---
title: "Competing in Fresh Food, Meituan's Biggest Rival Might Be Pinduoduo"
description: "The fresh food e-commerce track is getting increasingly crowded. During the pandemic, it solved the pain point of people being unable to go out to buy groceries, making it a hot favorite among investment institutions, with large-scale financing rounds. In July, Miss Fresh announced the largest financing in the fresh food delivery industry—$495 million; in August, community e-commerce platform Shihui Tuan announced an $80 million C2 round; Yipin Fresh announced 2.5 billion yuan in financing; and Xingsheng Youxuan entered the IPO tutoring phase. Even giants couldn't resist joining. Recently, Meituan and Pinduoduo launched new platforms, with Meituan introducing 'Meituan Select' and Pinduoduo registering 'Duoduo Maicai', preparing to enter the community group buying segment."
author: "财经新媒体"
publisher: "New Distribution"
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published: "2020-09-29"
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# Competing in Fresh Food, Meituan's Biggest Rival Might Be Pinduoduo

> The fresh food e-commerce track is getting increasingly crowded. During the pandemic, it solved the pain point of people being unable to go out to buy groceries, making it a hot favorite among investment institutions, with large-scale financing rounds. In July, Miss Fresh announced the largest financing in the fresh food delivery industry—$495 million; in August, community e-commerce platform Shihui Tuan announced an $80 million C2 round; Yipin Fresh announced 2.5 billion yuan in financing; and Xingsheng Youxuan entered the IPO tutoring phase. Even giants couldn't resist joining. Recently, Meituan and Pinduoduo launched new platforms, with Meituan introducing 'Meituan Select' and Pinduoduo registering 'Duoduo Maicai', preparing to enter the community group buying segment.

The fresh food e-commerce track is getting increasingly crowded.
Due to solving the pain point of people being unable to go out to buy groceries during the pandemic, fresh food e-commerce has become a hot favorite among investment institutions, securing large-scale financing. In July this year, Miss Fresh announced the largest financing in the fresh food delivery industry—$495 million; in August, community e-commerce platform Shihui Tuan announced an $80 million C2 round; Yipin Fresh announced 2.5 billion yuan in financing; and Xingsheng Youxuan even entered the IPO tutoring phase.
Even giants couldn't resist joining. Recently, **Meituan and Pinduoduo successively launched new platforms: Meituan introduced 'Meituan Select', and Pinduoduo registered 'Duoduo Maicai', gearing up to enter the community group buying segment.**
When it comes to fresh food, will Meituan get meat or just vegetables? Can it bite off this hard bone of community group buying?
**-01-
Racing and Braking, Meituan's Fresh Food Path is Both Urgent and Chaotic**
**Meituan is not late in entering fresh food e-commerce.**
In October 2015, shortly after Meituan merged with Dianping, it launched a platform called 'Meituan Food Market', planning to do O2O in the fresh food market.
Also in 2015, the inspirational orange 'Chu Orange' started direct e-commerce sales, Miss Fresh decided to go all-in on front warehouses, and a host of fresh food e-commerce companies like Womai, SF Preferred, Benlai Life, and Yiguo were actively competing for this seemingly undeveloped blue ocean.
However, within a few months, Meituan Food Market was taken offline. Since then, **Meituan has embarked on a path of racing, braking, turning, then racing again, braking again, and turning again in the fresh food track. In two words: 'urgent' and 'chaotic'.**
Meituan's fresh food path can be divided into three stages:
**1. Pre-IPO sprint.** Meituan went public on the Hong Kong Stock Exchange on September 20, 2018. Using Meituan's IPO as a dividing line, before the IPO, Meituan, in order to boost its valuation ceiling and provide more imagination space for the secondary market, started a sprint in the fresh food business, benchmarking Hema Fresh and launching Xiaoxiang Fresh.
In July 2017, Meituan launched its supermarket fresh food business, Zhangyu Fresh.
In May 2018, Meituan's first Xiaoxiang Fresh store opened in Fangzhuang, Beijing, officially introducing dine-in and live aquatic products, and upgraded its supermarket fresh food business, Zhangyu Fresh, launched in July 2017, into Xiaoxiang Fresh.
In July 2018, Xiaoxiang Fresh entered Wuxi, opening two more stores. These two stores were larger and had a food classroom area of about 30 square meters for interactive cooking classes.
On the day of Meituan's IPO, it opened at HK$72.9, briefly rising to HK$74, and its market value ranked fourth among Chinese internet companies at the time, enjoying a moment of glory.
