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Meituan commission turmoil

Date: 2020-04-22

On April 15, the Guangdong Food and Beverage Association, which was "distressed" by the Meituan, was dissatisfied with the Meituan's response and continued to request the Meituan to reduce its commission.

Catering businessmen have made fierce speeches. After the epidemic in the first quarter of 2020, many businessmen have reached the point of survival. On the other side, Meituan also faced difficulties. Affected by the epidemic, Meituan, which just made profit last year, is expected to lose money in the first quarter of this year. If you agree to reduce the commission, the Economic Observer reporter roughly estimates that the commission will be reduced by 5% according to the requirements of the merchant. This alone will cause a huge loss of more than 10 billion yuan every year to Meituan.

Not only Meituan but also another food delivery company hungry were also accused by several restaurant associations. So far, the contradiction between the merchant and the platform is not just a matter of a takeaway company. The outside world raised doubts about the business model of the take-out industry, "Is this business worth only 2 cents per order?"

Cui Lili, executive director of the Institute of E-Commerce of Shanghai University of Finance and Economics, told reporters that the value of the takeaway platform is not only about delivering meals. In addition, we must expand to other multi-category and multi-scenario. "

The 30-minute instant delivery network built by Meituan was the root of the rise of this company. Logistics expert Zhao Xiaomin analyzed to reporters that Meituan ’s instant distribution system utilization rate is currently only 60% effective, and 40% can be developed.

In the middle of the storm, Meituan is increasing its non-catering business recently. However, business model improvement is not a one-time task. Returning to the present, how to deal with the contradiction with the business is still a problem that Meituan needs to face urgently.

Wronged business

Before being interviewed by reporters, Li Mi (pseudonym) emphasized anonymity. He opened more than 100 stores on Meituan. The epidemic is not over yet and he still needs to rely on takeaway income.

But he was a bit overwhelmed. Li Mi opened a store in Meituan a few years ago, and witnessed the increase in commissions from the beginning of 0 to 5 points, 8 points, 15 points, 18 points, 23 points. He said that the closing rate and turnover rate of new store openings on takeaway platforms are very high, which can be seen from the pressure on small stores to survive. "If the commission is more than 20%, our shop will be very uncomfortable." This is the figure calculated by Li Mi's operation team. His shop commission is 23%. He told reporters that the gross profit margin of restaurants is generally 50% to 60%. If you cut off 30% (in addition to commissions, merchants generally need to have about 5% of marketing and promotion expenses on the platform), the platform fees are above 20%. -Profit between 30%. This profit is then used to spread out the expenses of rent, labor, water and electricity, and the merchants hardly make money or even lose money.

On April 10, a paper document from the Guangdong Food and Beverage Association detonated the accusations of businesses against Meituan. The Guangdong Food and Beverage Association has made fierce speeches, accusing Meituan of commissions with a maximum deduction of 26%, which has greatly exceeded the critical point tolerated by restaurant merchants.

On April 13, Meituan responded that the commission for more than 80% of Meituan ’s takeaway merchants in 2019 was between 10% and 20%. The real number is far lower than various rumors and imaginations. The Guangdong Food and Beverage Association disagreed, and once again issued an article on April 15 stating that there were 120 merchants in the Haifeng County Small Food and Beverage Association in Guangdong Province, and none of them had a commission lower than 20%.

The main demand of the merchants is to request Meituan to reduce the commission, "direct reduction or exemption of all catering merchants in Guangdong Province by 5% or more."

Under the epidemic, catering merchants faced a difficult problem of survival. According to data from Evergrande Research Institute, only within 7 days of the Spring Festival, the epidemic has caused a loss of about 500 billion yuan in retail sales in the catering industry. According to statistics from the China Culinary Association, 78% of catering companies have lost more than 100% of their operating income.

Meituan ’s statistics show that, among the merchants that operate, 53.6% of the sales of outdoor sales account for more than half of the operating income, and 42.9% of the sales of outdoor sales account for more than 70%. Offline restaurants are unsustainable, and takeaways have become a "life-saving straw" for businesses. However, under the high commission of the takeaway platform, this straw is a bit "difficult to swallow".

The practice of merchants demanding lower commissions, Liu Yuanju, a researcher at the Shanghai Institute of Finance and Law, believes that it is the legitimate rights of merchants. "It is reasonable to ask for commission reductions at any time, which can be regarded as market behavior."

The catering association hopes that the platform can reduce commissions. Can the platform do it?

Meituan's problems

In 2019, Meituan ’s takeaway commission income was 49.6 billion yuan, and Meituan said that 80% of merchants ’commissions were less than 20%. The reporter calculated the average commission as 20%. If he agreed to the 5% commission reduction required by the association, the total commission would be calculated in 2019, and Meituan would lose at least 12.4 billion yuan in revenue.

For Meituan who just got rid of the "big loss" hat, this is almost an impossible number.

