As an important landing scene for consumption, local life has achieved a certain degree of recovery in the second quarter.

Recently, Meituan announced its second-quarter financial results: revenue reached 82.3 billion yuan, up 21.0% year-on-year, with a net profit of 11.4 billion yuan, compared to 4.7 billion yuan in the same period of 2023; adjusted net profit was 13.606 billion yuan, up 77.6% year-on-year. In terms of business performance, Meituan's core local business revenue increased by 18.5% year-on-year to 60.7 billion yuan. Operating profit increased by 36.8% year-on-year to 15.2 billion yuan, and the operating profit margin increased by 3.3 percentage points from the same period last year to 25.1%.

This article will focus on two main aspects for interpretation:

First, what are the reasons for Meituan's growth, and what significance does it hold for local e-commerce?

Second, in the bilateral market of local e-commerce, what benefits can merchants and consumers gain?

Enhancing internal capabilities: structural upgrades and significant synergies

Meituan's second-quarter report demonstrates growth through proactive adaptation and seeking incremental gains through organizational restructuring.

On April 18th this year, Meituan merged its February integrations of the Meituan platform, On-site Business Group, Home Delivery Business Group, and Basic R&D Platform into the "Core Local Business" segment, with Wang Puchong appointed as CEO of the "Core Local Business" segment.

Large enterprise organizational restructuring is common due to changing external environments, necessitating internal adjustments. However, achieving the positive feedback demonstrated by Meituan is uncommon. Specifically, the organizational integration of home delivery and on-site services generates significant synergies.

If you know Meituan well, you'll find that it's resilient, anti-fragile, and adept at street fighting. When it first ventured into group buying, Meituan was considered a second- or third-tier player, but it ultimately emerged victorious. Amidst fierce competition and peak seasons, Meituan's recent business performance demonstrates its adeptness in tackling challenges.

The impact on the business level is evident in the new version of Meituan's elite membership program. The new elite membership is no longer limited to food delivery, with benefits redeemable across various scenarios like dining group buying and hotel bookings. The base denomination of the elite coupons is 5 yuan, which can expand to higher denominations in certain scenarios, reaching tens to hundreds of yuan depending on the specific business context. The subsidies are jointly borne by the platform and merchants.

The restaurant 'Chongba Niu Fu,' which made Meituan's Must-Eat List, saw 25% of its orders come from elite members within a week, with an 8% increase in average order value per person. The health and wellness brand Shenyuantang witnessed a 556% YoY increase in transactions on Meituan. The gaming brand Daplayer saw approximately 45% of its July orders come from elite coupons, with over 40% of new customers attracted by these coupons. Cao Guanqiao, the head of Suqi Hair Salon, revealed that elite membership drove a 27% MoM increase in online orders, with some package deals seeing a 58% increase in orders compared to pre-campaign levels. "Some users may have come from other categories like dining, and the proportion of new customers is relatively high." As of July 4th, over 5 million merchants had signed up for the elite membership program, covering 13 consumption scenarios such as leisure, entertainment, and dining group buying.

As a foodie, I immediately signed up for the elite membership program. From a user and industry observer's perspective, here's my take:

The coupon expansion feature is fun and gamified, appealing to people's love of surprises, especially among younger generations who enjoy opening blind boxes. Meituan, as a local lifestyle consumption app, adds an element of fun that aligns with people's underlying consumption logic.

Meituan has long admired Amazon, known for its successful membership programs like Prime and Costco's Star Membership and Executive Membership. Once consumers purchase Prime membership, Amazon becomes their go-to choice for future purchases, fostering loyalty and a large user base.

Since joining the elite membership program, I've become more sticky and frequently repurchase. With ample consumption scenarios like hotel bookings, food delivery, and wellness services offering discounts, the sunk cost of membership reduces my willingness to shop elsewhere, similar to Costco and Amazon's retention strategies.

As the membership system matures, it will generate scale effects and gain momentum.

While food delivery forms Meituan's core competency, the elite membership program further fortifies this position.

Another noteworthy aspect is instant retail. Meituan's instant retail achieved a record-high daily peak order volume of over 98 million in August. Meanwhile, the average purchase frequency of annual transaction users has increased for 15 consecutive quarters since mid-2020.

The instant delivery system is the fertile ground for instant retail's growth. Instant retail embodies Meituan's long-term vision. In a sense, Meituan transcends the typical internet company mold, relying on a vast network of delivery riders to build its foundation. This offline, labor-intensive approach becomes formidable once scale effects kick in.

Today, Meituan Flash has become a lifestyle for many: from buying medicine and groceries to ordering fresh produce and flowers, it caters to a wide range of needs.

Supply side: Synergistic resonance and digital empowerment for operational efficiency

Upon reviewing Meituan's second-quarter growth logic, in addition to the management efficiency gains from internal structural adjustments, another crucial factor is Meituan's growth mindset - enlarging the pie.

Meituan addresses not only supply-demand matching but also demand mining and supply capacity enhancement.

Consumer perspective:

Despite challenges, people's yearning for a better life persists. They aspire to quality living while minimizing expenses, which Meituan's elite membership program fulfills by offering a favorable quality-price ratio.

Merchant perspective:

In the second quarter, Dianping released its 2024 Must-Eat List, featuring nearly 2,800 restaurants, half of which are locally distinctive, and 46% are small, local eateries. Meituan accompanies users in discovering these vibrant small businesses, supporting their growth and providing a big stage for them. This quarter witnessed record-high annual active users and merchants on Meituan, with over 6.2 billion instant delivery orders.

Meituan Food Delivery's 'Brand Satellite Stores' welcomed brands like Laoxiangji and Haidilao, offering commission rebates, traffic support, operational guidance, and fulfillment services. By June 2024, 120 brands had successfully implemented the satellite store model nationwide, opening over 800 satellite stores.

Merchants participating in the elite coupon program enjoy targeted quality traffic support. The paid elite coupons, known as 'Shenbao,' convert more paid users into frequent and loyal customers.

By tapping into latent demand - consumers' pursuit of quality-price ratio and merchants' excess supply capacity - Meituan enlarges the pie for both sides.

As an infrastructural pillar of local life, Meituan's initiatives like the elite membership program stimulate consumption, aid economic recovery, and demonstrate the societal significance of platform economics.

Local life, encompassing food, entertainment, and leisure, is a crucial consumption scenario. Small businesses, like capillaries in the local economy, drive vitality and prosperity, gradually restoring public confidence.