MEITUAN-W: Confident in Consumer Recovery in 2023, Hoping to Take Off with the Wind

The following is a summary of the MEITUAN-W 1Q23 conference call. For financial report analysis, please refer to "The Explosive Delivery Guy, Can He Help MEITUAN-W Stand Out?"

1. Management Remarks

In terms of food delivery and express delivery business, the average order value in 1Q23 performed well, with significant improvement in unit economics compared to the same period last year across different product categories. Categories such as flowers and medicine have very good unit economic benefits in the instant retail business, and online marketing revenue is also growing rapidly. The growth is mainly due to the fact that many merchants are turning to online expansion, and MEITUAN-W can provide them with the best support.

In terms of hotel and travel business, revenue has been good in the past two years, with good growth both year-on-year and quarter-on-quarter. On the one hand, service consumption and travel are strongly recovering, and many merchants hope to have better development after the epidemic. On the other hand, consumers also hope to find better hotels and get better travel experiences.

In addition, the subscription plan has also developed very well, encouraging more merchants to participate in the plan on the platform. GTV has grown significantly year-on-year. During different holidays, opportunities will be seized to achieve better operating results. In terms of traffic allocation, more support will be provided to high-quality merchants and new merchants.

In summary, the company hopes to better meet consumers' diverse needs at different stages of consumption recovery. The frequency of user consumption has increased significantly in the past few years, and there is greater growth potential in the future. The company is confident in the growth of its core local business and will further improve management and operational efficiency to ultimately achieve its mission.

2. Q&A Session

Q: Progress and future plans for new marketing methods for food delivery and in-store business

A: It has just started and more new marketing methods will be explored. In terms of in-store, hotel, and travel business, we started trying a few months ago and hope to use live streaming to divert traffic to merchants to promote their products - the new model is effective.

In March, we launched a brand-new "Sharpshooter" marketing campaign to merchants in Shenzhen, where merchants can promote high-quality products at low prices through different forms such as live streaming and short videos. In April, the monthly marketing event "Sharp Coupon Festival" was upgraded. In marketing activities, merchants can provide discount coupons to consumers through different marketing forms such as limited-time flash sales, live streaming, and short videos.

The activities have achieved very good growth, with active users increasing by more than 70% year-on-year, and GTV of participating merchants increasing by more than 30% per week. Merchants in different categories can consider participating in such activities to achieve significant growth and encourage consumers to open the platform more frequently.

Visual appeal is very important for marketing tools. Short videos and live streaming can attract more consumers visually and further improve product sales, but this process does not need to be provided immediately. Consumers can consume after obtaining discount coupons for a period of time. In terms of live streaming, we will fully consider which products are suitable for live streaming, and further improve consumer recommendations to ultimately increase profits and consumer satisfaction.

Q: In the current recovery environment, what are the signs of recovery in takeaway orders, and what is the outlook for 2Q23 order volume and unit economic benefits?

A: Recovery situation: In the current environment, business has shown strong growth, with a growth rate of several tens of percent in April, and more new merchants joining the platform. Order volume has increased significantly, and platform traffic has further increased.

2Q23 outlook: In the hotel and tourism sector, since April, demand in low-tier markets has clearly recovered, and low-frequency users and low-value orders have also quickly recovered. We believe that this year will see continuous growth in orders, and there will be further growth in 2Q23.

The current development momentum is very good, and the long-term goal is still to improve unit economic benefits, such as helping merchants seize the current consumption recovery trend through "Sharpshooter" and "Coupon Festival" to achieve better growth.

All current growth is being achieved through cost structure optimization. From a seasonal perspective, the economic situation and weather are usually favorable at the end of 2Q, so there will be stronger growth momentum at the end of 2Q. We will continue to invest in stimulating consumer demand, and focus on high-quality growth and operational efficiency improvement.

Q: Under the trend of recovery, what is the competitive situation and response measures for in-store business, and what is the operating profit margin guidance for 2Q23?

A: The strong recovery of hotels will continue, and the year-on-year growth will be very significant. There has been a significant increase in GTV during the Qingming Festival and Labor Day, and GTV has increased by more than 200% year-on-year during the May Day holiday.

