ChinaTravelNews, Ritesh Gupta – Meituan’s senior management has highlighted that its prowess in consumption data analysis as well as the efficacy of its marketing tools paved the way for the e-commerce platform to post a solid financial performance in its core local commerce segment in the second quarter (Q2) of this year.
Speaking during the company’s Q2 earnings call, Meituan’s CEO, Wang Xing, said that the team focused on aspects like continuous iteration of operating strategies, collaborating with local governments to conduct specific events and expansion of marketing tools via initiatives such as special deals, increase in live streaming frequency (coming up with more recommendations and sales promotion tools in these sessions). Meituan has been working with local governments and coming up with city-wide live-streaming events to stimulate local consumption. The team also added that all of this added up and enabled the company to capitalize on what it described as “peak consumption holiday season” in China.
This lifted Meituan’s operating profit in the core local commerce division, which includes hotel and alternative accommodation, attraction ticketing and transportation ticketing, along with food delivery, Meituan Instashopping and in-store services. Operating profit rose to RMB11.1 billion in Q2 this year, up from RMB42.9 billion in Q1.
Overall, revenues from the core local commerce segment increased by 19.4% to RMB51.2 billion in Q2, up from RMB42.9 billion in Q1.
“On the profitability side, it is worth mentioning that the second quarter was a peak season for local service. We think it's really important for us to have sufficient investment in this quarter to further stimulate consumption recovery and help us solidify our competitive advantage as well as to enhance consumer mindshare,” said Wang.
Travel business
Meituan stated that the GTV growth of its in-store, hotel and travel businesses contributed to the overall revenue growth. The team attributed this performance to recovery in local consumption and favourable seasonality impact. Plus, swift action when it came to efficient marketing that allowed Meituan to “capture the growing consumption demand” also yielded positive results.
For travel business, Wang said that annual active merchants and annual transaction users for this business “reached new highs”. The company shared that it did offer merchant incentives and worked on joint marketing events with them to strengthen relationships with “core merchants”, according to Wang. Meituan also expanded its direct sales team especially as it plans to further penetrate into lower-tier cities.
Wang said in addition to boosting action at a local level, Meituan also worked on category-specific moves, for instance, more hotels on the platform. Meituan banked on data and evaluated different consumption scenarios. The marketing team also leveraged promotional events and festivals. “We strengthened consumer awareness of the diversity and convenience that we offer,” said Wang. “These efforts solidified the consumer mindshare of Meituan as a platform that helps save money when booking hotels,” said Wang.
“We enriched our “Hotel+X” package deal for leisure travel and vacation scenarios during the peak demand season,” said Wang. He also shared that Meituan added more hotels in the “high-star categories) and “deepened collaboration with high-star (hotel) merchants and solidified price competitiveness”.
“For live streaming, besides leveraging our Meituan Hotel channel, we also collaborated with the in-store and food delivery businesses to sell hotel vouchers during their live streaming sessions. Furthermore, we successfully capitalized on the recovery in outbound travel by increasing the supply of overseas hotels and broadened our outbound travel customer base,” said Wang.
Synergy within the ecosystem
The decision to capitalize on other product categories and channels within the Meituan ecosystem, as highlighted by Wang, is all about making judicious use of the traffic that is actively transacting. The company shared that total accumulated transaction users reached 470 million by quarter-end.
“Transaction frequency of existing users increased as we further enhanced our consumer mindshare,” said Wang. A lot of work goes into making more frequently bought product categories click and then eventually when a consumer is actively engaging for products such as food delivery then the company tactically recommends a relatively non-frequent product like travel.
The rise in user frequency showcases effective cultivation of consumer habits, said Wang.
“Moreover, we increased the density of front-end warehouses in the major cities that we operate in, leading to continuous improvements in delivery efficiency and user experience,” said Wang, referring to the fact that at no point Meituan can slip up when it comes to timely delivery of a category that is all about instant gratification or falls in the high frequency category. During April-June, Meituan Instashopping maintained a robust growth trajectory, with peak daily order volume reaching 11 million for the second time, thanks to the enhancement in user base and purchase frequency.
