We wrote about Wang Xin, founder of Meituan earlier this week, and some of you asked us “Wang Xin is definitely a survivor, but how did he survive?”
The early story of Meituan is definitely different from those of Didi, MoBike or ofo. Capital was not necessarily the biggest factor there.
Groupon’s entry into China (interestingly led by the Samwer brothers who later founded Rocket Internet) saw the mushrooming of thousands of deal sites.
Most of these deal sites are location-based listing mainly services (such as dining and SPA).
What is the challenge of being location-based? Well, you need to physically go to the shop to redeem the deals – a hussle that limits the growth.
There is a solution to that: listing goods rather than services. For example, during the mid-autumn festival users can group buy mooncakes. With the fast-growing ecommerce delivery network in China, this model seems to scale much fast than the service based model.
One painful, but right, move
Most of the deal sites pivoted their model to group buy of goods. Meituan did not.
It must have been a very painful choice – seeing your competitors growing in leaps and bounds, splashing ads everywhere.
You might ask now, why didn’t Meituan do it?
Well, Wang Xin was acutely aware of the power of Taobao (Alibaba) in ecommerce. If Taobao launched a group buy service, the other competitors would simply be obliterated.
Taobao did exactly that, launching a deals site called Juhuasuan.
Meituan, who was not invested in the group buy for goods business model, escaped.
That strategic oversight, plus the real focus on operations (which is not easy at all), built up Meituan as a giant of today.
Not over yet
Alibaba is still relentlessly assaulting Meituan, through the purchase of Ele.me (food delivery service) to the massive discounts for Koubei (its service discovery service attached to Alipay app).
Interestingly, when Alibaba shifted its ecommerce deals focus to slightly upscale Tmall, Pinduoduo started, and thrived.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].