Meituan's new challenge: Tier 3 and 4 markets are impacted, and many O2O giants are involved

As a survivor of the group buying war, Meituan has relied on caution and steadiness to develop since the group buying market expanded rapidly in 2011. Three years later, when Meituan has firmly established itself as the number one group buying company, the company has become more aggressive because in the broader market, the competitors Meituan needs to face are larger and more fierce.

According to data from Tuan800, in the first half of 2014, Meituan's transaction volume was nearly 15 billion yuan, accounting for more than half of the group buying market. However, its old rivals during the group buying war, such as Lashou, Wowo, and Manzuo, only have a single-digit market share and have long been squeezed out of the first echelon of group buying.

But today's Meituan is not without competitors. It's just that its competitors are no longer those group-buying websites that once made people crazy. Facing Dianping, which has a stronger historical accumulation, and Nuomi, which has greater financial support, Meituan's share in third- and fourth-tier cities is facing strong challenges.

At the same time, CEO Wang Xing's new positioning of Meituan as a "large platform for eating, drinking and having fun" also hints at Meituan's ambition to share the O2O market for life services. However, it will be a huge challenge for Meituan, which lacks a mobile Internet traffic portal, to compete for the market with rivals such as 58, Ganji , Baidu and Dianping.

Defend the third and fourth lines

In today's group buying landscape, the competitors following Meituan are Dianping and Nuomi, which stands behind Baidu. Dianping's group buying transaction volume in the first half of the year was 6.8 billion yuan, accounting for about 20% of the market share. Nuomi's transaction volume in the first half of the year was 3 billion yuan, accounting for 10% of the market share.

Meituan, Dianping, and Nuomi have different spheres of influence. Dianping’s strengths are mainly concentrated in first- and second-tier cities, especially in Shanghai, Beijing, Nanjing, etc. Nuomi’s share mainly comes from second- and third-tier cities. Meituan has opened stations in the most cities, and currently has advantages in second-, third-, and fourth-tier cities, of which third- and fourth-tier cities account for nearly 70% of Meituan’s share.

Meituan’s revenue structure also represents some changes in China’s group buying market.

Three years ago, the battlefield of group buying was mainly in first- and second-tier cities. In 2011, Meituan even took the initiative to close some branches in fourth-tier cities. The consideration at that time was that payment habits had not yet been formed in fourth-tier cities, and there were relatively few merchants, so the online advertising model was difficult to accept.

But three years later, the situation has changed dramatically. According to the data of Tuan800 in July this year, the transaction volume of group purchases in third- and fourth-tier cities has accounted for 59% of the market share. This means that third- and fourth-tier cities have become the battleground for group purchases.

Meituan is the absolute leader in third- and fourth-tier cities. However, as the third- and fourth-tier cities mature, Dianping and Nuomi have accelerated their expansion in these cities.

Meituan's plan this year is to increase the number of its city branches from 180 to 300 within a year. Dianping has also clearly revealed its plan to "expand to third- and fourth-tier cities," and the number of its city branches has now expanded from 40 to 50 at the beginning of the year to 140. After being fully acquired by Baidu, Nuomi's expansion plan is even more astonishing, and it is expected to increase the number of its city branches to 400 within the year.

After Nuomi was upgraded to Baidu Nuomi, the team also underwent a major upgrade. With the infusion of Baidu's search marketing team, the total number of Nuomi employees has now reached 6,000. At the same time, this year, Nuomi has seized market share from its competitors with a series of low-price promotions.

Baidu CEO Robin Li publicly stated after the release of the first quarter financial report that "Baidu's LBS platform business is growing very rapidly, with a quarter-on-quarter growth of about 80%." Although the group purchase share still ranks third in the market, Robin Li is confident because "we are catching up very quickly."

Zhang Tao, CEO of Dianping.com, also believes that "expansion will be more aggressive" this year. He explained the logic behind the "third and fourth tier strategy" in this way: in relatively underdeveloped cities, consumers' main demand is still discounts, so the group buying business needs to be vigorously promoted in third and fourth tier cities.