Recently, offline consumption has rebounded, and we will take further measures to consolidate our competitive advantages and develop online marketing plans for different categories. For certain specific categories and low-tier markets, we will encourage more merchants to join the platform and use our online marketing services through invitations and relaxed access.

There will be some large-scale promotional activities in 2Q23, such as special price and live streaming activities, which can bring unique opportunities for merchants to achieve better marketing, and consumers can use coupons and discount coupons. We will further explore this model in the future.

In fact, the company also needs new traffic acquisition channels, and will cooperate with different partners to expand distribution channels, such as WeChat and other media platforms.

Starting from 2Q23, we will further consider more video content and new marketing models to further improve consumer awareness and let consumers know that the best and most cost-effective deals are on the MEITUAN-W platform. We will further study how to promote GTV growth nationwide, cultivate merchants, and cultivate consumer awareness of merchants' feedback.

Q: How did hotels and tourism perform in April and May, such as the demand performance of the May Day holiday, and what is the outlook for 2Q hotel booking growth?

A: The recovery has indeed further promoted demand growth, and demand has become more diversified. The company has launched different promotional and live streaming activities during holidays to seize the opportunity to stimulate consumption. We hope to achieve stronger synergy between hotels and other businesses, and better conversion for users in different business sectors. In addition, we have strengthened our search and recommendation functions to help consumers make booking decisions more efficiently. The company's brand awareness has further increased, and its share of consumer mind has also increased.

We have launched corresponding marketing activities with major hotel brands, hoping to provide comprehensive marketing solutions for high-star hotel merchants. When cooperating with new brands, we hope to help them with their operations.

We have signed cooperation agreements with more than 140 hotels for hotel plus X. Through hotel plus X, we hope to achieve stronger synergy between other businesses and hotels, and consumers using other businesses can switch to using the MEITUAN-W platform to book hotels.

We have cooperated with travel agencies to launch many travel group products to capture market opportunities, and launched special activities to promote overall growth. We have also improved our business travel operations and hope to attract more business travel consumers.

Throughout 2Q, hotel GTV and other data achieved growth of around 100%. In the recovery process, we will further explore innovative models and further strengthen our product strength. There will be very powerful measures in promotion and business acceleration.

Q: Thoughts on user numbers and improving user experience

A: Due to epidemic control measures, consumer demand was not strong last year. Now that the new crown epidemic has faded, the growth momentum is very strong, and consumers will have more local consumption needs. Measures have been taken to further stimulate consumption recovery.

The number of active users is still at a very healthy level, and the number of active users reached a new high in May. At the end of April and during the Labor Day period, another statistics was conducted, and the number of active users was very good in these statistics. We hope to further consolidate our user base.

So far, user engagement and numbers are high. It is expected that China's local consumption market will further recover this year, and the long-term development potential of local services is very strong. The company has the opportunity to further strengthen user penetration and seize consumption upgrade opportunities.

In the past 11 consecutive quarters, the frequency of user transactions has increased significantly, which is largely due to the company's continuous innovation, infrastructure, and supply-side measures.

In the past few years, consumers have established a very strong share of mind. The goal now is to further strengthen the synergy between different business sectors and operate the entire platform as a stronger brand, strengthening consumer mind.

Data shows that the longer consumers use the platform, the higher the frequency and probability of service conversion. In the first year of acquiring users in 2015, the transaction frequency was 6 times, and by the eighth year, it may be 50 times, an increase of about 9 times. The consumption categories will also continue to improve. Previously, consumers may have consumed in categories 1 and 2, but after 8 years, they may consume in 4 or 5 major categories.

Q: Thoughts on AI

A: In the long run, AI may have a fundamental impact on various aspects of society, but its impact on performance-based service industries is currently relatively small. MEITUAN-W has a positive attitude towards exploring AI capabilities and applying them to business scenarios. We are currently researching and developing basic models and applications, and are open to external technical cooperation and investment opportunities. If we make progress in this regard, we will be happy to synchronize with the market.

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