Source: Wall Street News Author: Cao Zexi, Chang Jiashuai

On May 25, Meituan announced results for the first quarter of 2023.Financial reports show that Meituan performed well in the first quarter of this yearIt not only achieved steady revenue growth, but also achieved impressive results in terms of profit. The strong recovery in offline consumption in China has been verified.

In the first quarter, Meituan's revenue was 58.62 billion yuan. Although there was a slight decline from month to month due to off-season factors, there was a sharp increase of 26.7% year-on-year. In terms of net profit, it also reversed losses both year-on-year and month-on-month, reaching 3.36 billion yuan, far exceeding the market's estimated loss of 210.4 million yuan. The same period last year was a net loss of 5.702 billion yuan, and Q4 22 had a net loss of 1.08 billion yuan.

At 7 p.m. on the same day, the management of Meituan said on an earnings call thatOver the past 11 quarters, the trading frequency of Meituan's active trading users has continued to increase.Meituan management said that in the future, the frequency of user transactions will become a more important driving force for growth. On the basis of speed and convenience of delivery, Meituan will continue to provide consumers with value-for-money products, meet the diverse needs of consumers, increase user stickiness and transaction frequency, and strive to become the preferred platform for consumers to find cost-effective merchants, products and services.

CEO Wang Xing said that in the first quarter, thanks to a strong recovery in local consumption, the company's various businesses achieved healthy growth. Meituan deeply appreciates the resilience of domestic economic fundamentals and the deep potential of national consumption, and continues to benefit from the development of China's retail industry.

CFO Chen Shaohui said:

This quarter, we seize the market recovery period to adjust our business strategy in due course, improve quality and efficiency, and achieve steady growth. In the future, Meituan will continue to focus on long-term value creation, promote supply and fulfillment upgrades through innovative business formats, and strive to create greater value for industry participants.

During the earnings call, the management of Meituan also expressed their views on AI topics that are hot in the industry.CEO Wang Xing believes that in the long run, AI may have a fundamental impact on how society interacts, but the impact of artificial intelligence on the fulfillment service industry is still small. Regarding the big model development process that the outside world is widely concerned about, Wang Xing said that basic models and applications are currently being researched and developed, and that he is open to external technical cooperation and that if relevant progress is made, he will be happy to keep pace with the market.

The following is a transcript of the call:

1. In-store and takeout businesses have recently used some new marketing tools, such as live streaming. How are these experiments progressing?

Meituan answered:

We began piloting new marketing tools such as live streaming for in-store, takeout, and wine travel businesses a few months ago.

We believe these new marketing tools will drive the growth of our order volume. In March of this year, we began some live streaming events and special price events in Shenzhen. Meituan encouraged consumers to stock up on vouchers for non-immediate purchases. At the same time, Meituan will continue to enhance video content and deploy new traffic gathering tools, such as cooperating with third parties to further enrich channels to increase traffic.

Looking ahead to the second quarter, Meituan has captured the trend of continued recovery in consumption. It will further expand the supply of high-quality products, promote the development of special group buying activities and live streaming events, and further encourage consumers to find low-priced products on Meituan through video and other channels to promote GMV growth.

Starting April 18th, we've fully upgraded our monthly promotion and called it the “Sacred Voucher Festival.” On April 18 and May 18, Meituan livestreamed the Sacred Voucher Festival. According to 418 cross-sales data previously disclosed, the average write-off of 1 gift certificate can drive 1.5 times the order transaction amount. In other words, when a 100 yuan gift certificate is written off, the average user will buy 50 yuan of other goods and services on the shelf. The cancellation cycle for gift certificates is usually 1-2 weeks, which means that the gift certificates sold this time will further increase shelf sales in the near future.

Our special offers were also expanded throughout the end of March and April, and cooperated with more merchants to provide consumers with high-quality products and services from various categories of high-quality merchants. For example, during the May 1st period, popular businesses, including buffets and hot pot, had more events.

2. The volume of takeout orders and management's views in the second quarter

Meituan answered:

In the second quarter, we expect takeout orders to continue to grow. In fact, we already saw a 25% year-over-year increase in April. Small and medium-sized businesses are also starting to catch up.

During the May 1st period, late-night orders and the like became a new highlight, and young people's consumption momentum was strong. Judging from the nighttime consumption order data from 22:00 to 5 a.m., the post-90s, post-95, and post-00s became the main force for nighttime consumption. For example, the number of nighttime orders in the “leisure and entertainment” category during the May 1st period increased 194.1% compared to 2020, and increased 89.5% year-on-year compared to 2019. In the nighttime consumption of the “leisure and entertainment” category, the younger generation of post-90s, post-95, and post-00s consumers accounted for about 80% of the total population.

We also believe that the overall economic recovery is beneficial to us. We expect takeout orders to continue to increase, while we also need to consider high-quality growth and efficient operations.

3. Evaluation of the recovery and growth of the in-store business in the first quarter, and how did Meituan respond to competition in the first quarter, and what are the growth and profit prospects of the in-store business?

Meituan answered:

In the future, we will further focus on building a merchant service ecosystem, strengthen innovation in marketing activities such as content creation and live streaming, and plan to expand existing successful experiences to more regions.

During the recent holiday season, our in-store, hotel, and travel business increased by more than 200% year over year. While this is certainly a result of economic recovery, it also shows the result of our increased efficiency.

We are also continuing to take more steps to reinforce our competitive advantage. For example, optimizing the format of our products and improving the quality of service to consumers. We're taking steps to encourage more merchants to use our online marketing services across all of our platforms.

When it comes to competing with platforms such as Douyin, Meituan is very confident in terms of the quality of riders, operating networks, and merchants. On short video platforms, many businesses advertise for reasons such as traffic costs, etc., which will be more cost-effective. However, Meituan has established a very broad network that can meet greater demand, especially takeout demand during peak times. Meituan's operating network will be more reliable and efficient in the future, so the takeaway business has further potential for growth in the future. Meituan is confident in its leading position. It will continue to have a competitive advantage in takeout and merchant networks. It will also further optimize its market strategy and provide products through different marketing strategies to better meet the growing demand of consumers for goods and services.

4. Meituan's progress and views on AI

Meituan answered:

In the long run, AI may have a fundamental impact on how society interacts, but the impact of artificial intelligence on the fulfillment service industry is still minimal. Regarding the big model development process that the outside world is widely concerned about, Wang Xing said that basic models and applications are currently being researched and developed, and that he is open to external technical cooperation and that if relevant progress is made, he will be happy to keep pace with the market.

Over the past few years, Meituan has also continued to develop and invest in robot-related technology. Currently, Meituan's robots have become more and more intelligent. AI is influencing the physical world and the digital world, and Meituan needs to continuously improve and prepare to organically integrate AI with the company's overall strategy. Meituan is very open to all kinds of external technologies, and the interior has always wanted to set up models and apply them.

In response to the progress of AI, there is currently no more content that can be disclosed, and Meituan is in the stage of catching up. Meituan has accumulated some user cases and corresponding data. Meituan's engineering team is also continuously training and learning. Meituan will actively invest to strengthen its technical capabilities. Furthermore, Meituan is committed to implementing AI and other technologies into the company's mission, which is to make people eat better and live better.

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