Original link: https://www.latepost.com/news/dj_detail?id=1726
Community group buying has entered its third year, and the team that was once the most combative is feeling exhausted.
This business was once regarded by major Internet companies as the biggest opportunity to rewrite China’s retail industry. Now there are only two national players—Meituan Best and Duoduomaicai. But they are also far away from the final victory, and their business operations have not met expectations in the past two years. Since the second half of last year, the two companies have successively entered a period of business adjustment, and their core goals have changed from focusing on growth to turning positive gross profit. More flexible and light in terms of organization, Duoduomaicai overtook Meituan at this stage and became the number one in the market.
“LatePost” learned that in early June, the management of Meituan Optimal held a summer meeting and announced the launch of a three-month “summer campaign.”
According to people familiar with the situation, Guo Wanhuai, the person in charge of Meituan Optimal, reviewed Meituan’s exploration in the fresh food retail business at the meeting. Fresh, Meituan Grocery, and Meituan Best, Meituan has invested a lot of resources in this business. For Meituan Optimal, the company will continue to invest until it wins.
An optimization person said that he understands that the biggest signal sent by the meeting is that even if the business is facing difficulties, the progress is not as expected, and the financial pressure is huge, Meituan will not give up optimization.
This month, in the Meituan Optimal Work Area, the lobby and workstations on each floor have been covered with red “Summer War” signs and banners. The big screen on the first floor displays the real-time business competition in each area of the company.
Marked by this meeting, the focus of Meituan Optimal has shifted from cost reduction that lasted for more than a year to growth.
Meituan Optimal has made a series of adjustments before. Including the replacement of a number of optimal core management in April , and the transfer of the more combat-effective Kuailu management team to Optimal. In May, the regional system was abolished, and the five major regions (North China, South China, East China, Central China, and West China) were adjusted to 17 regions. Some regional leaders resigned or transferred. Among them, Zhao Dawei, the head of South China, returned to the headquarters to cooperate with the headquarters to manage 17 regions. After the adjustment, regions will have more decision-making powers to improve decision-making efficiency and increase flexibility in dealing with competition.
Opponent Pinduoduo has also made moves in organization. In June, Duoduo Maicai further dismantled the previous 20 provinces and regions, and divided the country into 81 regional business units, which were managed by 81 persons in charge dispatched from the headquarters and promoted locally. The organization, talents, and decision-making were all closed loops. Decision-making, self-financing.
“LatePost” learned that since the beginning of this year, the first-level executives who were in charge of buying vegetables have been withdrawn one after another, and transferred to the main website or overseas business Temu. Duoduo Maicai has also changed from reporting to Pinduoduo COO Gu Pingping to co-CEO Zhao Jiazhen. The former is the second person in Pinduoduo after the founder Huang Zheng. The successive withdrawal of first-level managers of Duoduo Maicai means that Pinduoduo judges that the war is going to a stable period, and the company has begun to shift its focus to new businesses with higher returns.
Meituan has a chance to counterattack.
After two years of see-saw, Meituan temporarily lags behind
Meituan entered the community group buying one month earlier than Pinduoduo. The two companies focus on “higher-quality fresh groceries” and “extremely cost-effective products”. From the perspective of single volume, from the fourth quarter of 2020 to the first quarter of 2022, Meituan has quickly become the number one in the market with its large investment, local promotion capabilities, and subsidy efficiency. From the second quarter of 2022, Duoduomaicai overtook Meituan and became the number one, but both companies are far from achieving the goals set at the beginning of the year in 2022, and both are in a state of loss.
Since the second half of last year, other players in this field have withdrawn one after another. Taocaicai and Xingshengyou are still investing, but they have shrunk to some areas. Meituan Optimal and Duoduomaicai have also slowed down. Improving gross profit and transforming UE are more important goals than growth.
Buy more vegetables and achieve the goal faster. “LatePost” learned that except for Sichuan, Chongqing, Guangdong, Xiangbei, and Hangzhou, Duoduo Maicai has achieved positive gross profit in other regions of the country, while Meituan has not yet achieved positive gross profit in any province.
