Meituan (CNS) and its Path to Profitability

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Meituan Dianping is the largest food delivery and service platform in China with 3.6 merchants and over 400 million users. It heavily subsidizes its customers by its venture capital money in return for greater market share, just like TNCs. In contrast to the U.S. where the majority of the courier deliveries are done by automobiles, in Chinese cities, food deliveries are more often done by electric motorcycles, e-bikes, and motorcycles. In addition, there are usually some rules regarding the ETA /speed of delivery. Meituan Dianping requires all deliveries to be done within 30 minutes duration (if not, the courier will not receive any payment for that order). This regulation though is cruel, it pushed their couriers to plan their deliveries “wisely” (trip chaining). The company has also been heavily investing in developing and improving its route choice algorithm in order to plan the “best” delivery routes for its couriers. For example, one courier has five delivery orders and its algorithm can plan the most efficient routes for the courier within 0.55 seconds. Meituan claims that in 2015 the average delivery time was about an hour, and it managed to shorten it to less than 30 minutes in 2018.  Important to note that because Chinese cities are densely populated and the labor is still relatively cheap, it is easier for CNS to make profits in China than in other developed countries.
Besides the problem with route choice, Meituan has also faced another problem-the operation inefficiency. Almost all its couriers work full time and thus raise the problem of inefficiency during off-peak time. In fact, Meituan has created 2.7 million food delivery jobs in China and with an average monthly income of 6,000-8,000 yuan (about $1,000-$1,200), which is higher than the salary of most blue-collar jobs. In addition, most of the time, the couriers head to restaurants with nothing to be delivered. To address these problems, the company recently expanded its service to incorporate short-distance delivery to improve efficiency and better utilize its existing manpower. Today, on average, a food delivery courier can deliver 30 orders per day, but for a regular delivery staff (like FedEx), one can deliver about 120 to 150 orders. The expansion of the service, however, means the company will compete with the existing express delivery companies, such as SF express. Meituan has also partnered with companies such as Carrefour and Baigouyuan (the largest fruit retailer in China), to expand its fast delivery services for almost everything. I think that Meituan may point out the path to profitability, and I would love to learn what other CNS are experimenting.

P.S.: I really enjoyed the presentation on the courier network services which we have long ignored but had huge impacts on people's travel behaviors and traffic impacts. I hope in the near future we will have sufficient data to compare the trip chaining done by the consumers with the ones done by the couriers to really understand the CNS's traffic impacts.

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Comments

  1. MiyukiJune 5, 2019 at 10:08 PM

    Thank you for focusing CNS and commenting about our presentation! That pool-type delivery style is very interesting!

    ReplyDelete

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