**2. Post-IPO correction.** Just one month after the IPO, Xiaoxiang Fresh changed its leadership. Meituan's senior vice president Chen Liang took over from Jiang Yueping, a former Dianping executive. Meituan began its post-IPO correction, planning to shed heavy assets and explore light assets. The development of Xiaoxiang Fresh turned around, and the previously rumored slogan of 'opening 20 stores by the end of 2018 and 50 stores by 2019' fell silent, as Xiaoxiang Fresh started a store closure plan.
On April 17, 2019, three Xiaoxiang Fresh stores in Changzhou's Zhonglou, Wujin, and Xinbei districts ceased operations; in the same month, two Xiaoxiang Fresh stores in Wuxi also closed. A Xiaoxiang Fresh store that was waiting for decoration and opening in the newly built Shanghai Xiexin Plaza in November 2018 never saw its opening day.
The new platform Meituan Maicai was launched in January 2019, based in Shanghai, with services radiating to a 1.5-kilometer radius.
The development of Meituan Maicai can also be described as 'urgent'.
In March 2019, Meituan Maicai expanded to Beijing, with the service scope expanding to 2 kilometers; in July it landed in Wuhan, and in November it entered Shenzhen, expanding the service scope to 3 kilometers, while continuously raising employee wages. It was once rumored that the wages of Meituan Maicai's ground promotion and delivery staff in Beijing were all above 10,000 yuan.
At this stage, Meituan seemed to be imitating Miss Fresh, frantically building front warehouses, with over 50 front warehouses in Shanghai, Beijing, and Shenzhen each.
**3. Post-pandemic shift.** The pandemic profoundly changed people's consumption habits and also changed the direction of Meituan's fresh food track. This time, Meituan's benchmark became Xingsheng Youxuan. Meituan even named its platform similarly to Xingsheng Youxuan, calling it Meituan Select, focusing on community group buying. On July 7, 2020, Meituan Select was officially launched. By August, Meituan Maicai in Wuhan was fully taken offline and replaced with Meituan Select; the Dongguan business, which had only been operating for four months, was also fully taken offline.
And the development of Meituan Select continued its usual fast pace:
> July 15, entered Jinan;
>
> August 22, entered Wuhan;
>
> August 31, entered Guangzhou;
>
> September 2, entered Foshan;
>
> September 8, entered Chengdu.
**Looking back at Meituan's development across these three tracks, in Wang Xing's words, 'Don't dwell on the past, charge forward with passion.'** **Sunk costs are sunk; Meituan only focuses on the future direction. However, the market only sees Meituan's urgency and chaos in the fresh food track.**
Meituan doesn't seem to have figured out how to approach the fresh food track, instead choosing to imitate whoever is popular. It lacks a consistent policy, so it hasn't reaped the rewards of time, and its accumulation in any direction is insufficient.
Meituan tries to compensate with speed, racing ahead, conquering territories, and developing rapidly. But what starts fast ends fast. With a sudden brake, everything resets, and past costs are forgotten.
Now Meituan is trying to seize the community group buying track. Can it bite off this meat bone?
**-02-
Giants Compete, Flames Reignite, but the Fresh Food Track Still Has No Winner**
**1. Conquer fresh food and conquer the world? This world is a bit too small**
Today Capital founder Xu Xin said in 2015, 'Conquer fresh food and you conquer the world.' This phrase is regarded as a golden rule by the fresh food industry, but 'Tanglang Finance' has to say, this world is a bit too small.
**According to 2019 data, the absolute majority of fresh food sales channels are still wet markets, accounting for 56%, followed by supermarkets at 36%** , together accounting for 92% of the entire market, with fresh food e-commerce accounting for only 6%.
Moreover, after nearly 10 years of development, the speed of fresh food e-commerce is far from expectations. Over the past decade, the e-commerce penetration rate in the fresh food market has only increased from 0.3% to 6.3%.
(Image source: see watermark)
In 2019, the annual food expenditure of Chinese urban residents was approximately 6.5 trillion yuan, while the scale of online e-commerce was about 0.3 trillion yuan.
In general, **due to the high-frequency, low-price purchase characteristics of fresh food and the high demand for freshness, the crowding-out effect of online e-commerce on offline entities is very small.**
**2. The world is small, but there are many competitors**
However, although the world is small, there are many competitors. After all, this is a new track, and a new track means a new market, a new market means a new story, and a new story means new financing.
