From 2018 to 2020, Meituan Dianping-W (HK:03690), as the leader of local life services, will usher in a powerful challenge.
On October 12, ele.me and WOM officially merged. This has long been a clue, and it has a complete path: in June 2015, BABA injected 6 billion yuan to establish word of mouth, in April 2018, BABA acquired ele.me for $9.5 billion, and the financial results disclosed in August 2018 showed the establishment of a local life holding company. then there is the formal merger of ele.me and word of mouth. Add that previously Xiaoyaozi (BABA CEO Zhang Yong) had said that the internal and external sales business would achieve 50% share in three years, which was mentioned again in the performance meeting.
However, Meituan's comments are not easy to mess with. As of 1Q 2018, the takeout business accounted for 59.1% of the market, and the catering takeout transaction volume in the first half of the year was 122.7 billion yuan, an increase of 97% over the same period last year.
How do you chase ele.me? BABA's performance meeting on August 23, 2018, the advantages of the management are as follows: a strong user base (traffic), strong funds (about 3 billion of investment commitments have been received, and more funds are being discussed).
To sum up the above paragraph, "the one who has the flow is the father, and the one who has the money is the father." it seems that many investors hold this view. However, from the point of view of Meituan's "first-to-last" and "bloody battle to the end", the current situation is very difficult to be shaken.
Reviewing the history of "local life", Meituan's first stage, as a witness to the rapid maturity of the group-buying market.
The emergence of the group-buying model of Groupon (NASDAQ:GRPN) in 2010 attracted a burst of competition in the entrepreneurial industry to imitate. Wo Wo Tuan went to QQ for group buying, Mickey net to wheat bag, Nuomi.com to Meituan net. At that time, entrepreneurs in the motherland fought from Heihe to Tengchong, which was known as the Thousand regiments War. In October 2015, the two biggest players with very different styles, Meituan with heavy trading (high frequency and low price) and Dianping with heavy content (low frequency and high price), announced a merger.
The war of thousands of regiments ushered in the final conclusion, although there was no division operating profit, but from Meituan's "expenditure classified by nature", group buying had occupied all the minds of users and had little expenditure, and became a "super cash cow" commented by Meituan. And it is growing rapidly: the gross profit contributed by group buying business (arrival, hotel and tourism) to Meituan from 2015 to 2017 was 3.033 billion yuan, 5.938 billion yuan and 9.579 billion yuan respectively. The annual compound growth rate is 77.7%.
At this time (June 2015, the end of the group-buying war), Ali's rich and mobile group-buying newcomer was born. Let's look at the data directly: from 2016 to 2018 (the fiscal year ending March 31), according to BABA's interest in word-of-mouth (from 49.6% in the first year to 38% in the next two years), the word-of-mouth losses can be estimated to be 1.748 billion yuan, 2.605 billion yuan and 3.526 billion yuan respectively.
On this side, word-of-mouth failed to reverse the throne of Meituan's comments, while on the other side, Meituan expanded the border and grabbed the battle flags of ele.me (which had not yet been acquired by BABA at that time) and Baidu, Inc. takeout-- this was Meituan's second stage. Group buying king quickly became the king of takeout by virtue of the ecological platform.
In terms of time, ele.me was established in April 2009. it has been in operation for four years and raised funds to round C. after 100000 daily orders in more than a dozen cities, Meituan takeout arrived late (set up in December 2013). In just 3 years, Meituan takeout market share > (ele.me + Baidu, Inc. takeout) is so magical, and the gap is widening, even if ele.me bought Baidu, Inc. takeout for $800,000,000 in August 2017, it can't be stopped.
Then you may have to ask, what is the core driving factor behind Meituan's executive power?
In fact, the password comes from Meituan's core strategy "Food+Platform": to establish a technology platform to support multiple categories of eating, drinking and playing, which can pull each other and cross-market each other.
