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Meituan’s market strategy

Meituan’s market strategy in China now includes private traffic

As a Chinese leading online-to-offline (O2O) life service platform, Meituan aims to help hundreds of millions of consumers eat and live more conveniently. Founded by Wang Xing in 2010, Meituan has gradually expanded its business lines from food delivery to more diverse categories, including bike-sharing, hotel and travel booking and online grocery. During the COVID-19 pandemic period, this Chinese “SuperApp” surged by 58.7 million active users in the first quarter of 2021, a historical high. As of May 2021, Meituan has achieved revenue of 37 billion CNY in the first quarter, an increase of 120.9% year-on-year. How did Meituan stand out in the fierce competition and become the Top 3 listed Internet companies in China by market value? This case study will explore Meituan’s market strategy and analyse how they apply private traffic to reach consumers and facilitate brand growth.

Strategy 1: Applying the platform business model to create a Chinese leading Super APP

The platform business model has become a more popular strategy for internet companies since the pipeline businesses are highly competitive and the development of the information technology. The platform business model brings producers and consumers together to create values in exchanges. For platform businesses, the sources of competitive advantages are to facilitate more external interactions and to create “network effects”.

As a local life platform offered over 200 services, Meituan regards its operating system as a bridge to connect merchants, riders and end consumers. All the participants are able to instantly connect and conclude transactions on this platform.

To enhance network effects, Meituan also adheres to the principle of technologies, allowing big data, cloud computing, AI and other technologies to serve the evolution of the entire instant delivery network. As of December 31, 2019, the number of active users and merchants on the Meituan platform have reached 450 million and 6.2 million respectively. As the number of users grew, the value assets of the platform are increasing accordingly. By maximising the total value, the platform can continuously provide more valuable services for users, thereby building a circular ecosystem.

Meituan’s Main Business Lines Meituan’s market strategy
Data source: Meituan, Designed by Daxue Consulting, Meituan’s Main Business Lines

Food + Platform model

Many successful platforms launch with a single type of interaction that can bring high value, and then they move into other markets to increase both value and traffic. Meituan originally launched its business as the “Groupon of China” in 2010. After eight years of development, Meituan’s market strategy upgraded to “Food + Platform”. This means Meituan regards food-related services as its core business, and supports multiple categories by establishing a super platform. The purpose of this new tactic is to build a moat around its core business (food delivery) and reduces the pressure of market competition toward other companies. As of 2020, Meituan has obtained an overwhelming advantage in the food delivery industry in China, with a market share of 68%.

Online Food Delivery in China market share Meituan’s market strategy
Data source: Statista, Online Food Delivery in China market share

Strategy 2: Regarding “customer-centric” as the most important value

While providing users with full-scenario services, Meituan has always adhered to the “customer-centric” concept. In this case, the “customers” refer to both the end consumers and B2B merchants. Meituan Waimai can save consumers about 48 minutes per order. However, Meituan doesn’t only convenience consumers, but their vendors. For example, Meituan provides merchants with comprehensive solutions, including precision online marketing tools, efficient real-time distribution infrastructure, cloud-based enterprise resource planning (ERP) systems, aggregate payment systems, and supply chain management support. These technical support enables merchants improve efficiency and increase traffic exposure.

Digital Lifestyle Service Meituan’s market strategy
Data source: Deloitte, Designed by Daxue Consulting, Digital Lifestyle Service

Strategy 3: Creating private traffic to build a sustainable ecosystem

Private traffic became one of the most popular China marketing trends in 2019 and 2020 where brands funnel traffic to their own platforms (in contrary to third-party platforms) where they can control data and increase repeat purchases.

How private traffic works on Meituan?

Bonus Fandom Group

Bonus fandom group is a channel provided by Meituan Waimai for merchants to efficiently and directly reach end customers. The entrance of Meituan’s fandom groups currently is only available on the merchant’s homepage. Consumers can enter the group chat by clicking on the banner with “Shop Bonus Fandom Group”. The banner also includes advertisements such as “You can get coupons when you enter the group” and “limited-time offers” to attract users, which positioned the “bonus” function of the fandom groups.

On the one hand, businesses can intuitively reach the consumers and combine the fun gameplay and fan service to interact with users, thereby improving consumer satisfaction. Moreover, private traffic is easier for both Meituan and merchants to capture consumer needs, which will have a higher possibility of increasing the conversion rates. On the other hand, consumers can also establish real-time online communication scenarios with the merchants to create a more convenient shopping experience.

Fandom Group Banner on Meituan Meituan’s market strategy
Source: Zhihu, Fandom Group Banner on Meituan

Meituan Mini Programs

According to Everbright Securities, increasing customer acquisition costs of centralized e-commerce platforms has led to increasingly expensive public traffic, and the economic burden passed on to merchants has increased. For example, Alibaba has approximately 90% market share in e-commerce, and its customer acquisition cost has increased from 278 CNY/person in 2018 to 929 CNY/person in 2020, an increase of nearly 234%.

Mini Programs increased private traffic

In response to the potential threat, instead of falling into the public traffic, Meituan Dianping entered the field of Mini Programs to make better use of the private traffic in the WeChat ecosystem. WeChat, as a Chinese most popular multi-purpose App with over 1.2 billion monthly active users, can drive huge traffic for the brands and help to fully own and engage consumers. Additionally, the launch of the Meituan Mini Programs will be more cost-effective than investing in advertisements on other platforms and billboards.

Most of the functions in the Meituan Mini Program are the same as the Meituan APP, such as homepage, order and profile. In addition to these basic functions, consumers can not only click the icon in the upper right corner to add commonly used Apps on WeChat, but also use the Meituan Mini Program to set up a clock to remind them collecting coupons. This step can increase the retention rate and ordering rate of users.

Three steps to use Meituan Mini Program on WeChat Meituan’s market strategy
Source: WeChat, three steps to use Meituan Mini Program on WeChat

However, private traffic competition has recently intensified; almost all mainstream Internet platforms have launched their own private traffic pools. Operating private traffic has become the standard configuration and Internet infrastructure for SuperApps after nearly three years of development. Therefore, how to more effectively manage the existing private domain traffic and explore new competitive advantages is likely to become the consideration for the future development of Meituan.

Author: Yifan Ma

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