The rhythm of Duoduo’s shopping quickly resumed, and it maintained growth in many regions, and its share in some regions exceeded Meituan’s 10%. Since the first quarter of this year, Meituan Best has lagged behind Maicai Duoduo in terms of order volume, GMV, and UE. Since the second quarter, the gunfire has reignited, and Duoduomaicai will focus on attacking the Guangdong market. This area is the preferred base camp of Meituan.
An optimization person said that in the first quarter of this year, Meituan Optimal adopted a bidding strategy to compete, that is, the price of the same product Meituan Optimal should be lower than that of Maicai Duoduo. But in late April, the strategy was called off by management.
It is understood that this year, the national order gap between the two sides was close to 6 million orders at its highest point, that is, about 32 million orders for Meituan Best, and about 38 million orders for Duoduomaicai. Then Meituan Best narrowed the gap.
The business gap first comes from Pinduoduo’s crushing of Meituan’s traffic. When entering community group buying in 2020, the number of daily active users of the Meituan App was 50 million, and that of Pinduoduo was 250 million during the same period. Daily active users on the Meituan app have doubled to 104 million in the past three years, but are still only a third of Pinduoduo’s.
The degree of fit between community group buying and traditional e-commerce is higher than that of food delivery and instant retail. Therefore, the efficiency of Meituan App in distributing traffic to preferred businesses is not as good as that of Pinduoduo. At the same time, buying more vegetables can incubate more high-margin standard products into popular products, while Meituan can only rely on selling better and cheaper products-fresh food, supplemented by refined operations to increase gross profit.
Considering the average gross profit of 3% in the fresh food industry, from the very beginning, it was more difficult for Meituan to do this business than Pinduoduo.
Genes also bring route differences.
Meituan, which lacks a retail foundation, takes the route of “higher-quality fresh groceries”, hoping to drive the sales of other categories through frequent repurchases of fresh groceries. Therefore, the proportion of fresh groceries in the total number of selected SKUs has always exceeded 30%, and Stable contribution of 40% -50% of GMV, which means longer and more expensive supply chain investment. From the very beginning, Meituan’s warehouse construction costs and cold chain investment are the highest among all community group buying platforms.
Buying a lot of vegetables takes the route of “extremely cost-effective products”. Pinduoduo is the largest agricultural product sales platform in China. It has more and cheaper goods. The national commodity library of buying a lot of vegetables has 26,000 SKUs after deduplication, relying on the main website for supply support And to support the white-label product-based route, buying a lot of vegetables can make 60% of the products cheaper than Meituan.
To achieve “higher quality fresh groceries”, Meituan had to set higher business standards and hire more people. Although Meituan has been reducing costs and increasing efficiency for more than a year, in many links, the cost is still significantly higher than that of buying vegetables.
The storage area of Meituan is larger, and new automation equipment is constantly being installed. From the beginning of storage, strict moving line planning and zoning are designed, and sorting workers are required to complete the work in strict accordance with several steps. The warehouse strictly pays attention to details. There are regulations on the material, color, and font of each kanban, the brightness of the indoor lighting, the paint on the floor, and the music played during work.
However, Doduo’s warehouse does not have strict moving lines, almost no automation equipment, and does not pay attention to operating specifications. It only pursues high-speed operation at the lowest cost.
In terms of numbers, Meituan Optimal currently has about 10,000 employees across the country, which is three times that of Duoduo Maicai.
The profitability of buying a lot of vegetables is also related to its earlier emphasis on commercialization. In 2022, Duoduo Maicai will start selling various popular promotion spots on the Maicai homepage to merchants, and the increase in advertising revenue will also help it further increase its profits to a certain extent. At the same time, Meituan Optimal has not started commercialization, and the platform’s requirements for merchants stay in the joint subsidy during the promotional activities.
