Meituan "Looking Inward"

MEITUAN-W, which has recently experienced a sharp decline in stock prices, is attempting to unleash its potential and enhance its ability to compete in the local life battlefield through a series of reforms.

On December 3rd, MEITUAN-W announced personnel changes. Zhang Jinmao stepped down as the head of the basic research and development platform and will continue to serve as the chairman of the technical committee. Han Jian, the former head of the MEITUAN-W platform technology department, took over as the head of the basic research and development platform and reports to Wang Xing. Si Tiange, the former head of the Quick Donkey business unit's product, operations, and technology, took over as the head of the platform technology department and reports to Li Shubin, the head of the MEITUAN-W platform.

In addition, a technology governance group is being prepared under the leadership of Mu Rongjun, senior vice president of MEITUAN-W, and Zhang Jinmao, chairman of the technical committee.

MEITUAN-W stated in the announcement that this adjustment is necessary to further enhance the efficiency of technology-supported operations. The company also needs to increase research and development investment in areas such as autonomous vehicles, drones, AI, and large-scale models. It actively explores new applications and experiences in retail business scenarios.

Bai Wenxi, Chief Economist of IPG China, believes that this adjustment is an important organizational change in the company's development process. The purpose of the adjustment is likely to optimize the organizational structure to better adapt to the company's future development strategy.

All personnel adjustments are made to match the company's business. Since the second half of this year, MEITUAN-W, which has always been known for its stability, has undergone several personnel adjustments. Wang Xing first promoted five executives, including those responsible for drones, home delivery platforms, restaurant SaaS, flash sales, and grocery shopping, to vice presidents. He then promoted Li Shubin, the head of the platform, to senior vice president.

At present, the management team, which has undergone multiple job rotations, not only has a deep understanding of technology but also is familiar with various specific businesses. They can achieve synergy and innovation at a higher level. Taking Si Tiange as an example, he and Li Shubin can not only better build the MEITUAN-W APP technology infrastructure but also better integrate the takeaway system and live streaming technology, thereby bringing more business possibilities.

The recent large-scale personnel adjustments and widespread reshuffling of personnel imply MEITUAN-W's anxiety in the market competition. According to the third-quarter report, the operating profit of MEITUAN-W's core local business was 10.1 billion yuan, an increase of only 8.3% YoY, and the operating profit margin was 17.5%, a decrease of 2.6 percentage points YoY.

Compared with the 124.6% growth rate of operating profit in the same period last year, the profit growth rate of MEITUAN-W's local business in the third quarter of this year has declined significantly. Moreover, MEITUAN-W's operating profit growth rate is also lower than the 34.8% in the second quarter, reaching a low point in nearly two years. MEITUAN-W stated in its financial report that the increase in operating profit was offset by increased subsidies, and the decrease in operating profit margin was mainly due to a higher subsidy rate.

In other words, the competition with Douyin (TikTok) has already begun to erode MEITUAN-W's profits. In order to gain a larger market share, MEITUAN-W has increased its subsidy efforts. A marketing director of a catering brand told Wall Street News that currently, MEITUAN-W provides subsidies to some merchants, and the intensity of subsidies depends on the transaction volume. For example, if the monthly transaction volume reaches 300,000 yuan, the commission charged is only 2%, which is much lower than the normal level. In the future, the performance growth of MEITUAN-W is also not optimistic. During the third quarter earnings conference call, MEITUAN-W CFO Chen Shaohui stated that based on the current market competition landscape, MEITUAN-W's marketing expenses will further increase in the fourth quarter.

The management of MEITUAN-W expects that the year-on-year growth rate of delivery income in Q4 will be slightly lower. At the same time, in order to ensure the continued improvement of in-store and hotel performance, more targeted investments will be made to strengthen the coverage of local teams in sinking markets and seize future opportunities in these markets.

Over the past decade, Wang Xing has led MEITUAN-W to emerge victorious in the "Battle of the Hundred Groups" and the "Food Delivery Battle," becoming the king of local life without any rivals for many years. However, now, with the fierce attack launched by Douyin, a new round of market competition in local life has begun. Meituan, Ele.me, Kuaishou, Xiaohongshu, Pinduoduo, and others are all continuously increasing their efforts or entering the market one after another. MEITUAN-W is facing unprecedented pressure.

It is obvious that this will be a difficult battle of offense and defense. The frequent personnel changes indicate that Wang Xing has already begun a new round of deployment. Whether he can completely defend the position of the king of local life will be answered by time in the end of this competition.