MAGZTER: Meituan - Country's Biggest Internet Giant
(SOURCE) https://www.magzter.com/article/Business/Bloomberg-Businessweek/Meituan-Countrys-Biggest-Internet-Giant
From MAGZTER:
Lulu Chen, David Ramli, and Peter Elstrom
In Beijing, it’s often cheaper to have food delivered than to get it yourself. Like, way cheaper. Abey Lin, a 19-year-old Californian studying at Beijing Film Academy, uses his smartphone to order a local restaurant’s roast duck dish for 20 yuan ($2.99), about 80 percent less than it costs at the register, via delivery app Meituan. He can get a 40 percent discount on two pizzas topped with golden potatoes and barbecued seafood. Meituan charges $1.46 for a bean curd dish from another shop, a little over a third of the price on the restaurant’s menu. It would be tough for Lin to beat that price even if he had a kitchenette to make the dish himself. “It blew my mind,” he says.
Lin, an aspiring director, arrived in Beijing mentally prepared for the hardships of the capital—the blackened air, the bitter winters, the government bans on Instagram and Snapchat. He wasn’t as thoroughly briefed on China’s new order of city living, but he’s quickly adapted. He mostly avoids his dorm cafeteria in favor of a steady supply of burgers, noodles, and cumin meat skewers available at any time, usually within 30 minutes. When he ventures out into the smog to pick up the latest bag at the college gates, there’s always a group of deliverymen stomping their feet to stay warm as they wait for other students. “This is way more convenient, and it costs less,” Lin says. “China has this efficiency that’s ridiculous.”
Across the country, millions of people like Lin are ordering in two or three meals a day, as well as groceries, office supplies, haircuts, massages, and whatever else they might want. Behind this $35 billion delivery market isn’t exactly efficiency, though—it’s a fight between Meituan and Alibaba Group Holding Ltd., China’s most valuable company. Alibaba and its various subsidiaries dominate the country’s online retail market for physical goods, but Meituan is leading the way in services. Its namesake app, a sort of mashup of Grubhub, Expedia, MovieTickets.com, Groupon, and Yelp, has 600,000 delivery people serving 400 million customers a year in 2,800 cities. Alibaba is betting it can undercut Meituan to death. Both companies are spending billions in an escalating war of subsidies that might persuade even JeffBezos to cut his losses.
The showdown isn’t just business. It’s personal. Alibaba funded Meituan in its early years, and the relationship ended after Meituan Chief Executive Officer Wang Xing wriggled out of that partnership, infuriating Alibaba co-founders Jack Ma and Joe Tsai. Wang, a slight figure with wire-rim glasses and a buzz cut, says the clash was inevitable. “Alibaba has this weird way of thinking,” he says at Meituan’s Beijing headquarters in his first interview since the company’s initial public offering in September. “If you do anything in commerce, they think you are stealing money from them.” Wang cuts the figure of a bashful programmer, but by China’s standards, he’s a firebrand. He calls Facebook Inc. a copycat for imitating other online services. He says Ma, China’s most celebrated founder, has an “integrity problem” that’s hurt the country’s reputation for years, dating to a surprise spinoff of an Alibaba subsidiary. Alibaba declined to comment for this story. Facebook didn’t respond to a request for comment.
For more than a decade, China’s internet has been dominated by three companies: Alibaba, Baidu, and Tencent. Now, a younger generation has a chance to take on those giants and their founders. (Ma and Tsai are 54 and 55, respectively; Wang just turned 40.) Wang’s effort to control China’s services-app market, expected to top $800 billion in annual transactions within five years, is likely to erode the sales of conventional online retailers, especially Alibaba. Hence the subsidy war.