In the past three years, Meituan has invested more than 70 billion yuan in new businesses, most of which came from Meituan Best. Since there is no hope of profit, a number of secondary market analysts told LatePost that their current valuation of Meituan Optimal is still 0.
Meituan has already reduced its losses significantly. In 2022, Meituan’s new business operating loss will be 28.4 billion yuan, a year-on-year decrease of 84.5%. In the first quarter of this year, Meituan’s new business loss will be 5 billion yuan, a year-on-year decrease of 40.5%. Considering that in the new business, taxi-hailing has given up self-operation, flash shopping has been spun off, Meituan Kuailu, Power Bank, and shared bicycles have made profits, and Meituan Maicai has turned its gross profit into positive at the end of last year. The new business losses in the first quarter basically came from the US. Group preferred.
Meituan currently plans to make the national gross profit of the preferred business turn positive in 2024, and the national gross profit including the headquarters’ equal sharing will be turned positive in 2025.
It is reported that after this adjustment, the preferred goal is to continue to pursue growth without closing the city, improve UE, and regain market share.
The development of the community group buying business has been slower than expected by the industry. Because it is not easy to sell goods cheaper. Community group buying failed to truly challenge offline retail in terms of scale. The price control power of a large number of standard products is still in the hands of manufacturers, and manufacturers will still firmly maintain the long-established price system of offline multi-level dealers. Most items are not much cheaper.
The richness of categories is also a problem. Consumers across the country have various preferences, and the “good” products that the platform wants to sell to consumers may not necessarily be the products they need. For example, the edible oil brand preferred by many consumers in Guangdong is Knife, but Meituan headquarters collects standard products, and mainly sells Arowana and Fulinmen.
Fresh food can be sold more abundantly and cheaper, but the low price and low gross profit prevent this category from contributing enough profit. Today, the platform hopes to control losses and increase the gross profit of fresh food as much as possible. It cannot accept the loss of fresh food to drive the repurchase of other categories as before.
In the past year, many people in the industry have expressed similar concerns to us. When consumer confidence tends to be conservative, more and more people only buy common necessities instead of actively trying more new products.
Meituan and Pinduoduo, two small giants known for their combat effectiveness and execution ability, started in the first half of 2020. After unremitting efforts, in 2022, Meituan will complete 1.1 trillion GMV, with optimization contributing about 13%, and Pinduoduo will complete 3.2 trillion GMV, Duoduo Maicai contributed about 5.6%.
Doing the right thing in the long run, a competition with “day by day”
A Duoduo shopping person once concluded to LatePost that he believes that the success of Duoduo’s shopping business is the victory of institutional advantages.
The company headquarters has fully delegated authority to the region from the very beginning, and the regional person in charge is the highest decision-maker for regional business. The regional leaders are all from the directors of Pinduoduo’s main site. They also lacked experience at first, but they dared to make decisions, relying on “day by day” to deal with problems and correct mistakes faster than their opponents.
Meituan Optimal continues to use the successful experience of previous businesses. The headquarters manages the local area, makes unified decisions, and has a clear hierarchy.
But the effect is not ideal. A former optimization person summed up the problem of the unified management model of the headquarters as “As soon as there is a linkage, you will argue, if you take responsibility, you will throw the blame, and if you take the reward, you will share it equally.” When it comes to specific business cooperation, each department cares more about its own gains and losses than the overall business. goals, at the expense of efficiency, and progress was not as expected.
From October 2021, Meituan will adjust its organizational structure, implement a regional system, and delegate some of the headquarters’ powers to the regions. In April of this year, Meituan revoked the regional system in one fell swoop, and adjusted the five major regions (North China, South China, East China, Central China, and West China) into 17 regions and delegated power to regional leaders.
In terms of specific implementation, Meituan hopes to make a decision after full demonstration to reduce the cost of making mistakes. Pinduoduo believes in running in small steps and fast trial and error.
