A foundation of operational resilience marked by steady progress.

Author|Wang Chi

Editor|Yang Zhou

On November 29, Meituan released its third-quarter financial results for 2024, reporting revenue of 93.6 billion yuan, up 22.4% year-on-year. Amidst the collective turbulence in the consumer industry, this final report from the internet sector exceeded market expectations.

Although this financial report attracted considerable market attention, it largely met Meituan's previously guided expectations. Therefore, regarding this performance, Meituan CEO Wang Xing stated, "During this quarter, all our business lines achieved steady growth. We will continue to meet user needs, support merchants in their operations, care for and support the development of riders, and achieve win-win outcomes with our ecosystem partners."

The differing internal and external reactions to the same financial report stem from different perspectives on business resilience. While the market often judges the health of a company based on financial report data from an external perspective, for Meituan, financial report data merely reflects quarterly performance, with ecological win-win being the intrinsic driver of steady growth.

From the perspective of capital flow, Meituan's approach to building an ecologically win-win situation can be summarized in six words: "Spend wisely, invest wisely." In terms of saving, the new business incurred a loss of 1 billion yuan this quarter, a decrease of 300 million yuan compared to the previous quarter. Compared to the approximately 5 billion yuan operating losses per quarter in 2023, Meituan's continued loss reduction this year undoubtedly reflects a commitment to prudence.

In terms of spending, expenses increased by 5.2% year-on-year during this quarter. Sales and marketing expenses amounted to 17.95 billion yuan, up 6.2% year-on-year, primarily due to user incentives and promotional and advertising costs. Administrative expenses grew by 10%, mainly due to increased employee compensation. However, the rate of expense growth was lower than revenue growth, indicating improved spending efficiency.

Within the core local commerce segment, which is dominated by food delivery, operating profit declined quarter-on-quarter compared to the second quarter, with the operating profit margin decreasing from 25.1% to 21.0%. Meituan attributed this primarily to seasonal factors leading to increased rider subsidies and a higher percentage of transaction user incentives as a share of revenue.

Meituan, committed to spending wisely and investing wisely, is continuously exploring an ecological balance that benefits riders, merchants, and consumers, thereby solidifying its operational resilience.

As management stated during the earnings call, Meituan places greater emphasis on rational and efficient operations, focusing resources on high-return investments and expenditures. Through precise market positioning and a comprehensive service system, Meituan has achieved steady profit growth throughout the business cycle, striking a balance between multiple categories, levels, and seasonal demands.

01 Business Synergy Enhances Efficiency

In the third quarter, Meituan's annual transaction user count, annual active merchant count, and average annual transaction frequency per user all continued to grow, reaching record highs. Specifically, the number of instant delivery orders, representing home delivery, increased to 7.1 billion, up 14.5% year-on-year. In the hotel and travel segment, representing store visits, order volume grew by over 50% year-on-year.

Despite this dual growth in store visits and home deliveries, marketing expenses increased by 6.2% year-on-year, significantly lower than the growth rates of revenue and order volume. Achieving more growth with less spending reflects the efficiency gains from business synergy following organizational adjustments.

In management theory, "synergy" and "focus" often have a dual relationship. While synergy believes that multiple businesses can interact to achieve a "1+1>2" effect, focus emphasizes maintaining core competitive advantages. For platform operations, it is crucial to maintain a focus on core competencies while achieving business synergy.

Therefore, in April, Meituan underwent its largest organizational restructuring in history, integrating its platform, store-based business group, home delivery business group, and basic research and development platform into the "Core Local Commerce" segment, with Wang Puchong appointed as CEO. This was Meituan's fourth structural adjustment within the year, aimed at enhancing business synergy.

Post-restructuring, the business can integrate store-based and home delivery operations, promoting collaborative development and operational efficiency. At the organizational level, Meituan no longer has separate store-based and home delivery business groups; instead, departments previously under these groups now report directly to "Core Local Commerce," enhancing management focus.

Among these changes, the "God Member" program represents the first comprehensively upgraded membership offering following the reorganization. Initially piloted in the second quarter, over 5 million merchants participated in the "God Member" program by early July. Strictly speaking, the "God Member" program had a limited impact on Meituan's second-quarter performance, with most of the synergy stemming from the natural integration of store-based and home delivery operations.

Building on this initial success in the second quarter, the synergy effects further strengthened in the third quarter, as the "God Member" program became fully operational across various consumption scenarios.

As the first full financial reporting period with the "God Member" program fully integrated and covering all consumption scenarios, the program was further expanded nationwide this quarter, with merchants actively participating. Currently, over 50% of merchants in the hotel and travel segment have enrolled. Benefiting from the interconnected membership system, Meituan's annual active merchant count in the hotel and travel segment reached a new high.

Due to improved resource integration and management efficiency from the organizational adjustments, Meituan Flash's daily order volume exceeded 10 million in this quarter, with both user count and transaction frequency achieving double-digit growth. On Qixi Festival, order volume peaked at over 16 million.

In the past, during the food delivery era, Meituan's business synergy primarily involved using high-frequency, low-margin food delivery to drive low-frequency, high-margin group-buying visits, a "high-frequency + low-frequency" traffic synergy. Now, in the retail technology era, Meituan's business synergy has evolved into a two-way synergy of traffic and operations.

02 Spend Wisely, Invest Wisely

During the reporting period, Meituan's adjusted net profit for the third quarter of 2024 was 12.829 billion yuan. More efficient business synergy led to a larger order volume. However, for low-margin local lifestyle service platforms, the key to profit growth lies in loss reduction through "prudence."

