Meituan starts another layoff round to cut costs: report

Chinese local service platform Meituan initiated a new round of layoffs involving core business units after cutting up to 20% of staff in April this year, Chinese media outlet LatePost reported on Thursday.

Why it matters: Meituan faces high losses in its group buying business, leading it to continue laying off staff in related units. Meanwhile, the company also significantly reduced its campus hiring starting in September, with the actual number of hires less than half of the 5,000 planned. Chinese internet companies often replace higher-paid employees with cheaper ones to reduce operating costs.

Details: The redundancies mainly affected people from the Beijing-based company’s group buying unit called “Meituan Select,” according to LatePost’s report. 

• This round of adjustment also involves Meituan Select’s management level. Hua Fang, who is responsible for products on the platform, has notably been on a long leave recently. Hua’s position was taken over by Zhang Peng, who previously led the company’s search and recommendation efforts.
• The group-buy unit has been unable to achieve profitability while losses continue to expand. The operating loss of Meituan’s new initiatives reached 48% in the April-June period. Meituan Select was rebranded to next-day delivery supermarket business in October.
• Laid-off employees will be compensated based on their number of years of service to the company plus one month’s salary.
• Meituan is also saving money on employee-related benefits. For example, the report said that some department leaders recently recommended that their subordinates leave work earlier to reduce commuting costs. (The company reimburses taxi fares after 9:30 p.m.) 

Context: After the massive layoffs in April, Meituan’s marketing expenses in the second quarter decreased by RMB 1.86 billion yuan, down 17.1% year-on-year.

• Meituan’s 2021 annual report shows that employee benefits expenses became the second-largest expense, followed by food delivery-related costs, totaling RMB 34.77 billion ($4.8 billion) in 2021, an increase of 61.4% year-over-year. The increase in the number of employees also led to a jump in sales and marketing expenses, research and development expenses, and general and administrative expenses, which rose 46.4%, 41.0%, and 24.8%, respectively, compared to the previous year.