Meituan–A Super App in China

The transformative impact of Meituan's digital business transformation

Meituan food delivery platform in China

"美团外卖" by Kentaro IEMOTO is licensed under CC BY-SA 2.0

The emergence of Meituan has become a leader in the food delivery industry. As an innovative company, the application of Internet technology to life has promoted convenient life services, especially in the shared service industry. Focusing on the role of Internet technology, Meituan and the transformative impact of the delivery industry and life service industry will be critically analyzed.

The first part of the essay will illustrate the overview of the Meituan company, and its history of development, and the business module will be explored in the second section. While the third and the fourth sectors will examine its regulatory model and provide a diagram to demonstrate internet ecology. Finally, the innovative digital business transformation of Meituan will be discussed.

What is Meituan?

Meituan is a comprehensive information application that provides more than 200 kinds of life services such as food delivery, accommodations booking, and bike-sharing (Meituan, 2018). Meituan can be regarded as the “Groupon” in China, which is a leader in the local life service industry and in a strong position in the ecosystem of China (Gao, 2020). Initially, Meituan only focused on food delivery services, while it has expanded the scope of services by merged with Dianping which is a platform specialized in restaurant reviews (Henriques, 2019). This company delivers food through online platforms or shares purchase experience, which is a new form of business exchange called the sharing economy (Williams, Tushev, Ebrahimi & Mahmoud, 2020). Although Meituan is based on serving consumers, it has played a sharing function in its marketing. John (2017) said that many media companies have absorbed the concept of sharing to better market their companies.

The historical development of Meituan

Meituan was established in March 2010 and started as a Groupon-like business in China which was a media platform specialized in food delivery services. While in 2015, Meituan merged with Dianping which was an application that specialized in restaurant reviews and gradually developed as a Super App that offers the majority of services in daily life. Fisk (2020) explained that this company located in Beijing is led by the founder Wang Xing and he aims to help people eat better and live better which is focusing on customers’ needs. Since most restaurants hope to expand their popularity and increase their contact with users, social media platform like Meituan provides them with a good publicity environment to support and encourage users to use similar group purchase application for consumption (Ghiselli & Ma, 2015).

Meituan
Figure 2: Meituan App open interface. Image: GGVC, All Rights Reserved

Due to the food delivery platform emphasizes speed and efficiency, the delivery workers are usually under tremendous pressure and need to deliver orders to customers quickly (Sun, 2019). The delivery of the platform caused traffic accidents and work time flexibility for delivery workers, which caused Meituan to lose money in 2017 (Griesbach, Reich, Elliott-Negri & Milkman, 2019). However, the founder Wang recognized the issue immediately and expanded other services including meet daily needs for food, extended to broader lifestyle and travel services (Meituan, 2018). The original idea of Meituan came from “Groupon” in America which is a form of group shopping that provides coupons, discounts, and information about special events (Edelman, Jaffe & Kominers, 2014). Through the continuous localization and innovation of digital business transformation by Internet technology, Meituan has become a comprehensive life service provider offer food, accommodation, and entertainment.

Initially, Alibaba was one of Meituan’s investors, while Tencent supported “Dianping”. But since the merger of Meituan and Dianping, Alibaba has reduced most of Meituan’s shares (Shu, 2018). The merger of Meituan and Dianping gather two competitors Alibaba and Tencent together which provides a good economic foundation for Meituan to become the largest service in China and O2O (online to offline) platform market (Fisk, 2020).

An introduction video of Meituan Dianping.

Figure 3: Source: Ying Wu: Meituan Dianping Introduction, standard YouTube License

The transformative business model of Meituan

A business model refers to a description of how a company conducts business (Pels & Kidd, 2015). In other words, it is a structure that mediates between technological development and economic value creation. The business model explains how participants establish connections in the value network or supply chain and the product market (Ritter & Lettl, 2018). The leapfrog development of Meituan has created a new model of service economy for users which has brought revolutionary influence in all aspects. Meituan emphasizes the point of interaction between users and businesses by the collaboration with online social media platforms rather than formal intermediary transactions which provide strategic advantages for Meituan. Meituan plays the role of the digital market in China as businesses use this platform to place information and advertisements to connect consumers on this information-gathering media platform (Tung, Yang & Yu, 2019).

Through the page of the Meituan application, users can choose the items they want to buy or book. For instance, click on “美食” and a list of nearby restaurants will appear. Users can choose according to price, reviews, and ratings. Online purchase or reservation services can be operated not only through the official website but also through the download of mobile applications, including IOS and Android systems which expand the user range. One of the reasons for the success of Meituan’s business model is that it is an internet commercial business center that brings close physical business to the Internet and provides two-way feedback (Bhatt, 2018). Users can give feedback on their purchase experience and make comments and scores while merchants provide rebate coupons to consumers with high praise or high scores.

 

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Figure 4: Users post their select purchase interface and order completion page on Instagram. All Rights Reserved.

