & D Platform into "Core Local Business", and no longer set up In-store Business Group and Home Delivery Business Group; to merge Meituan SaaS, Cycling, Charging Treasure and other businesses into "Software and Hardware Services", and to merge Kuailv, Xiaoxiang, Youxuan and other businesses into "Grocery Retail", etc.
The core purpose of these several "big mergers" is to achieve resource sharing, traffic complementarity, and strategic unity through business synergy.
Taking Core Local Business as an example, on the merchant side of the supply end, there is a certain overlap between in-store and home delivery merchants. Especially in the context of Meituan's vigorous promotion of brand satellite stores, Meituan Flash Purchase and other businesses in recent years, the overlap between merchants of the two has further increased. Therefore, marketing, R & D and other resources of the two business lines of home delivery and in-store can also be shared. On the demand side, in the current environment where the traffic dividend is gradually fading, deeply digging the potential needs of users and promoting the mutual transformation of in-store and home delivery customer groups have become an important strategy to expand the traffic pool.
In order to achieve the above goals, the first card played by Meituan is the full consumption scene coverage of "Shen Member".
The purpose of the membership is to enhance user repurchase and user stickiness. Previously, Shen Member has achieved excellent results in Meituan Takeaway, proving the feasibility of the membership system. And Meituan's move to expand Shen Member to in-store dining, entertainment, and wine and travel scenes, for member users, has greatly enriched their consumption choices; for merchants, it has added a new traffic entrance; for the platform, it is naturally the increase in user consumption frequency and consumption amount.
According to Meituan's disclosure, "Shen Member" completed full coverage of various consumption scenes in July and further upgraded and expanded to the whole country. Currently, the proportion of merchants who have signed up to participate in the in-store wine and travel business exceeds 50%. Of course, to achieve the coverage of a member in multiple consumption scenes, it itself requires the collaborative cooperation between the home delivery and in-store departments. Therefore, under the coordination of the "Core Local Business" business division, it is also easier to implement Meituan's strategic intent.
To a certain extent, Meituan Flash Purchase is also the fusion product after in-store merchants open the home delivery business. For example, the laying of merchant lightning warehouses requires the combination of the insight into the immediate consumption demand of the in-store department, as well as the support of the home delivery department's distribution system and regional consumption data.
The company disclosed that the average daily order volume of Meituan Flash Purchase exceeded 10 million orders in this quarter, and the number of users and transaction frequency both achieved double-digit growth. On the Qixi Festival, the peak order volume exceeded 16 million orders. Supported by the huge user demand, large retailers have also begun to accelerate their entry into Meituan Flash Purchase. In October, MINISO and Meituan announced the achievement of a deep strategic cooperation, and more than 800 "24H Super Stores" in the form of lightning warehouses will be launched on Meituan within the year. Up to now, 500 stores have been opened.
Specifically for the lightning warehouse, Meituan Lightning Warehouse has currently covered more than 30,000 merchants, including more than 10,000 convenience stores specializing in immediate retail. The company pointed out in the earnings call that it is expected that by 2027, the total merchandise transaction volume of Meituan Lightning Warehouse will exceed 200 billion yuan and cover more than 100,000 merchants.
From the perspective of financial performance, Core Local Business achieved operating income of 69.373 billion yuan in 2024Q3, with a year-on-year growth of 20.2%. In terms of business data, the company's immediate delivery order volume increased by 14.5% to 7.1 billion orders, and the in-store wine and travel order volume increased by more than 50% year-on-year. At the same time, Meituan's annual transaction users, annual active merchants, and the average annual consumption frequency of annual transaction users have all reached new historical highs. These achievements are closely related to the significant improvement of the company's core local business synergy effect.
02
Continuous Construction of a Win-Win Ecology
The above text details the strategic importance and initial results of Meituan's business synergy. It is particularly worth noting that Meituan's business synergy is not limited to within the platform, but includes the systematic cooperation of the entire business ecosystem, including merchants, riders, and consumers.
Taking Shen Member as an example, its successful coverage in various consumption scenes is inseparable from the active participation of merchants. Specifically, the acceptance degree of merchants towards Shen Member determines the coverage rate of consumption scenes, and the coverage rate of consumption scenes affects the consumption stickiness of consumers, and the improvement of consumption stickiness in turn feeds back to the business performance of merchants. From the results, merchants, consumers, and the platform all benefit from it, rather than a zero-sum game.