Merchants request for commission reduction, should the platform agree? Liu Yuanju told reporters that this is a game between the two sides. He feels that there is a bad phenomenon now, that is, the publicity of price issues and market issues, "This is not a good trend for the market economy."

As the object of criticism from merchants, the days of Meituan under the epidemic were not easy. Meituan CFO Chen Shaohui said in the latest quarterly earnings call that at the end of January, Meituan ’s takeaway orders began to decline, and February ’s order volume was half of the normal level in previous years. Meituan ’s financial report estimates that the first quarter of 2020 will result in a loss or loss, and the operating results in the next few quarters will also be adversely affected.

Wang Putzhong, senior vice president of Meituan and president of Dajia Business Group, complained: In the fourth quarter of 2019, Meituan ’s average takeaway profit was less than 2 cents per order. The vast majority of the platform ’s income needs to be invested in helping merchants provide professional delivery, Get orders and digital construction.

Some catering merchants used Ali,, Pinduoduo and other e-commerce platforms as examples, mentioning that the commissions of merchants on e-commerce platforms are low, so Meituan should also reduce commissions as e-commerce platforms.

Meituan ’s profit model is different from e-commerce platforms. Cui Lili told reporters that the main source of revenue for the e-commerce platform is advertising, marketing and other services based on the big data of the transaction between the buyer and the seller, and the annual platform entry fee is almost negligible. However, in Meituan, the revenue cannot be achieved by relying on merchants ’advertising and marketing charges.“ The bidding ranking of the takeaway platform is based on location. Perhaps only 3 to 5 kilometers around the merchants participate in the bidding, unlike e-commerce platforms that are nationwide. At auction, the magnitude is different. "

According to Li Mi, the other expenses of his shop on Meituan, including promotion and marketing expenses, are generally within 5%.

At present, commissions are still the main source of income for takeaway platforms. In 2019, Meituan ’s takeaway commissions accounted for 67.2% of total revenue.

The commission paid by merchants to Meituan is mainly the delivery cost of Meituan. Meituan said that the delivery service fee accounts for 80% of the commission. If the merchant does not choose the delivery service fee and solves the delivery by himself, almost all merchants' commission can be reduced to single digits immediately, which may be less than 5%.

With an instant delivery system that delivers goods within 30 minutes, Meituan started from "meal" and built a huge business empire with 450 million users, more than 6 million merchants, and nearly 4 million take-away brothers. At this moment, due to the high cost of immediate delivery, Meituan cannot make a profit while reducing commissions.

One side is the survival of the business, the other is the platform loss problem, the two sides are in the game.

Game and negotiation

Negotiations between merchants and Meituan are still stalemate.

The weight that the merchant holds in his hand includes administrative measures. On April 14, the Guangdong Shenzhen Consumer Commission investigated the issues related to food delivery services in Shenzhen, and sent investigation letters to Meituan, Hungry, and related food and beverage associations.

Businesses also have legal means. The Guangdong Food and Beverage Association believes that Meituan ’s request for exclusive operation by catering merchants is suspected of violating the relevant provisions of the Anti-Monopoly Law. The association mentioned in a statement that if the Meituan refused to respond and adjust its strategy, it would join the catering associations across the country to take further rights protection actions.

Can businesses meet their demands through legal or administrative means?

Deng Zhisong, a senior partner of Dacheng Law Offices and a senior antitrust lawyer, told reporters that the Internet New Economy Corporation ’s alleged monopoly disputes generally involve abuse of market dominance, and it is more difficult to identify such behavior.

Monopoly cases are divided into two categories, one is monopoly agreement and the other is abuse of market dominance. According to the association's accusations, the US regiment is suspected of the second category. Since the Anti-Monopoly Law came into effect in 2008, there are more than 200 cases involving monopoly agreements in China's administrative law enforcement and only dozens of cases involving abuse of market dominance, far lower than the first category. The reason is that it is difficult to determine.

As a senior antitrust lawyer, Deng Zhisong participated in several seminars on suspected monopolies by Internet companies last year, including various academic and practical meetings involving antitrust enforcement at the central and local levels. However, it is difficult for participants to form a unified opinion. Big".

The reason for the Guangdong Food and Beverage Association is that Meituan ’s takeaway market share in Guangdong is about 60% to 90%, and it is suspected of monopoly. Even though this market share has been identified, Deng Zhisong told reporters that market share is only one of the factors that determine market dominance. More important factors include the control of commodity prices and the ability to hinder new market entrants. Judging from the difficulty of entering the relevant market, if other companies are more likely to enter the takeaway market, it is difficult to determine that Meituan or other companies have a dominant position.

