“ ** Another player in fresh e-commerce is bleeding. Is there still a future?** ”
Meituan Select Withdraws from Four Northwestern Provinces
From its inception, fresh e-commerce set a life-or-death challenge for players in the赛道, and to this day, no one has solved it. As smaller players retreat one after another, the giants are locked in a stalemate. But now, Meituan Select, one of the three giants in the community group buying model, can no longer hold on. According to Interface News, recently, due to high operating costs, Meituan Select has begun to shrink its business scope. Meituan Select has withdrawn from four northwestern provinces, including Gansu, Qinghai, Ningxia, and Xinjiang, retaining its Xi'an stronghold. In addition to the four northwestern provinces, other regions will also see minor adjustments. Those who follow fresh e-commerce closely may find this news familiar. Last September, Orange Heart优选 was also reported to have cut business in some regions. However, Orange Heart优选's scope was broader, shrinking from 9 major regions and 31 provinces to 3 major regions and 9 provinces. By March this year, Orange Heart优选 had completely shut down. Looking at the timeline and focusing on the present, Meituan Select has also begun to reduce its battle zones. Unlike Orange Heart优选, although Meituan Select is also struggling, this move is more of a strategic self-rescue. By cutting off regions that are difficult to operate, it aims to achieve steady profit growth. After all, for Meituan now, turning losses into profits is the top priority. Conversely, if it continues to expand recklessly, it may bring unexpected disasters to the entire company. In February this year, news of layoffs at Meituan Select emerged, including personnel optimization in both agency teams and direct sales departments. Meituan, which previously had no cap on labor costs, has begun to reduce costs and increase efficiency. The community group buying sector is a key bet in Meituan's strategic adjustment of its business structure, but it has proven to be a difficult track. Many generals have fallen on this brutal battlefield. Meituan Select, Duoduo Maicai, and Taocaicai, as the top three leaders in the track, have not reaped much benefit either. None of the three platforms—Meituan Maicai, Duoduo Maicai, and Taocaicai—met their expected performance targets in 2021. If even the top students are like this, what about the smaller players below who are even more vulnerable? This also shows that Meituan Select's problems are not only due to poor corporate management, but more importantly, the entire fresh e-commerce industry's model has not been proven. In fact, the fundamental reason for Meituan Select's withdrawal from the four northwestern provinces is that the region is sparsely populated and transportation conditions are relatively backward. To smoothly carry out community group buying in this area, higher cold-chain logistics and transportation costs are required. Therefore, losing the four northwestern provinces is more of a burden reduction for Meituan Select, allowing it to travel light and face future challenges more flexibly and actively. But the supply chain shortcomings it has exposed are a problem that the entire industry needs to solve together. The first half of fresh e-commerce is full of thorns. Players in this segment can only do their best to protect themselves, hoping to get through this difficult road and reach the broad avenue in the second half.
Meituan Select Cannot Retreat
Meituan Select has been one of Meituan's most important and heavily invested businesses in the past two years. To inject blood into new businesses, Meituan has not hesitated to plunge itself into a loss abyss. On March 25, Meituan released its full-year 2021 financial report. The data showed that Meituan's 2021 annual revenue increased by 56% year-on-year, but adjusted net loss was 15.6 billion yuan, mainly from new businesses such as Meituan Select, Meituan Flash Purchase, and Meituan Maicai. The operating loss of new businesses expanded from 10.9 billion yuan in 2020 to 38.4 billion yuan, a year-on-year increase of 253.7%. Burning through a full 38.4 billion yuan in profits, Meituan certainly did not do this just to show off its strong financial strength and boldness; it has deeper considerations for the company's long-term development. As the market and policy environment gradually change, although the food delivery business is already a cash cow for Meituan, Meituan has also gradually realized the limitations of the food delivery business. As a labor-intensive industry, Meituan's food delivery has approached its growth ceiling and may lack subsequent growth momentum. (Domestic anti-monopoly efforts strengthened) Under the overall strategic goal of "technology + retail," Meituan is heavily investing in community e-commerce and instant retail. It can be said that Meituan Select's strategic significance is greater than its profit significance. But business is not charity; companies cannot risk bankruptcy to fill a bottomless pit. The world is bustling, all for profit. Meituan Select must quickly develop its own self-sustaining ability and form its own moat. Of course, this does not mean that Meituan Select can only suck blood. Its contribution to the parent company is more indirect, not directly reflected in profits, but in the growth of Meituan's transaction users. After the launch of new businesses, as of December 2021, Meituan's transaction users reached 690 million, a year-on-year increase of 35.2%. Meituan is a company with a "late mover" gene in its bones, from overtaking Ele.me, to following Dingdong Maicai with Meituan Maicai, to launching Meituan Select, which is widely considered to be closer to profitability with its community group buying model. Every step Meituan takes is made with full investment only when there is visible hope. Under losses, Meituan's choice is to shift from aggressive expansion to careful calculation. The aforementioned withdrawal of Meituan Select from the four northwestern provinces, which are difficult to operate and have relatively thin profits, as well as the layoffs in February, are all manifestations of Meituan Select's move towards careful calculation. Whether due to the need to adjust the company's profit structure or the tens of billions already burned, Meituan Select will not want to retreat. This is a war that concerns the company's future direction.
Fresh E-commerce's Future Uncertain
Despite countless casualties in fresh e-commerce, it has still played an irreplaceable role at critical junctures of the times. Fresh e-commerce has come a long way without cheers or praise, but with too much blame and harshness. Netizens only see the difficulties of vegetable stall vendors, but ignore the new vitality that fresh e-commerce brings to agricultural production areas; they only see platform shortages and orders that never arrive, but also ignore what it would be like without fresh e-commerce today. Admittedly, the development of fresh e-commerce should be given more tolerance, but platforms themselves must also set higher standards for themselves. Regarding the development of fresh e-commerce, industry discussions mainly focus on the collision between several models, with the most discussed being community group buying and the front-warehouse model. In the face of the era's big test, the front-warehouse model has shown greater resilience than the community group buying model. Generally speaking, the community group buying model is closer to asset-light, with warehousing often in the form of franchising or outsourcing. Therefore, some in the industry call community group buying the model closest to profitability in fresh e-commerce. However, the "pre-sale + self-pickup" format of community group buying is not ideal for users, and platforms lack control over outsourced units, leading to weaknesses in product quality control. In contrast, the front-warehouse model is the opposite, being asset-heavy with a self-built logistics system. This model focuses on "cost-effectiveness + delivery to home," requiring higher fulfillment capabilities and product quality. Dingdong Maicai and Miss Fresh have achieved counter-trend surges by relying on the underestimated front-warehouse model. While one can guarantee supply against the trend, the other needs to shrink its business scope. The reason for this difference lies not only in the model difference, but also in consumer user experience and supply chain control capabilities. In the end, the era of fresh e-commerce expanding territory is over. How to achieve refined user operations and enhance the capabilities of the industry chain itself is the key to getting out of the困境. Source: E-commerce News Pro (ID: kandianshang) Are you "watching" me?