This is also Meituan's business philosophy, that is, the pursuit of ecological win-win. The consumption behavior in the local life industry has the characteristics of high timeliness and high planning, such as immediate consumption and immediate use of takeout, stable verification and stable quality of in-store wine and travel. This requires the platform to provide a highly deterministic supply. The construction of the platform's supply capacity, on the one hand, relies on the high-quality and stable supply of merchants, and on the other hand, relies on the high delivery efficiency of riders. The core logic for the simultaneous realization of both is to make both merchants and riders profitable. Therefore, riders, merchants, consumers, and the platform fundamentally constitute an interest community.
At present, Meituan has also launched a number of measures to help merchants improve their operational efficiency and provide more rights and benefits protection for riders.
On the merchant side, Meituan Takeaway upgraded the catering "Flourishing Plan" in November, investing one billion yuan in support funds to provide cash and other support for catering merchants who focus on products and explore innovations. All cash support will be distributed in batches starting from December 31 this year. In addition, for newly settled small and micro merchants, Meituan extends the free traffic support period from 7 days to a maximum of 14 days to help them quickly improve their daily business performance. In addition, according to the earnings call disclosure, for brand satellite stores, Meituan also provides a 6 to 12-month commission rebate and provides free AI location selection services for more than 500 brands for satellite stores.
On the rider side, this quarter, Meituan has also implemented a series of measures including the "Rider-Friendly Community" passage solution, the launch of the "Rider's Home" function, and the pilot rider fatigue management mechanism, further enriching rider care and providing more rights and benefits protection and support for riders.
According to the company's disclosure, as of the end of October, the "Rider-Friendly Community" passage solution jointly launched by Meituan and seven property enterprises including Vanke Property, China Overseas Property, and Jinke Service has cumulatively served more than 1.6 million riders, and it is expected to be implemented in more than 10,000 communities nationwide within the year.
In addition, in the earnings call, Meituan also simultaneously disclosed the development of rider income. In the third quarter of this year, the monthly average income of high-frequency riders nationwide ranged from 5,720 yuan to 10,865 yuan. Among them, the monthly average income range of riders in high-tier cities is 7,629 yuan to 10,865 yuan, and the monthly average income range of riders in low-tier cities is 5,720 yuan to 7,803 yuan. From the perspective of the average income in various regions, the average income of high-frequency riders is slightly higher than the average income of local residents. From the perspective of income growth, compared with June this year, the average income of riders in high-tier cities is basically the same, while the average income of riders in low-tier cities has increased significantly.
Figure: Rider Income Data Source: Meituan Earnings Call, 36Kr Collation
03
New Businesses Continue to Reduce Losses
Since 2024, Meituan's stock price has performed outstandingly among a group of platform-based enterprises. The reason why investors favor Meituan so much is on the one hand due to the recognition of the company's steady growth in performance, and on the other hand, the company's enhanced risk resistance ability after the reduction of losses in new businesses.
Before 2023, Meituan invested a large amount of capital expenditure and operating expenditure in new businesses such as Youxuan, and the cumulative operating loss in the five years from 2019 to 2023 exceeded 100 billion yuan. The drag on Meituan's operating profit by new businesses once caused concerns in the capital market, resulting in the company's stock price continuing to pull back from 2021 to 2023.
In the fourth quarter of 2023, Meituan began to work on reducing losses in new businesses, and the operating loss in that quarter narrowed by 24.1% year-on-year. Entering 2024, the pace of loss reduction continues to accelerate. The single-quarter losses of Meituan's new businesses in 2024Q1 - 2024Q3 narrowed by 45%, 74%, and 80% respectively. Especially in 24Q3, the operating loss of new businesses is only slightly over 1 billion yuan. The reduction of losses in new businesses has made a direct contribution to the company's profits.
In addition, under the current background where the capital market expects and the policy side supports enterprises' dividend payouts and share buybacks, Meituan is also working to enhance shareholder returns. The company disclosed in the earnings call that from the beginning of September to the closure of the buyback window, Meituan has repurchased stocks worth more than 600 million US dollars, and the total number of repurchases accounts for 4.2% of the company's total shares, which exceeds the total repurchase amount from 2021 to 2023.
Being in the high-speed growth track of immediate retail, having a stable performance and risk resistance ability, and at the same time building a healthy and win-win ecological system with partners, Meituan is walking more and more steadily in the context of the future policy's efforts to support consumption.