The main reason why merchants accuse Meituan of monopoly is that Meituan requires merchants to sign exclusive agreements. Deng Zhisong said that the "Anti-Monopoly Law" respects the market autonomy of business entities. The key point is whether the merchants have the right to choose. If the merchant does not have the right to choose, the takeaway platform requires that the exclusive must be signed, which undoubtedly constitutes an illegal act. If the merchant has the right to choose, he can sign an exclusive to form a long-term cooperative relationship and have a reasonable business discount, or he can choose to give up this discount and cooperate with multiple takeaway platforms at the same time, then it may not violate the Anti-Monopoly Law.

On April 13, Meituan responded to the Guangdong Food and Beverage Association that it plans to hold business talks nationwide in 2020, to communicate and communicate with businessmen more deeply, to jointly discuss and implement a more effective and effective catering recovery plan. However, the association is not satisfied with this, because "in the epidemic, many catering companies can't wait for the convening of the talks", the association hopes that the US regiment will take substantive action earlier and give a deadline of April 17.

Where is the conflict going

The conflict between the two sides has been fermented this year. In fact, in the second half of last year, businesses constantly jumped out and accused the commissions of takeaway platforms for being too high. Both Meituan and Hungry were accused. "There is a more fundamental problem. After Ali, Tencent, and Baidu, the newly emerging platform model of the Internet economy should have been a smart, light-operated Internet economy, but they are becoming more and more heavy." A network legal expert I told reporters that Meituan, Didi, and the bustling bicycle-sharing industry have a clear trend.

The business is so heavy that the platform cannot digest the costs. In order to make a profit, they will pass on the costs to consumers or other upstream and downstream businesses, which triggers complaints.

The commission for Meituan's takeaway has gone through a gradual increase. At the beginning of the establishment of Meituan in 2015, there was 0 commission, and subsidies were given to merchants and users. In that year, the gross profit margin of Meituan was negative 124%. In 2017, Meituan's takeaway gross profit margin began to be positive. In 2018, the gross profit margin was 14%. In 2019, Meituan's takeaway gross profit margin was 19%. In 2019, after many years of loss, Meituan finally realized profitability.

Behind the increase in takeaway gross profit margin is the rise in merchant commissions. According to the Guangdong Food and Beverage Association, the high deduction point has exceeded the critical point endured by restaurant merchants. Before, the merchants did not pay much attention to this. During the epidemic, the merchants' dissatisfaction and even anger were born.

According to the figures calculated by Li Mi's operation team, the current takeaway commission ratio is close to the ceiling. If it rises again, it will be difficult for merchants to survive. "After the bilateral business model is stable, we must find ways to find more value-added services, that is, other businesses that can generate more business value around the core transaction relationship. Instead of sitting on the platform for bilateral transactions on the platform Charges. "Cui Lili told reporters.

Compared with the earliest generation of Internet companies Baidu, Tencent, and Alibaba, Meituan, Didi, and other new Internet economic companies claim to be "work hard." In addition to the labor cost of delivery and delivery, Meituan also pushes the cost of land, which makes it difficult to make profits. Cui Lili believes that Meituan ’s push cost is relatively high, but its stickiness is also higher than other e-commerce platforms. It is possible to provide more value-added charging services, namely value-added services, between these relatively stable merchants and customers.

At the same time, Meituan can also expand the marginal effect and accelerate its business beyond catering. There are public comments behind Meituan, and the store and consumers have established a connection. "It is a natural choice to do this. It is a natural choice." Cui Lili said.

In March, Meituan is already working on other businesses. During the epidemic, Meituan ’s non-catering business progressed rapidly. The founder of Meituan Wang Xing told the financial report that during the epidemic, certain non-catering products grew surprisingly high, and business grew rapidly. The non-catering business includes fresh food and medicine, as well as new categories such as newly launched books and mobile phones. Wang Puzhong, who manages Meituan's food delivery business, emphasized that Meituan's distribution network is playing a greater role in social distribution, delivering everything, not just catering.

After all, the improvement of the business model cannot be completed in a short time. After all, both the merchant and the platform are in a state of anxiety. Can this matter be resolved quickly?

After studying the Internet for many years, Zhang Yi, CEO of AiMedia Consulting, told reporters that the open battle between the platform and the business has never stopped. Even now, the game between Taobao, Jingdong, Pinduoduo and the platform still exists. In 2011, Taobao ’s 1.5 million small and medium sellers were dissatisfied with Taobao ’s new regulations and launched the “Taobao October Siege”, which caused a sensation in the industry. Eventually, this matter was also resolved.

"In the face of interests, both parties have room for negotiation," even though the merchants are angry at Meituan, Zhang Yi believes that the merchants also need to rely on Meituan. He feels that in the end, both parties will coordinate with each other and learn from each other's strengths. Merchants cannot abandon the Meituan platform, and Meituan is unlikely to make particularly large adjustments, "find a balance between each other."

This is not a business or a party of the US group. "It must be a multi-faceted intervention, including the US group, business, industry associations, even financial institutions, and government intervention. There may be a relatively satisfactory solution." The online legal expert said.