After the group-buying business gained a foothold, Meituan did not stop, but immediately began to create the second growth curve of the takeout business. Although ele.me started four years later, Meituan's operation is not as difficult as expected, because it has a large number of users.
At the beginning, the transformation of takeout business to the users of group buying business is incomparable to other players. In essence, the various businesses of local life services are the entrances to other businesses. Group SPA service, group KTV, booked air tickets and hotels, booked domestic service, when you find this is an omnipotent life service platform, all aspects of your life may be completed here, of course, it includes some takeout, not to mention a restaurant that tastes delicious, and next time you don't bother to go out and order his takeout directly.
From the beginning is not the same dimension of competition, in this race across the river, although you start early, swim frequently, but I am a man with a yacht!
The transformation from group buying users to takeout users became more obvious after the merger of Meituan and Volkswagen in October 2015. The market share of takeout increased by 15% in 2016 alone, surpassing ele.me and Baidu, Inc. takeout combined. According to IT Orange data, the monthly active users of the food delivery business on Meituan and Dianping's app in 2017 is about twice that of the independent Meituan takeout app.
Of course, we say that the various businesses of local life services are the entrances to other businesses:
That is to say, group buying users are transformed into takeout business. It also means that takeout users have transformed into group buying business. after all, the independent Meituan takeout app has more than 30 million monthly active users. We can see that 1Q 2018 and Meituan comment on the online hotel reservation market share of 33.6%, which has surpassed Trip.com 's Noumenon (excluding companies with acquisition and investment) by 0.6%. It can be seen that the entire group buying business with a gross profit margin of 89% will be strengthened in the future.
Wang Xing is very ambitious about the key points in local life, expanding services to users and merchants, and improving and expanding this platform. "having this book has a great influence on me, which is called the Game of finite and Infinite." The limited game is played within the boundary, while the infinite game is played with the boundary, that is, with the rules, exploring and changing the boundary itself. In fact, there is only one infinite game, and that is your life, and death is an insurmountable boundary. By contrast, other boundaries are not so important.
In contrast, with the merger of ele.me and word of mouth (let's not mention the labor pains caused by the merger, which is understood by anyone with a little management experience), it may be difficult to change the market pattern through simple flow and capital investment in the future.
While you are still holding on to a little bit of first-mover advantage, I have defeated you with ecological synergy; when you also want to piece together an ecological platform to imitate the ecological platform, I have dug the moat deeper, wider and farther, whether it's improving long-tail services for users, building business infrastructure, or investing in technology. I think the challenge posed by the merger of ele.me and word of mouth may be the last challenge in the field of local life services.
To sum up, Meituan's review model is based on the long-term development of rich mines in local life business, sitting on highly shared customers, highly related long-tail business, using AI/ big data and other means (the most intuitive effect is the shortening of distribution time, the improvement of realization rate and gross profit margin) better service users, investment in infrastructure construction service vendors, will eventually form a network effect, expand the accumulation of more users and businesses. Finally, it is not only the main business, but also some derivative forms such as payment, consumer credit and so on.
In the field of cross-selling and ecological collaboration, Meituan is like Wells Fargo & Co invested by Ba, whose vision is to meet all the financial needs of users, and the former is "aimed at becoming an intelligent assistant in people's daily life". As a shareholder, I hope Meituan can win the lifelong cooperative relationship, win the relationship with users and merchants, win the relationship with the team, win the relationship with society, win the relationship with shareholders. After all, life service, trust is the important weapon for the development of the company.
At this stage, local life is a high-frequency, rigid demand, alternative (enjoy doing it yourself to others), and a lifelong business. Meituan uses high-frequency "eating" to drive other low-frequency services, leading the way and making a significant moat. The short-term stock price fluctuates with the general trend, but in the long run it should be worth between $61.4 billion and $64.5 billion (see "how to value Meituan?" This coincides with the target price of HK $90 recently offered by JPMorgan Chase & Co.