Taking commodity procurement as an example, Meituan’s headquarters once decided what to sell and which categories to put on the shelves. The decision usually required research by business divisions, research by the commodity department, and internal argumentation by the industry research and regional cooperation. This process usually takes weeks or even months.
The right to buy a lot of vegetables is directly handed over to the front-line procurement, and the feedback can be put on the shelves after the provincial president agrees. New products are usually put on the shelves within one day, and the sales are not good within three days. If necessary, just copy the actions of competitors directly.
To deal with competition, we will try our best to buy more vegetables. A person in charge of Duoduo Maicai province once disguised himself as an employee of Meituan Best, and squatted outside the warehouse of Meituan Best for a week. By counting the number of delivery vehicles and the volume of different goods, he asked the driver about the supplier’s phone number and then increased the price to get the goods. By taking away the supplier resources, you can quickly copy the categories and hot items that Meituan has done well.
In Meituan, the external data and work experience obtained by front-line employees can only be used as part of auxiliary decision-making. The decision-making still needs to go back to further research and detailed demonstrations to prove whether the experience is correct, why it is done, and whether this is a problem. Optimal solution?
One optimist interpreted this situation as a team of smart people who were doing something wrong. He observed that Duoduomaicai sells more cooking oil, chili, and milk powder that are popular with local consumers in regional markets, even if some are niche brands. Meituan is more concerned about how to reduce the price of standard products of well-known brands.
He and his colleagues knew that Duoduo’s ideas were more effective, but they were unwilling to make complex arguments to seek changes, because making changes meant taking responsibility.
Different from the “day by day” idea of buying a lot of vegetables and letting the market test, Meituan believes in using the business sub-system to help business decisions. Meituan has set up a commercial sub-team of more than 400 people for this business, and conducts the most detailed research on each link and component.
A former person who optimizes business points believes that the most common problem encountered by Meituan’s original business point system in the face of complex retail business is that the original data obtained at the beginning is biased; Deviation: The new plan is sent to the front line for execution, and the deformation of the action leads to a deviation in the final result. If the business management system is highly relied on, the goals and results may be quite different.
In 2022, under the goal of reducing costs and increasing efficiency, each department of Meituan Optimal will receive more detailed KPIs, which are directly linked to the individual performance of employees. Collaboration across departments has become more difficult.
Many people from Meituan gave us feedback that everyone only cooperates to the minimum degree to meet the requirements of the headquarters, rather than providing maximum convenience to each other for the overall business.
Their feeling is that it has become more difficult to launch new products and adjust categories. The adjustment and update of some product categories will take several weeks, and ordinary employees need to use more meetings and documents to advance, and go up to the team leader for coordination. , Finally, the person in charge of multiple businesses will be involved together, so that it can be pushed forward reluctantly.
“Everyone seems to be responsible for the task, but everyone is not responsible for the overall goal.” A person from Meituan commented. And when the pressure of competition increases, these shortcomings and problems are also exposed at an accelerated rate.
Learn to say goodbye to path dependence
A number of optimized people told “LatePost” that some people in Meituan had proposed to learn how to buy a lot of vegetables in an all-round way, change the organizational structure to a regional system, and highly delegate power to the localities, but this proposal was not approved by the management in the end.
A more acceptable solution is to remove the big area, re-select the business leaders from the headquarters and the front line, simplify the reporting process, optimize the personnel and processes at the headquarters, and make the headquarters closer to the business.
Meituan tends to fine-tune existing strategies. Compared with making big decisions, Meituan believes that through adjustments on the right track time after time, various problems can eventually be solved.
It is understood that after this adjustment, the assessment requirements of the optimization headquarters for the 17 regional leaders are to produce more output without increasing investment. score. The headquarters also hopes that the new leaders will be able to sum up new methods, new experience, precipitation and formation of barriers to serve the entire system.
At the headquarters level, it is preferable to change the commercial sub-team to a business analysis team to focus on the specific problems of the front-line business and better serve the business. The optimal business sub-team has been reduced from nearly 400 people at the peak to less than 200 people.
