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Meituan geared for expansion into B2B and finance sectors

Meituan now wants to shift the focus from food delivery. The company is now extending loans to help restaurants upgrade to attract customers.

Nov 28, 2018 by A. Alfaro
Meituan geared for expansion into B2B and finance sectors

Meituan has plans to link up data from its multiple applications, 36kr reported citing an insider. To start off, Meituan will first merge data from its user-review-powered app Dazhong Dianping and bike-sharing app Mobike.

Meituan’s main app offers hotel services, food delivery, travel services, among others. The company wants to sync all the data, eliminate duplicates and set up a unified account system for all its users.

Meituan had a unified system until it acquired Mobike in April 2018. “Mobike has users from overseas after the company expanded to countries including US and Japan. This complicated the handling of data, given the different privacy laws in different countries,” the source said.

Meanwhile, some departments are hesitant to hand over data fearing ceding control. However, data integration is a long process and could take up to a year, the source said.

Meituan is trying to follow in the footsteps of Alibaba. Under the aegis of Jack Ma, Alibaba set up an “88 Member” system last year unifying data from platforms such as Taobao and TMall and assigning each user a single credit score for all Alibaba platforms. By paying CNY 88, users can unlock discounts and get VIP treatment. However, Alibaba is still in the process of sorting data.

The wellspring of inspiration for a unified system comes from Amazon (revenue from Amazon Prime membership reached USD 10 billion in 2017- 5.5% of its total revenue). During an interview with 36Kr, Meituan’s vice chairman Wang Huiwen said, “We study Amazon’s managing style and its operation concept”.

Irons in the fire

Meituan is in cruise mode after its September IPO. The unified account system is a big part of its expansion plans. Data integration would help Meituan get a clearer picture of its users and allow advertisers to reach its target audience in an efficient way, which could in turn boost Meituan’s commercial value. The move will also help counter WeChat’s aggressive foray into Meituan’s space.

In 2015, Meituan’s CEO Wang Xing talked about his plans to establish a fin-tech business line back when Meituan was seen as just a food delivery company.

Food delivery accounts for 60% (an 84.8% leap year-on-year) of Meituan’s total revenue, according to the third quarter report. Meituan, however, wants to diversify. Although the financial report showed significant growth in food delivery line, the company is still incurring losses (USD 354 million from last year’s USD 137 million).

The Shenzhen Stock Exchange approved its plan to issue CNY 5 billion (USD 722 million) of asset-backed securities (ABS), Meituan announced on 21 November. Meituan had also secured a license to grant small loans in November 2016.

More than 5 million merchants are active on Meituan. Now, Meituan has two kinds of loans: Quick loans and operation loans - the former has a ceiling of CNY 50,000 (USD 7,200) while the latter offers up to CNY 500,000.

According to Wang Liyang, an analyst consulted by National Business Daily, “It is notoriously difficult for medium and micro businesses in China to get loans from traditional financial institutions”. This is why many tech companies are providing financial services to small businesses.

Meituan has licenses to operate in insurance, payment, small loans and banking sectors.

Food for thought

The profit margin of Meituan’s food delivery business is just 16.6%, mainly due to the delivery executives’ compensation which accounts for 41% of total costs. Although food delivery helps Meituan to increase its user base, the payoff is less. Meituan now wants to shift the focus from food delivery and act as a go-between app for customers to locate restaurants. Therefore, Meituan is extending loans to help restaurants upgrade to attract customers.

The B2B gravy train

While the B2C sector is approaching a saturation point, companies such as Tencent and Alibaba are seguing into relatively unexplored B2B services. Meituan is already providing small restaurants and vendors with marketing tools, delivery infrastructure, payment systems and cloud enterprise resource planning (ERP).

With the help of cloud enterprise resource planning services (ERP), technologically-handicapped restaurant owners can keep track of their transactions and avert eventual fragmentation of their data. In return, Meituan gets access to the restaurant’s data and decide whether it needs a loan.

According to Meituan, when it comes to loans, 2.75% of small companies default in China, 1.7% points higher than big companies. However, in the case of Meituan, less than 1% turned out to be bad loans. It shows the efficiency of Meituan’s algorithm to separate wheat from chaff.

A. Alfaro

A. Alfaro is a Beijing-based freelance reporter. He focuses on China's politics, culture and society. He can be reached at varofaro@gmail.com. 

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