Another advantage of Meituan is that Meituan is able to use the idea of sharing economic ecology in marketing. Meituan launched a group buying function in WeChat Mini Program to encourage users to share product links with family and friends on social media (Henriques, 2019). Besides, Meituan has expanded its sharing business nationwide, such as bike-sharing and power bank sharing. The sharing economy is digital and is accessed through websites and applications (John, 2017). For cultural or technical reasons, Chinese people are more eager to share than Westerners (Grigorian, 2019). Meituan is also involved in the sharing economy as an online media platform that offers shared services. It acts as an organizer and makes a profit by charging merchants a trading commission (20%) and advertising fee (Yau, 2020). Moreover, Meituan charges consumers service fees through differentiated services. For instance, membership charges more, but they also have more information and discounts. Meituan is a digital market that combines consumers and merchants and minimizes indirect costs through double-sided revenue.

The internet ecology of Meituan

Internet ecology is an organized system in which participants interact and use information technology to impact and support each other’s operations (Looi, 2001). As a market leader in the sharing economy industry, Meituan is involved in a variety of services. Services such as food delivery, hotel booking, bike-sharing, and movie ticketing are provided on the Meituan media platform, while the company has become a major competitor in meal ordering delivery and Internet-related services and products industries.

As an online media platform with multiple services, Meituan has many competitors such as Ele.me, Dada Nexus and other local companies that provide the same delivery service. International companies such as Groupon, Foursquare, Yelp that provide online services and discounts have become competitors of Meituan (Craft, 2020). The development of other giant companies such as Baidu and Alibaba and their online businesses may become stronger rivals for Meituan.

The core suppliers of Meituan are its merchants those who participate in online services such as local restaurants and hotels. The State Administration for Market Regulation and the municipal government as well as users of the platform play the role of regulating Meituan (Shen, 2019). The main partners of Meituan include film companies and airlines, as well as the most important payment providers such as Alipay and WeChat Pay (Lee, 2020).

Below is the ecosystem map for Meituan.

Meituan Ecosystem
Figure 5: Meituan Ecosystem

Meituan became part of the Internet and brought a transformative impact

Christensen first introduced the term “disruptive technology”, which refers to new technology with lower cost and performance but higher auxiliary performance, while disruptive technology enters and expands into emerging markets (Vorbach, Wipfler & Schimpf, 2017). Meituan as China’s largest food delivery platform and a Chinese internet company giant, its innovation has a transformative impact on offline catering, tourism, and hotel industry transactions in a low-cost way which has changed the way people interact in society.

As an e-commerce platform, Meituan has introduced a new business model of O2O in China which uses the Internet to communicate in a timely, rapid, and low-cost way to allow users and merchants to directly contact, providing great convenience to people’s daily lives. Linking the two parties in ever-changing ways, which each side of the platform can achieve higher consumer satisfaction and greater revenue (Baden-Fuller & Haefliger, 2013).

Figure 6: Meituan official Twitter account announced the expansion of online grocery retail services. All Rights Reserved.

The transformative influence of Meituan is to create a platform that connects users and businesses which tends to focus its digital efforts on driving customer needs and experiences. Therefore, the success of Meituan caused its competitors to make major adjustments to their business models, especially some vertical traditional companies such as Ctrip which operates hotel and travel booking businesses (Gao, 2020). Through Internet reviews and scoring and other forms, it is better for consumers and merchants to communicate directly.

Figure 6: Screenshot of Meituan restaurant review
Figure 6: Screenshot of Meituan restaurant review, taken by the Author November 2020.

However, although this disruptive technological development has changed the way business operations are performed, some people are excluded by this technology, such as the elderly. Due to their unfamiliarity with Internet technology, they have become a marginalized group of people in the physical transformation instead of benefiting from this technological innovation like most young people. There is no doubt that the establishment of Meituan is revolutionary which takes advantage of the scale effect of high-frequency consumption scenarios and converts users to services with a lower frequency and higher profit margins (Gao, 2020).

This disruptive technological innovation has greatly affected the business environment which its built-in information system and payment services provide users with the convenience and connectivity of online interfaces. However, the scope of Meituan’s business is more prone to censorship issues than other platforms that only focus on one business (Shen, 2019). Besides, users may make dishonest reviews in order to obtain discount coupons which do not reflect their real experience well.

Summary

In general, Meituan has become part of the transformation of the Internet, which has a revolutionary impact on the understanding of the Internet. Meituan introduced an O2O (Online to offline) e-commerce model and established a new consumption method which used the characteristics of the Internet to directly connect consumers and businesses. Besides, Meituan has expanded its business scale instead of limiting to a single like other traditional network platforms, and fully manage and share the communication power of the Internet.

Reference List

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About Katie Huang 2 Articles
A sophomore in USYD study about Digital Culture and interested in the relationship between Social Media platforms and the Internet.