On Tuesday, Meituan suspended the Beijing operations of Meituan Select as the Chinese food delivery and local life service giant joins local peers in scaling back community group buying businesses.
Why it matters: Meituan and Pinduoduo led China’s community group-buy craze that took off two years ago. Meituan Select’s withdrawal from Beijing has raised market speculations about the company’s further retreat from the cooling market.
- The company halted the service despite a recent surge in consumer demand for grocery products, driven by panic buying in the city after finding new coronavirus outbreaks.
- The news came two weeks after a major layoff in Meituan, which reportedly hit grocery delivery services Meituan Select and Meituan Maicai, as well as enterprise-facing food distribution arm Kuailv, the worst.
READ MORE: The Big Sell | Will Shanghai lockdown change the game for community group buying?
Details: Meituan stopped receiving orders for Meituan Select, a community group buying service that offers next-day grocery pickup services, in Beijing from Tuesday. The company has removed Meituan Select from the homepage of its main app and its WeChat mini program, local media outlet Caixin reported.
- Amid a market downturn, Meituan Select planned to shut down operations in loss-making cities a few months ago, according to Caixin’s report, which cited an unnamed employee at the company. Beijing was one of Meituan Select’s loss-making cities due to high delivery and order fulfillment costs and low margins.
- Although Meituan has taken a step back from the community group buying services, the Beijing-based company has joined grocery peers as it has beefed up its support for on-demand grocery delivery service Meituan Maicai to cope with the recent Covid-19 outbreak in Beijing.
- The company declined to comment on the matter when contacted by TechNode on Wednesday morning.
Context: China’s grocery delivery craze is losing momentum as the industry sees withering investment. After witnessing the collapse of a group of smaller players, deep-pocketed companies like Meituan, Didi, and Alibaba are retreating from the market after struggling to find a commercialization path.
- Meituan recorded a net loss of RMB 23.5 billion ($3.6 billion) in 2021, compared with a net profit of RMB 4.7 billion in 2020. The company’s operating loss from new initiatives such as Meituan Select expanded to RMB 38.4 billion in 2021 from RMB 10.9 billion in 2020.
- Community group buying teams at various Chinese tech giants are among the worst affected by the ongoing layoffs in Chinese tech companies.