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Meituan Ride-Hailing VS Didi Takeaway Ordering: Which Platform Has Better Odds of Winning?

摘要: Why did Meituan start to provide online ride-hailing service, while Didi attempt to provide online takeaway ordering service? What would the new service mean for both platform? Which platform has better odds of winning?

(Chinese Version)

While MeiTuan, the top online takeaway ordering platform in China, has taken on the online ride-sharing business, Didi, the top online ride-sharing platform, has also started providing online takeaway ordering business. The other days, a piece of recruitment ad was widely spread on the internet, revealing that Didi was recruiting deliverymen for its online takeaway ordering business, and that the service was to be launched first in nine cities, including Wuxi, Nanjing, Changsha, Fuzhou, Ji’nan, Ningbo, Wenzhou, Chengdu and Xiamen. Besides, Didi Takeaway, a designated APP for takeaway deliverymen of Didi, has also been launched.

At the same time, Meituan has also entered the Chinese online ride-sharing market since December 28th last year and launched the service in seven cities across China, including Beijing, Xiamen, Fuzhou, etc.

So, here comes the question: who’s more likely to win?

As we all know, the basic landscape in both the Chinese online takeaway ordering market and the online ride-sharing market have already been settled. While Didi basically dominates the online ride-sharing market, Meituan and ele.com grab the most share of the online takeaway ordering market.

For Meituan, online ride-sharing business is more like a natural extension of its business line, including clothing, food, drink, housing and transportation.

For Didi, however, online takeaway business is more like an add-on to its original business. Didi can’t make use of its resources gathered in the ride-sharing market. Instead, it has to recruit separate deliverymen and equip them with electric bikes to enable the service.

More specifically, Didi divided its deliverymen into two groups: Loyal Deliverymen, and Free Deliverymen. The former have to stay online for at least 48 hours a week and earn a basic salary of RMB 1,000 every month, while the latter can accept orders anytime with double income per order. The biggest advantage of Didi Takeaway, of course, is the huge user base and high brand reputation of Didi.

Nevertheless, to enter an unfamiliar market, subsidy strategy and price battle are quite necessary, whether for Meituan or Didi.

There isn’t much room for improvement in the Chinese online takeaway ordering market

In the Chinese online ride-sharing market, Didi has the absolute monopoly. Statistics suggest that Didi provided 7.43 billion times of ride-sharing service for around 450 million users in total in 2017 and accounted for over 90 per cent share of the Chinese online ride-sharing market.

Whether Meituan has any opportunity for success in the online ride-hailing market, it depends on whether users are willing to shift to Meituan, and whether Meituan can fulfil unsatisfied needs. For both riders and drivers, Meituan’s entry is good news. After all, Meituan has a huge user base as support.

Statistics suggest that Meituan has grabbed over 600 million users via O2O business, among whom 220 million are active users. In this background, it won’t be much of an issue for Meituan to grab enough users for its online ride-hailing service, which features high user frequency and user activity.

For Didi, however, it could pose a huge challenge to enter a market that’s already quite mature and meet most people’s needs.

Of course, the nature of online takeaway platforms and online ride-hailing platforms is basically the same: creating a market and linking supply end with demand end. For them, it’s necessary to meet the need of a single group of users first and related groups then in order to achieve massive scale at last.

For example, an online ride-hailing platform has to gather enough riders first in order to attract enough riders to sign up and provide services, while an online takeaway ordering platform also needs an active and steady user flow before attracting restaurants and businesses to join it.

However, as is the case of the Chinese online takeaway market, Chinese users can already enjoy a good user experience via Meituan and Ele.com, book takeaways from a variety of restaurants and timely receive their meals. Therefore, it’s quite a challenge for Didi to win over users from Meituan and Ele.com.

Besides, since users have already known Didi as an online ride-hailing platform, it could be quite difficult for users to get accustomed to the idea that they could also book takeaways on it.