Judging from the growth rate in the first half of the year, the entry of competitors has not yet brought too fatal impact to Meituan. Meituan's transaction volume in the first half of the year increased by 183.1% year-on-year, higher than Dianping's 147.9%. Nuomi's market share has not increased significantly compared with six months ago.

However, facing the third and fourth tier cities that it has to defend, Meituan has to be nervous. An interesting detail is that Meituan, which once resolutely refused to promote to protect cash flow, has also begun to invest heavily in advertising. Since May, Meituan's large-scale brand promotion activities have appeared on the popular programs of Hunan Satellite TV and Jiangsu Satellite TV, and Meituan can also be seen in building media, buses and subways in major cities.

In addition, some teams are also facing new changes. First, the number of staff has increased, and then with the increase in competitors, in order to stabilize cooperative merchants, Meituan's transaction commission has been significantly reduced, and the commission in some cities has even been reduced from the original 10% to 3%.

More than just group buying

Group buying is a sharp weapon to seize the market, but it does not represent everything for the future.

Meituan is now entering more market segments in the group buying business, including movie tickets and hotel business. On the other hand, it has also begun to enter services other than group buying. For example, the food delivery business led by Vice President Wang Huiwen went online at the end of last year .

Wang Huiwen described Meituan’s overall layout as a “T-shaped strategy”, with group buying as the horizontal section and vertical categories as the vertical section, and Meituan Takeout is one of the “vertical sections”.

Meituan has already established a considerable business in movie ticket and hotel group purchase. According to data released by Meituan, as of August 2014, Meituan's movie sales accounted for nearly 20% of the total box office in China. Hotel group purchase is another market segment that Meituan has taken the lead in grabbing. According to data from iResearch, in the first half of this year, the transaction volume of hotel rooms in the group purchase market was 3 billion, and Meituan accounted for 75% of it.

As CEO, Wang Xing summarized Meituan as "a large platform for eating, drinking and having fun." The fact facing Wang Xing is that "the entire market share of the narrow group buying industry is only 30 to 40 billion, while the entire life service industry is several trillion. The group buying industry is only a very small part of this market."

But Meituan is not the only one targeting the "big platform for eating, drinking and having fun".

Since the beginning of the year, in addition to the more intense competition in the group buying field, the competition among companies is more reflected in the comprehensive strength of O2O, and there are also giants among them. Tencent's strategic investment in Dianping, Baidu's integration of Nuomi and the recently launched "Direct Number" all show its ambition in the life service market.

Dianping first entered the food, drink and entertainment market with a review and promotion model. Around 2014, through strategic adjustments and business unit reforms, Dianping's O2O thinking gradually became clear. On the one hand, it continued to expand in depth in the catering field, that is, to deepen services such as group buying, reservations, takeout, and member management. On the other hand, it expanded horizontally in the industry and entered new fields such as weddings and travel.

In the past few years, Baidu has never given up exploring products related to life services, relying on the LBS attributes of maps. At the Baidu World Conference, Baidu launched a new platform that connects merchants and users: Zhidahao. The launch of Zhidahao also means that Baidu's O2O strategy has a clearer approach.

Liu Jun, vice president of Baidu, said that Direct Number will be a magic weapon for traditional enterprises to integrate O2O online resources in the future. The logic behind it is actually to divert traffic through Baidu's mobile terminal, and ultimately achieve a one-stop connection for merchant services including group buying, reservations, and ordering.

From the outside, Baidu has a huge amount of traffic and strong demand for active searches from users. It matches the needs of users and merchants through "direct numbers", which gives Baidu O2O more room for imagination.

Regardless of the entry point, it is obvious that every participant has seen the huge O2O business opportunities hidden in the traditional real economy.

Just like the theme of Meituan’s 2014 annual meeting - “Crisis” and “Growth”. In the competition in the O2O field, Meituan needs to challenge the larger competitors. It is difficult to judge the winner by looking at group buying alone. Whether it can survive in the melee again is the biggest challenge for Meituan.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.