Meituan Looks to Expand Its E-Commerce Business. It Wants to Rival Alibaba and

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Food delivery drivers for online shopping platform Meituan in Beijing. Meituan is looking to expand its e-commerce business.

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Jade Gao/AFP via Getty Images

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China’s largest food delivery platform is looking to use its mammoth user base to expand into e-commerce and bolster its existing forays as a bike-share leader and travel intermediary. The moves come even as it remains under the vise of Beijing’s regulatory grip and its revenue slows.

Hong Kong-listed Meituan (3690: HK) released its 2021 financial results this week, showing an ambitious and maturing company. Analysts remain mixed on the company’s prospects, largely because of three factors: the unknown future of Meituan’s new initiatives, China’s clampdown on tech companies, and Covid-19.

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While Meituan beat revenue and profit expectations for the fourth quarter of 2021, numbers were down—for the quarter and for the year. Profits took a huge hit, falling from a $737 million gain for all of 2020 to a $3.7 billion loss for 2021. Total revenues were up 56% for the year, but have nevertheless been slowing for 10 months.

“Challenges” were a recurring theme in the firm’s commentary accompanying its financial statement. “As we entered 2022, we still face challenges from Covid control measures and a weakening consumption environment,” it said. It also blamed the “macro environment and natural disasters”—all of which are indeed impediments that have sideswiped a range of sectors in China over the past year.

“We expect the company’s earnings to remain under pressure with new regulations on food delivery commission and resurgence of Covid-19,” LightStream equities analyst Shifara Samsudeen wrote in a note this week.

Meituan didn’t respond to requests for comment.

But Meituan also seems to be going headstrong into its new and existing ventures. Late last year, it announced a change in its entire strategic positioning. It was moving from “Food + Platform” to “Retail + Technology,” it said in a statement. What that largely meant was that it would continue its successful leadership status in food delivery and bike-sharing, but would expand into full-fledged e-commerce.

Meituan is well positioned for this massive endeavor, even if competition is fierce. It already delivers a range of third-party products from food to retail items, and has a growing logistics network. And through its delivery and bike-share services—which are available alongside a number of other services in a single do-it-all app—it is already on more than 100 million phones in China, according to iiMedia Research.

Meituan’s e-commerce push involves expanding the products it offers in its delivery platform, but also increasing both third-party vendors and its own products. It is creating multiple spheres within its e-commerce vertical that target different user needs. Chinese media even reported that Meituan was establishing physical stores, much like Alibaba Group Holding‘s
(BABA) Tmall has done, from which drivers pick up goods to be delivered.

Meituan has also recently opened an overseas shopping portal for cross-border sales, allowing Chinese consumers to buy products from developed markets like the US That is already a crowded field, however, dominated by Alibaba‘s
Tmall, (JD), and Pinduoduo (PDD), with NetEase‘s
(NTES) Kaola, (AMZN), and Suning (002024.China) taking smaller portions, according to Analysys.

Even short-video apps like Douyin (China’s original version of TikTok) and Kuaishou Technology (1024.Hong Kong) have begun seeing significant revenue through sales of consumer goods available via click throughs. But revenue is slowing for the three big e-commerce leaders, Alibaba,,
and Pinduoduo.

On an earnings call this week, Meituan went further than noting that its huge food-delivery user base would give it an advantage diving into e-commerce, hinting that its various e-commerce platforms would help drive up its traditional verticals.

So while it bleeds money, it still has the confidence of many observers.

“As we believe it is reasonable to keep the businesses in loss, we value the company by revenue. We believe revenue will rise by 29% in 2022 and 25% in 2023,” Ming Lu, Chinese equities analyst at Aequitas Research, wrote in a note this week. “We conclude an upside of 20% for the year end 2022, which suggests a price target of HK$160 ($20.44).”

As for the slew of new initiatives that are driving losses, Fitch Ratings said going forward it “expects better discipline over investment in new businesses that do not yield economic improvement.”

Analysts at Nomura were more dour, positing that downside risks of Meituan stock include “intensifying competition from Alibaba in both food delivery and in-store consumption verticals, and worse-than-expected performance in the new initiatives” such as e-commerce.

Though Meituan’s stock fell Thursday, it was still up almost 15% for the week.


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