After the wild growth since 2015, fresh food e-commerce has developed four major models:
**The first model is the store-warehouse integration + delivery model represented by Alibaba's Hema.** Large offline stores serve as both traffic entrances and front warehouses, attracting consumers to order through the online app, with delivery personnel delivering to homes;
**The second model is the supermarket chain + delivery model represented by JD.com.** JD.com uses JD Daojia as an entry point, partners with supermarket chains like Yonghui and Walmart, and delivers goods through Dada, forming a closed loop of traffic, supply chain, and delivery capacity.
**The third model is the front warehouse + delivery model represented by Miss Fresh.** Miss Fresh's model has proven viable so far, and the industry's largest financing of $495 million is capital's recognition of this model.
These three models have developed relatively maturely through steady progress, each with a relatively stable customer base. Meituan's attempts at the first and third models failed to gain a foothold, always hovering at the edge of the industry.
This year, the pandemic disrupted the market landscape. During the pandemic, people couldn't go out, and community group buying, which originated as a mutual aid model within residential communities, emerged as a fourth force. Xingsheng Youxuan, Shihui Tuan, and other community group buying platforms are thriving. This is the track that Meituan Select and Pinduoduo's Duoduo Maicai are currently trying to enter.
The business model of community group buying is not complicated. It involves a group leader initiating group purchases of certain products, allowing consumers in residential communities to place orders via WeChat group chains, and then the merchant delivers the products to a pickup point at the community entrance, where consumers pick them up or the group leader delivers them.
(Image source: from iyiou.com)
**Meituan Select and Duoduo Maicai, as market followers, can easily replicate the successful model: recruit group leaders, gather people, select group products, and start groups.**
But the business line of community group buying is quite different from Meituan's and Pinduoduo's previous business lines. Currently, **Meituan and Pinduoduo have few advantages to rely on.**
Their strong brand effects can help them gain huge traffic. But it must be noted that Meituan's users are those who order takeout. Can they really be converted into users who buy groceries and cook? Isn't it precisely because users don't want to buy groceries and cook that they order takeout? As everyone knows, Pinduoduo's users are mainly lower-tier users in third- and fourth-tier cities, even rural users. They are among the most price-sensitive groups. Will they really abandon the wet market and use a mobile app to buy groceries?
Looking at it alone, Pinduoduo's experience with group-buying fission might be useful. But Pinduoduo's model is online group buying with factory shipping, relying on the existing express delivery chain. **Fresh food is different. Fresh food goes from the same-city fresh food base to the same-city fresh food cold storage, and then to the hands of same-city community consumers. The same-city fresh food supply chain is short, high-cost, and highly regional, with no industry giants, so everything must be built from scratch.** Pinduoduo has a long way to go in infrastructure.
Meituan Select also has some advantages, such as its strong ground promotion team, which helped Meituan win in previous takeout wars. This might help Meituan gain an edge in initial traffic. But Meituan is not good at community operations and marketing fission, which are long-term, steady efforts.
Additionally, Meituan seems to have an advantage in delivery, but 'Tanglang Finance' believes it will be difficult to fully leverage. Because the delivery times for takeout and fresh food overlap significantly. If fresh food delivery is assigned to takeout riders, it will only worsen their already tight schedules. What Meituan Select can use is Meituan's delivery algorithm, and its business and data middle platforms can provide advantages in supply chain management. As for the delivery end, a dedicated delivery chain will definitely be needed to support it.
**3. Many competitors, but not much food left**
After a rapid round of sinking during the pandemic, the fresh food e-commerce track has quietly shifted from an incremental market to a stock market.
**User penetration of fresh food e-commerce in first-tier cities has entered a plateau.** According to Jishu data, in June 2020, after the pandemic's education, the user penetration rate of fresh food e-commerce in first-tier cities reached 33.4%, meaning one in three people is a fresh food e-commerce user. This proportion is quite high.
(Image source: from Jishu)
**In contrast, in second-tier cities, the user penetration rate is only 1.4%.** However, this number is not surprising, because consumers in second-tier and below cities are naturally not high-viscosity users in fresh food e-commerce. Their work pace is slower, they get off work earlier, and they have enough time to cook dinner. Additionally, more of them have parents to take care of them, and parents are usually the main cooks.
So, **trying to attack from third- and fourth-tier cities upward, Meituan's strategy of surrounding the cities from the countryside will fall into an awkward position.**
According to Jishu statistics, over half of users have two or more fresh food e-commerce apps installed on their phones, and the proportion of those with only one app is also a sign of 'not much food left'. It's worth noting that in 2018, the proportion of users with only one fresh food e-commerce app was as high as 65.7%, but it has now dropped to 45.2%.
This also means that user stickiness is decreasing, and comparing prices across different platforms has become a routine action for nearly half of users when buying fresh food online.