Since April, employees in multiple departments have received higher-demanding goals, and some tasks were even impossible to complete when the departments were full.
Optimal is also dispatching troops to send more combat-ready personnel to the front line. In April, two Kuailu management personnel were transferred to Youyou as the core person in charge. In May, employees at Kuailu headquarters and multiple positions in the region also received a request to support Youyou. In 2022, the Kuailu division will be the best-performing business among the three businesses of Kuaimayou, and it will achieve profitability for the first time.
The preferred plan is to further increase the number of group points and strengthen the defense of the Guangdong area. In the first quarter of this year, Duoduomaicai operated about 2.4 million group locations across the country, and Meituan Optimal operated 2 million group locations. Youyou hopes to maintain the same level as Duoduomaicai, and further pursue effective newcomers in sinking markets.
Duoduomaicai is also learning from Meituan. In 2022, after the order quantity and other indicators exceed Meituan’s preferred selection, Duoduomaicai’s multiple regions will start to learn from Meituan’s experience in warehouse distribution, contract fulfillment, and products to improve its service quality.
The observation of a Duoduo shopping person is that in the past few years, the fresh quality of Duoduo’s shopping has been worse than that of Meituan. Some fruits and vegetables have begun to wilt when they leave the warehouse, and they are obviously not fresh. The damage rate of the goods is 2 – 3 times. Since last year, the provinces and regions of Duoduo no longer put low prices as the first priority, and began to emphasize quality orientation. The quality of some fresh products sold by Duoduo has been greatly improved compared with before.
American management scientist Clayton M. Christensen once summarized the reasons why large companies missed important opportunities in the book “The Innovator’s Dilemma” as that the failure of most companies is neither due to bureaucracy nor management’s decision-making mistakes. It is that they have gone too smoothly on the road to success in the past, and have become deeply dependent on the original path.
Therefore, for some entrepreneurs with lofty aspirations, the most important task after they achieve success is to break the path dependence in order to cope with the ever-changing market and consumer demands. But no matter how successful they were in the past, it will be as difficult to break the path of the past, which is no less difficult than breaking away from gravity.
Compared with Pinduoduo, Meituan has more opponents and has experienced more business battles. Meituan is a multi-business company, while Pinduoduo is a single-business company. When entering the same battlefield, the two chose completely different paths to cut in, and the two experiences collided head-on, which was a challenge for the organizations of both companies.
On the surface, Pinduoduo turns around more dexterously, while Meituan looks bigger and slower. The reason is that the matching degree of new and old businesses is different, and it is more difficult for Meituan to break the path dependence.
The strategy of Meituan is “technology + retail”. What we have to face today is not how to deliver food from A to B faster, or how to make dozens of sub-categories of hotels, hotels and travel more comprehensive and cheaper. It is the competition of hundreds of kinds of rice noodles, grains and oils, thousands of kinds of vegetables, fruits, meat, eggs and milk, and tens of thousands of various standard products. It is more complicated, more uncontrollable, and the network effect is weaker. But that’s retail.
Judging from the current business layout, Meituan not only hopes to meet users’ instant delivery needs within 30 minutes (takeaway/flash shopping/grocery shopping), but also hopes to meet users’ fast delivery needs the next day (community group buying). In the future, it hopes to meet the demand for cross-city remote distribution (e-commerce) in about 3 days.
Community group buying is the biggest market opportunity that Meituan has found after food delivery, and it may lead Meituan to a larger market. Through the construction and control of the fresh food supply chain, it is possible for Meituan to gain a firm foothold in the field of physical e-commerce, which is a must for military strategists. This is why it is difficult to give up the preferred business. The scale of Meituan’s fresh agricultural products in 2022 will be about 110 billion, accounting for less than 2% of the industry’s 6 trillion. It’s still in its infancy.
As one of the management of Youyou said in the aforementioned June meeting, although the growth of Youyou’s business is not as good as expected, this is the best achievement that Meituan has achieved in fresh food retailing.
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