The mainland’s regulatory storm “would like to be quiet but the wind will never cease”. 14 ministries and commissions including the National Development and Reform Commission and the Ministry of Commerce jointly took action last Friday to “guide” takeaway platforms to reduce intermediary fees. The share price of the industry leader Meituan (03690) fell sharply by 14.9% on the same day. . In fact, Meituan itself is still suffering from serious losses due to “burning money”, and the authorities have asked the food delivery platforms to improve the treatment of more than 10 million “riders”, and at the same time asked them to reduce prices and make profits to restaurants, as if “Meituan is good, and Asking Meituan not to eat grass” seems like an impossible task.
Last Friday, 14 ministries and commissions jointly issued the “Several Policies on Promoting the Recovery and Development of Difficult Industries in the Service Industry”, which contains 43 measures, including the 12th item “Guiding Internet platform companies such as takeaways to further lower the service fee standards for catering industry merchants and reduce related industries.” Operating Costs of Catering Enterprises”. After the news was exposed that followingnoon, Meituan’s stock price jumped into the water at a rapid rate in just one hour, with a high and low fluctuation of nearly 20% throughout the day. Since its peak in February last year, Meituan has tumbled 60% in one year, making it one of the biggest tech stocks that have been hit the hardest by this round of “regulatory storm”.
Ranli rider business model or rewriting
Meituan currently occupies regarding 67% of the mainland’s takeaway market, which has significantly left Alibaba’s (09988) Ele.me (regarding 27% market share), and is the industry’s first brother. Therefore, when the government requires the takeaway platform to “reduce prices”, Meituan must bear the brunt. However, although Ele.me is in a weak position, following all, it has the strong support of Ali and continues to attack Meituan fiercely. The competition between the two sides is still fierce. money” status.
At the same time, like international food delivery platforms such as Deliveroo and foodpanda, Meituan and Ele.me have more than 10 million “riders” to provide services; The three parties play the role of intermediary pairing. However, on July 26 last year, seven ministries and commissions including the National Development and Reform Commission and the Ministry of Commerce jointly issued the “Guiding Opinions on Implementing the Responsibilities of Online Catering Platforms and Effectively Safeguarding the Rights and Interests of Food Delivery Drivers”, requiring the food delivery platforms to greatly improve the treatment of “riders”, including paying for them Social insurance, as well as optimizing order distribution, improving income levels, reducing labor intensity, relaxing delivery time limits, etc.
According to Meituan’s 2020 annual report, the platform had 9.5 million registered “riders” by the end of the year, and last year’s total was likely to exceed 10 million. To pay social security benefits and improve treatment for this “military army” will inevitably increase Meituan’s expenses and even rewrite its business model, which is also the main reason for the group’s severe losses last year. Under this circumstance, if the authorities ask the food delivery platform to reduce the service fee to the restaurant, it will inevitably cause Meituan to “burn both ends of the candle”.
According to industry sources, the current commission rate of Meituan and Ele.me is regarding 15 to 20% (the higher the total unit price, the lower the rate), which means that consumers spend 100 yuan to order takeout, and regarding 15 to 20 yuan will fall on the takeaway platform. Pockets; however, the food delivery platform will use this money to pay for the “rider” remuneration and expenses such as servers, technology research and development, maintenance, operation, and promotion. bleeding”.
It is difficult to grab business at par
Like car-hailing, online shopping and other similar types of online platform businesses, the original wishful thinking of food delivery platforms was to burn a round of money to seize the market first, so as to achieve economies of scale, and then gradually increase the level of fees and improve profitability, in order to “loss the head and make the tail”. However, the market competition has not slowed down, and this abacus may not be successful.
Meituan’s share price plummeted last Friday, and some people think the market has overreacted. This is because, as mentioned above, 14 ministries and commissions issued “Several Policies” to help the service industry recover and develop under the epidemic, most of which are government tax cuts, fee reductions, subsidies and other preferential measures, which can be regarded as “gift packages”, while The policy on food delivery platforms is only one of the 43 items, and the wording is “guide” to lower the charging standard, not a mandatory price reduction.
However, from another perspective, the measures introduced by the mainland authorities last year, such as banning tutoring agencies and restricting online game operations, were initially only “gentle” opinions, but later they were gradually implemented as “iron fist” bans. With lessons learned, it’s no wonder investors are frightened.
In fact, it is not easy to set an objective standard for the level of fees charged by online platforms, but the reality is that the competition among mainland food delivery platforms continues to intensify. However, Meituan’s current market share is as high as 67%, and it itself suffers serious losses, which shows that the group is closer to the stage of “grabbing business at par” rather than “making huge profits at high prices”.
Taking a million steps back, even assuming that Meituan will establish a dominant position in the future, or achieve an oligopoly with Ele.me, and then start to “earn the tail” following “lossing the head”, the government should monitor whether it uses improper means. Gain monopoly advantage instead of forcibly limiting its level of profits. It is regarding investing in a new model or new product in the business world, which requires huge risks, and often “one battle is successful”, and this is also the source of social innovation; just like if a pharmaceutical company successfully develops a unique drug, it has the opportunity to earn ” Profits.” However, if the government sets an upper limit on drug prices on the grounds of public interest, it will be difficult for pharmaceutical companies to invest huge amounts of money in research and development for the treatment of chronic diseases in the future.
In general, public interests and commercial interests must be balanced, but institutional supervision should be adopted, rather than an “iron fist” attack at every turn, otherwise it will inevitably disrupt the operation of the market. The three-paragraph phrase “both … and … and …” is common in Chinese official documents, but it is often unrealistic. For example, when applied to a food delivery platform, “it is necessary” to provide good service to consumers, “and” to greatly improve the treatment of riders, and “also” to reduce prices and make profits to restaurants. Don’t dare to invest in innovative ventures anymore, and don’t blame the business world’s increasing tendency to “lie down”.