China’s Meituan Dianping pushes its short delivery service to more customers in search for profit

Meituan Dianping is offering its short-distance delivery service to more consumers and industries under a new brand “Meituan Delivery” as the loss-making on-demand services giant searches for more sources of revenue.

“The extension and opening of Meituan’s delivery network will help establish a more flexible delivery platform by customising services for different industries, upgrading our delivery dispatch system, and improving delivery infrastructure,” said Wang Puzhong, Meituan’s senior vice-president, in a company statement on Monday.

Meituan Delivery can be accessed on the Meituan super app where users can order takeout, book hotels and buy film tickets among many other services. The delivery service is aimed at helping customers reduce logistics costs and improve operating efficiency.

The Beijing-based company’s delivery system currently has more than 600,000 active daily couriers, and serves over 3.6 million merchants and 400 million people in China, according to the statement. The short-distance delivery platform can finish an on-demand delivery within an average of 30 minutes, thanks to its AI-enabled “Super Brain” engine, which can figure out the optimised delivery route for an order within 0.55 milliseconds, the company says.

Meituan Delivery is aimed at making better use of ‘down time’ for Meituan’s riders during the day – for example, before and after the busy lunchtime period. The expanded service will put Meituan into competition with consumer-facing in-city delivery services such as Shansong Express and JD’s parcel delivery service.

Tencent-backed Meituan reported a wider net loss of 3.4 billion yuan (US$502 million) in the December quarter last year amid intense competition for market share with Ele.me in its core food delivery business. Its gross margin fell to 22.6 per cent from 32 per cent a year earlier.

Last December, Meituan teamed up with Chinese coffee start-up Luckin Coffee to deliver coffee and other food products through Meituan’s delivery network in China. The tie-up came after global coffee giant Starbucks announced a partnership with Alibaba’s Ele.me last August.

Meituan has said it intends to focus on food-related initiatives, including restaurant management, and wants to reduce losses by shrinking subsidies for its ride-hailing and bike-sharing services.

About 400 million people made at least one purchase on Meituan’s multiple platforms in 2018. Last year, there were more than 36 million users of its online food delivery services on the mainland, according to a report by the Data Centre of China Internet. About 445 billion yuan (US$66.3 billion) of orders were transacted on Meituan’s platform last year, according to Chinese market research firm Analysys.

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