The takeout war became a litmus test. Meituan-W (03690) handed over resilience answers with low war losses

In the third quarter, the takeout and instant retail industries experienced the fiercest “scuffle” in history.

Data shows that in the second and third quarters of this year, the three giants of Meituan, Ali, and Jingdong collectively “burned money” close to 80 billion yuan, of which the third quarter reached about 44.4 billion yuan in a single quarter, setting the highest record in the industry's history in a single quarter.

Although Meituan has expressed opposition to irrational “internal rolling” competition many times, in the face of a new round of unprecedented takeout subsidy wars initiated by JD and Ali, Meituan can only do its best to defend its market position.

Judging from the latest financial reports, 1V2 Meituan's revenue in the third quarter increased 2% year over year to 95.5 billion yuan, but recorded an adjusted net loss of 16 billion yuan due to the continued increase in subsidies to the catering industry by core local businesses.

However, the deeper value of this financial report is that it shows the market a Meituan that dares and can play in the face of irrational external “internal rolling” competition. Its business resilience and lower war-loss ratio confirm that the systematic competitive barriers built by Meituan's deep cultivation of the local lifestyle circuit still play a key role. This not only guarantees the continuation of Meituan's long-term competitive advantage, but also indicates a high degree of certainty that after industry competition returns to rationalization, Meituan will return to a steady growth path.

Maintaining leading market share with low war losses, and the number of trading users reached a new high

E-commerce and instant retail are essentially completely different businesses. Instant retail does not simply “move” products online, but involves the construction of a series of complex systems such as user experience, delivery efficiency, product organization, and digital operation. It is this essential difference in business models that has led to the inefficiency of e-commerce's traffic style in entering instant retail.

According to the data, Ali's revenue from instant retail (takeout+flash sales) in the third quarter was 22.9 billion yuan, which is only one-third of Meituan's local commercial revenue of 67.447 billion yuan. However, the agency generally predicts that Ali's instant retail loss for the third quarter will be 36 billion to 40 billion yuan, far higher than Meituan's local commercial loss of 14.1 billion yuan during the same period. This means that Meituan kept the war loss ratio at 1:2.5 to 1:2.8, that is, if Meituan lost 1 yuan, Ali's instant retail business would lose 2.5 yuan to 2.8 yuan.

Furthermore, according to estimates by various agencies, Meituan lost about 40% of Ali's instant retail sector. Currently, the GTV ratio between Meituan and Taobao flash sales is about 6:4. This shows that even in the “1V2” situation, Meituan used lower losses to maintain a GTV share of up to 60% of industry orders, and has an outstanding leading edge. Meituan is still the preferred platform for hundreds of millions of users to meet catering needs.

Meituan revealed during the earnings call that Meituan accounts for more than two-thirds of the market share for orders with actual payment of 15 yuan or more; of the market share for orders with actual payment of 30 yuan or more, Meituan accounts for more than 70% of the market share. Users in this market have low price sensitivity, high repurchase rates, and obvious “resilience against subsidies.”

In contrast, Ali's subsidies mostly focus on “drainage orders” with a low customer unit price (such as less than 15 yuan). Although these orders can increase GMV in the short term, they have low value, high delivery costs, and are difficult to form long-term repurchases. After the subsidy subsides, most of these wool party order demand will disappear.

It can be seen from this that the essence of Meituan's low war losses is to reduce the average loss of orders to 1/3-1/2 of the opponent through high order density, high customer unit price order focus, and refined operation, thus forming the effect of “small for big” in terms of total loss amount. This indicator not only reflects the high efficiency of Meituan's short-term competition, but also confirms the effectiveness of Meituan's long-term competitive barriers in local life.

And the number of trading users has reached a new high, which is another strong proof of Meituan's competitive advantage in the field of local life. The Meituan App DAU increased by more than 20% year-on-year in the third quarter. The number of trading users in the past 12 months exceeded the 800 million mark, and the number of monthly food and beverage takeout trading users reached a new historical peak.

The industry has moved to a new stage of high-quality development, and new businesses continue to break through and reshape market expectations

After experiencing intense clashes in the second and third quarters, Ali took the lead in releasing a signal of strategic contraction — its CFO Xu Hong said in a conference call that Taobao flash sales investment would be significantly reduced in the fourth quarter. Behind this decision, it is actually an inevitable choice due to the intertwining of multiple factors.

Due to the inefficiency of subsidies, the serious imbalance between input and output, and the war loss ratio is far higher than that of Meituan, this development model of “killing 300 enemies and damaging oneself for 1,000” is not long-term.

At the same time, Ali's strategic plan to drive e-commerce through instant retail “fell through.” According to CITIC Securities data, instant retail sales only contributed 1% of e-commerce GMV during the Double 11 period, and the cross-sales conversion rate was less than 2%. This validates the weak correlation between instant retail and the e-commerce ecosystem — high-frequency consumption scenarios are difficult to divert to low-frequency planned shopping; on the contrary, the overall customer unit price of the platform may drop due to subsidies that overdraft users' spending power.

Furthermore, the tightening of regulatory policies became the last straw that forced Ali to shift its strategy. The General Administration of Market Regulation promulgated an “anti-domestic roll” policy, which restricted the competitive method of “low price subsidies” and pushed the industry to shift from a “price war” to a “service war.”

This means that starting in the fourth quarter, there will still be competition within the industry, but the vicious competition model of “burning money for scale” will come to an end. Instead, “value competition” will become the core logic, and the entire takeout and instant retail industry will enter a new stage of “high-quality development” driven by “efficiency and quality”, which is obviously more beneficial to Meituan, which has established long-term systematic competitive barriers.

Furthermore, Meituan's new business segment is reshaping capital market expectations with impressive performance. During the reporting period, Meituan's new business revenue increased 15.9% to 28 billion yuan, operating losses narrowed to 1.3 billion yuan, and the operating loss ratio increased 2.5 percentage points to 4.6%.

In addition to strong growth in the grocery retail business, Meituan's international business Keeta has made significant progress. After entering Qatar in August, Keeta landed in Kuwait and the UAE in September, improving the layout in the core region of the Middle East. In late October, Keeta began pilot operations in Brazil. It is worth noting that the Hong Kong business achieved early profit in October of this year, verifying the replicability of the Meituan model overseas, and greatly increasing the certainty of the international narrative.

Summary:

A loss of 16 billion dollars in a single quarter was not easy for Meituan, but from another perspective, extreme competition is also a high-pressure test of the industry's ability to defend Meituan. The low war loss of 1:2.5-1:2.8 is not only a true picture of Meituan's business resilience in extreme competition, but also a solid footnote to its long-term competitive barriers.

But Ali's strategic shift is not a silent recognition of Meituan's strength as a “ring keeper.” As takeout and instant retail move from a “price war” to a “service war,” a new competition has quietly begun. For Meituan, the most extreme stage of competition may have taken a turn. However, in a steady state, the takeaway industry, which has only 3% marginal profit, is bound to be the ultimate test of long-term fundamentalism. The bitter business of “bending over to pick up steel bars” places more emphasis on “internal skills.”