Moreover, it takes rounds of offline promotion in cities one after another and a large enough deliverymen team, which means high operation cost, to promote online takeaway businesses. While the online takeaway ordering business relies heavily on labor force, Didi used to be more like a light-weight intermediate platform in the past.

Of course, Didi could continue to apply the operation philosophy “quality service and differentiated operation” in the online takeaway ordering market. For example, it could provide ordering service of only more high-end takeaway. However, if so, is it really worth it to develop an entire supply chain and delivery system for such a tiny business? Is it possible to build an effective delivery service and provide satisfactory delivery service within a short time?

Nevertheless, Didi could start with something it’s already good at, and then seek opportunities to create user scenarios and promote consumption. After all, Uber, Didi’s counterparts, carried out similar service as early as 2014 and later launched UberEats, a separate APP for the service. At present, the service has already been launched in nearly 29 countries and regions around the world, and its growth rate even surpassed that of Uber’s core business. Today, UberEats grabbed nearly 10 per cent of the online takeaway ordering market globally.

With attractive subsidies for both users and restaurants, Did could certainly have a good start. However, there’s a huge difference between Didi and Uber: while Didi has very potent rivals like Meituan, Uber didn’t in the global market.

After all, Chinese users no longer need an online takeaway ordering platform that offers similar choices of restaurants as Meituan and Ele.com.

Meituan might have better ends of winning in the Chinese online ride-hailing market by meeting unfulfilled needs

However, this is not the case in the Chinese online ride-hailing market, since there remains huge room for improvement, such as price, service, order pickup time during rush hours.

For drivers, due to the rising oil price and decreasing subsidy, their income has reduced significantly, let alone the high platform fee ratio. In this case, drivers would love to join a new platform which offers high subsidy at first. After all, there’s nothing to lose.

For riders, to successfully hail a car, especially during rush hours, they have the incentive to try different platforms. Since Didi users will have to place an order at a premium during rush hours in order to hail a car in time, they would love to have alternatives.

Therefore, Meituan doesn’t need to afford high operation cost, while it easily attract a large enough rider and driver base.

Still, since the Chinese online ride-hailing market has already been monopolized by Didi and Meituan has long been adopting the “money-burning” strategy in its group-on and hotel ordering business, it’s impossible for Meituan to continue providing high subsidy for a long period of time. Nevertheless, as long as Meituan does a good job in car distribution, operation and offer users with a proper experience, it is likely Meituan could grab a small section of the market.

At present, Meituan’s platform fee ratio remains at around 8 per cent, while Didi charges a platform fee of 20 per cent of the total income. Therefore, Meituan does appeal to some Didi drivers, at least for now.

In other words, both Didi and Meituan have the opportunity to win over some users from the other platform by offering users with an alternative, neither of them could catch up and even surpass the other.

The difference is: users need an alternative more in the online ride-hailing market than in the online takeaway ordering market. From this sense, Meituan has better odds of winning than Didi.

Attempts to expand business lines might end up contributing nothing indispensable for both Didi and Meituan

However, there remains some challenges for Meituan: for one thing, Meituan will have to bear multiple burdens at different markets; on the other hand, Meituan still has to face potential government regulation and apply for relevant government license.

This is also why Meituan failed to launched the online ride-hailing service in Beijing, though it had already attracted over 200,000 registered drivers. Currently, Meituan has received government license for online ride-hailing service only in Nanjing.

In the internet circle, when the market landscape has been basically settled, it’s quite difficult to make any change. If needs be, Meituan and Didi could even force their own users to make a choice.

Up till now, no new player has managed to break the monopoly in any internet sector in China. If Meituan fails to grab certain market share and enter as many cities as possible within a certain period of time, provide users with a proper user experience and achieve profitability, it would have no choice but to quit the market. This is true also for Didi.

Although both Didi and Meituan are trying to expand their business line and provide users a more well-rounded user experience by entering the market of the other platform, it is likely that such attempt would only end up contributing nothing indispensable for both of them.

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The article is published with authorization from the author @Wang Xinxi, please note source and hyperlink when reproduce.]  

   Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

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