China has been through rapid growth platformization of infrastructures that help the growth of several tech giants such as Tencent, Alibaba and JD (de Kloet et al., 2019). The proliferation of different platform businesses has boosted the Chinese’s economy over the few years. Food delivery service platform which raised and became popular since 2017. Meituan, as a Chinese “super app”, hold a market power of 67.3% of the overall Chinese food delivery market in 2020 (Buchholz, 2021). This article will utilize the Chinese app Meituan as a case study of platform business by first introducing it and how it became successful, then discussing the transition and expansion of Meituan’s platform business; finally, it points out two raised problems from this platform.
What is Meituan?
“File: Meituan English Logo.png” is licensed with CC-BY-SA-4.0
Meituan is one of the Chinese biggest online service providers that can support users purchasing online and getting the product offline.
As founded by CEO Wang Xing, he defines Meituan as “the leading transformation of China’s traditional services industry by creating a powerful new e-commerce ecosystem that covers customers’ whole day lifestyle scenarios” (Meituan).
Meituan offers more than 200 online services, including food delivery, bicycle, hotel books, travel, and plane and train tickets, making this platform a super app (Khoso,2021). Food delivery is its most outstanding service, producing over 34 million food deliveries per day in China (Khoso,2021). Especially during Covid-19, the value of Meituan’s infrastructure characteristic was fully demonstrated. At the merchant end, due to the restaurant’s food restrictions, Meituan’s takeaway has become the only source of cash flow for many domestic catering enterprises. At the consumer end, Meituan’s group buying has become one of the most important platforms for purchasing necessities. At the employment ends, Meituan creates 69,000 employees at the end of 2020 (Reuters,2021).
How does Meituan create money?
August 2018 in Nanshan District, Shenzhen: Meituan food delivery worker is licensed with CC-BY-SA-4.0
As a platform itself, it mainly profits from advertising and commission (Elluminati, 2021). For the commission revenue between the users and merchant, Meituan act as an intermediate that gets revenue from the middle and gets about 20% of the total order (Daxueconsulting, 2020). The term of service (TOS) allows the platform to analyze user’s behaviour to For the advertisement revenue, Meituan mainly uses its algorithm to recommend advertising to the users through algorithm. In the platform society, users are doing the unpaid job of the platform that produces the information for the advertising process (Fiona, 2019). As a data-intensive platform, Meituan uses its free platform service to the user in exchange for their attention on advertising that invested in the platform (Mansell & Steinmueller, 2020). One of the characteristics of the networked information economy is commercialization (Benkler, 2006). Meituan makes every detail on its first page commercialized base on the user’s data. Its first page will use the algorithm to recommend food and increase the buying behaviour to create economic value.
How does Meituan become successful?
How Meituan Became China’s Other SuperApp Video from Asianometry. Source: Youtube https://www.youtube.com/watch?v=vyVyphJebfw
The success of Meituan can be seen from the transition of its business model that happened when Meituan chose to enrich its product service category and was good at holding the opportunity. At the begging of the business area of Meituan, it mainly focuses on grouping buying as known for people. The transition began in 2017 when Chinese e-commerce was only 20% saturation (Acquired, 2021). Meituan took the opportunity to develop its online services further when it was only 5% in China (Acquired, 2021). It began to put its food delivery service at the core of its business and used the strategy and mode called “Food+ platfrom” that allows the users to purchase food online and get the food offline (Khoso, 2021). Also, it gives reviews based on users to attract and build trust in other people when it merged with Dianping. It allows the consumer to provide their feedback on the platform and give other people expression on different food types (GNSS.Asia, 2020).
Nowadays, Meituan has become an aggregation platform with multiple services (Daxueconsulting, 2020). It put more effort into new delivery business lines: grocery, medicine and flowers (Khoso, 2021) since e-commerce business like Meituan can be lower revenue since it does not need as much as human services like physical operation offline (Mansell & Steinmueller, 2020). As for Meituan’s new business line, it also uses the previous model of “Food+platform” that offer this product to the consumer offline that reached their whole business line as the online to offline (O2O) model. As one of the benefits of the e-commerce platform, Meituan uses many discounts that give to the consumer to attract them since they operate at a lower cost, and some of their prices are cheaper than a brick retailer (Mansell & Steinmueller, 2020). Tencent is the big investor in Meituan, help Meituan develop its innovative technology, and both of these companies shared data. For example, WeChat is also under the Tencent company; consumers can also use the WeChat platform to open Meituan’s food ordering cross-platform.
What are the current problems raised by Meituan?
- Monopolistic behaviour
- Data privacy issue
As Meituan become a Chinese giant food delivery platform and have its dominant position in the competitive market, it faces techlash from both the consumer and the government. The first problem of Meituan become the food delivery giant platform is its monopolistic behaviour. Meituan now controls a large part of the food delivery market and back by the tech giants Tencent, which make it have the ability to operate at a lower average cost as the largest firm and have a large number of stable customers (Mansell & Steinmueller, 2020 ). From 2015 till 2019, Meituan has over 457.7 million users (Daxueconsulting, 2020). A natural monopoly happens when a platform’s users are increasingly growing along with an increase in the economic scale and scope (Mansell & Steinmueller, 2020). As for Meituan, as more and more users it has, the platform shows a tendency to natural monopoly (Srnicek, 2017). Unlike the western market model, the platform and the consumer are free-market principles, and there is limited government interference (Van Dijck, 2018). For China, the platform tends to be controlled by the government as state capitalism (Van Dijck, 2018). In 2021, China local government fined Meituan 3.44 billion yuan on its monopoly regulation. Since Meituan adopts a “pick one from two” strategy towards the local food merchant, they can only choose one platform for their distribution and profit. (Qu & Hu, 2021) Once the merchants pick up Meituan as their distribution platform, it is not allowed for them to choose another platform such as Ele.me, which is a monopolistic behaviour that crackdowns on the diversity of the market. The second problem raised by Meituan is its over-invasion from the users’ privacy. In October of this year, one of the users complained that Meituan tracked his position even not using this app and posted it on Weibo (Lee, 2021). The platform should not overuse personal data, and the Chinese government made a strict law on the invasion of personal data that should be noticed by the platform to stop from doing this.
All in all, Meituan, as a digital platform, has been through transition and success when the platform took the opportunity from the unsaturated e-commerce market, and the expansion of its multiplied services made it become the Chinese super-app today. As the food tech giants, Meituan should face its problem as its dominant position in China.
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This work is license by a CC BY-NC-SA 4.0.