(Image source: from Jishu)
Currently, no absolute winner has emerged on the fresh food e-commerce track. Whether it's Hema, Miss Fresh, JD.com, or Xingsheng Youxuan, despite establishing certain advantages, they are all still striving forward within the track.
For the newly joined Meituan, every piece of pie it eats is snatched from others' mouths.
But this pie is not so easy to snatch.
**-03-
The Disease of Community Group Buying Won't Be Cured Soon, and Meituan's Biggest Rival Now Is Pinduoduo**
Meituan and Pinduoduo are entering community group buying at this time, but their accumulated advantages in express delivery or e-commerce are not very useful, and they cannot escape the difficulties faced by community group buying.
**1. The capabilities required for community group buying, Meituan does not have an advantage**
What capabilities are most important for doing community group buying well? 'Tanglang Finance' believes that **community stores, group leader quality, and supply chain management are all indispensable.**
Take Xingsheng Youxuan, which has made community group buying a 'model':
First, community stores. Xingsheng Youxuan started from community supermarkets. In its birthplace, Changsha, almost every residential community has a Xingsheng Youxuan supermarket at its entrance. Such community stores play a crucial role in community group buying by solving the last-mile problem. All products that consumers group-buy on Xingsheng Youxuan can be placed in the Xingsheng Youxuan store in their community, and consumers can pick them up after work.
Xingsheng's community stores are mainly family-run small workshops like mom-and-pop stores or brother stores, which well solves the problem of group leader quality in community group buying.
**In community group buying, the position of the group leader is crucial; the group leader is the traffic.** And these mom-and-pop store owners can themselves become high-quality group leaders. They have been doing business outside the community for a long time, know the people well, and know the owners in the community, making it easy to pull groups and form groups.
Additionally, they can observe the consumption levels of community owners over time, allowing them to provide targeted group purchase products. This also involves supply chain management, such as how to accurately select products and increase consumer repurchase rates.
And Xingsheng Youxuan's vast network of community stores gives it bargaining power with suppliers, and community stores can also exchange goods, allocate resources, and manage collectively.
These three capabilities are interlocking. To put it bluntly, Meituan or Pinduoduo do not have any of these three capabilities.
**2. The problems currently shown by community group buying, Meituan will also face**
Xingsheng Youxuan and Shihui Tuan have mature community group buying, but they also face difficulties:
**First, customer loss due to group leader attrition.** The development of community group buying relies on group leaders, but when group leaders grow strong and seek to go solo, it will inevitably cause customer loss in the entire community.
**Second, pickup points will face competition from ground stores.** Generally, next to community supermarkets, there are also community vegetable stores. The time spent going to a community supermarket to pick up goods is not much different from going to a community vegetable store to buy vegetables. The low unit price of fresh food also makes the price difference less obvious, and the vegetables at community vegetable stores are fresher. Therefore, competition with ground stores is a problem that community group buying will always face.
**Third, community group buying also faces competition from other brands.** For example, the pickup points of Xingsheng Youxuan and Shihui Tuan are usually in the same store. So, how can they differentiate themselves and create competitive advantages?
It can be said that these three difficulties currently have no better solutions in community group buying, and Meituan Select or Duoduo Maicai will also face the same problems.
**3. Meituan and Pinduoduo are the real competitors**
Even internet giants doing community group buying start from a new starting line. Meituan Select and Duoduo Maicai, as new entrants, are currently on the same starting line.
They both need to open up markets from scratch and cold-start WeChat shopping groups. What's more cruel is that the members behind these shopping groups may already have no fewer than five group-buying groups in their phones.
They both need to gradually build supply chains that better fit local markets. Currently, there are no giants in the fresh food supply chain, and without giants, there is no sharing; everything must be built by themselves.
Finding food in a stock market is never easy. Newcomers can only fight each other, improve their combat effectiveness, and the survivors then compete with the old players.
So in the field of community group buying, Meituan and Pinduoduo are the initial competitors.
Meituan Select has taken the first step aggressively. In the stage of recruiting group leaders, it offered high commissions. Group leaders generally receive 5%-10% commissions, but Meituan offers 12%-20% and provides training.
Now it's up to Pinduoduo to respond.
**Time is money. Currently, whoever can figure out the industry's playbook first will be qualified to catch up with the leaders ahead. After all, when a bear is chasing you, you first need to outrun the competitor in front of you.**
**In this round of community group buying, there is not much time left for the giants.**
Source: Tanglang Finance (ID: TanglangFin), Author: Chen Xi
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