If "prudence" in enhancing efficiency focuses on breaking down organizational barriers between different businesses, improving resource circulation efficiency, and tapping into the growth potential of mature businesses, then "prudence" in reducing losses emphasizes eliminating the model of subsidizing new businesses for growth and enhancing their high-quality development capabilities.

In terms of loss reduction, the new business incurred an operating loss of 1 billion yuan this quarter, 700 million yuan less than the 1.7 billion yuan expected by Bloomberg, equating to a profit savings of 700 million yuan above market expectations.

Internally, this represents a decrease of 300 million yuan from the previous quarter and 4.1 billion yuan from the same period last year. The new business has exceeded its loss reduction target, with Meituan anticipating a loss of 10 billion yuan for new businesses this year (compared to 20 billion yuan last year). With losses totaling 5.9 billion yuan in the first three quarters, the annual loss for new businesses is likely to be less than the guided figure of approximately 10 billion yuan.

Despite these loss reductions, new business growth has not stagnated. During the reporting period, new business revenue reached 24.2 billion yuan, up 28.9% year-on-year, significantly higher than previous quarters and slightly higher than the previous quarter, indicating improved spending efficiency. New businesses are demonstrating operational resilience towards sustainable growth.

For large companies, cost reduction and efficiency enhancement, along with reducing loss-making projects, are general trends. Alibaba and Tencent have adopted similar strategies, and even Pinduoduo's Temu has begun to curb expansion, focusing instead on overseas e-commerce.

Beyond the operating profit generated from exceeding loss reduction expectations, Meituan also recorded significant non-operating income this quarter, contributing to its overall profit exceeding expectations.

Of course, for business operations, reducing losses does not equate to not spending; rather, it means spending wisely.

Meituan does not hesitate to invest where necessary. For example, administrative expenses increased by 10% this quarter, typically used for employee compensation, possibly due to increased expenditures related to overseas business expansion.

Additionally, during this quarter, Meituan continued to implement and improve a series of initiatives, including the "Rider-Friendly Community" access solution, launching the "Rider Home" feature, and piloting a rider fatigue management mechanism, further enriching rider care and providing more rights protection and support for riders.

Under the guidance of relevant departments, Meituan actively promotes the construction of "Rider-Friendly Communities." By the end of October, the "Rider-Friendly Community" access solution, launched in collaboration with seven major property management companies including China Overseas Property, Vanke Property, and Jinke Services, had served over 1.6 million riders and was expected to be implemented in over 10,000 communities nationwide by the end of the year.

Simultaneously, Meituan continues to support the catering industry, alleviating industry pressure and maintaining ecological health.

In November this year, Meituan Eleme upgraded its "Prosperity Plan" for the catering industry, providing subsidies to merchants focused on product innovation and exploration, driving industry innovation. This plan initially invested one billion yuan, which will be disbursed in cash installments starting in December. Future investments will continue in product iteration, service optimization, and supply chain improvements.

Furthermore, support for new store traffic for small and medium-sized businesses has been extended from 7 to up to 14 days. Addressing merchants' concerns about excessive industry competition, Meituan has simplified marketing tools to ensure reasonable traffic allocation during marketing campaigns. Meituan has also provided over 500 brands with "AI Smart Location Selection" services to help them open "brand satellite stores," which enjoy "commission rebate" support for 6 to 12 months.

03 What Are Meituan's Competitive Advantages

Internally focused on continuous efficiency enhancement and loss reduction, externally committed to investing in win-win ecosystems.

By balancing savings, spending, and earnings, Meituan is building its operational resilience through organizational adjustments and substantial investments.

According to traditional internet entry theory, it is challenging to establish true barriers in the service sector. User loyalty to service entry points is significantly lower than their path dependency on search engines, social networks, and e-commerce platforms.

The barriers of search engines lie in the search box, those of social networks in the relationship chain, and those of e-commerce in the supply side. The core of these barriers is that internet platforms can establish a first-mover advantage in traffic entry points in the online world and continuously expand them. In contrast, local lifestyle service platforms cannot monopolize physical world entry points.

If so-called "eating, drinking, and entertainment" services prompt users to actively choose a platform built by an internet company, it can only be because the platform offers a more convenient and efficient experience chain.

Behind the 7.1 billion orders in this quarter are the consumer votes of nearly 800 million Meituan users. While a company's business scope may be limited, user demand is often unlimited. Between these limits and infinities lies a company's wisdom.

To better meet diverse consumer needs, Meituan Eleme continued to explore innovative models and expand high-quality supply during the reporting period. In October, Miniso and Meituan announced a deep strategic partnership, with 500 Miniso stores already operating on the Meituan platform. As large retailers accelerate their presence on Meituan, over 800 "24H Super Stores" in the form of flash warehouses will be launched on the platform this year, serving consumers' round-the-clock instant consumption needs.

From group-buying to food delivery and now instant retail, the trends may change, but Meituan continues to improve its supply and expand its service boundaries to meet consumer demands in every possible way. Perhaps, as Wang Xing once customized a print for users during his Fanfou entrepreneurial days, "You must work hard to make it look effortless.""Today, Meituan's operational resilience lies in its past efforts to continuously push the limits of satisfying consumer demands. This aligns with James Carse's assertion in "Finite and Infinite Games," a book highly regarded by Wang Xing, that "it is our vision that is finite, not the things we contemplate. Recognizing this allows us to break any boundary."