Hi there, it’s Robin.
The unexpected happened this past week.
Despite warning investors that it faces the risk of remaining as a loss-making company, burgeoning losses, and ever-increasing threat of competition, China’s online food delivery platform and O2O giant Meituan-Dianping has finally become the nation’s 4th largest Chinese internet company.
Meituan is now worth more than US$50 billion in market cap.
This is no easy feat especially when considering the wave of negative forces out there in the market today.
– The Sino-US trade war isn’t getting better. Jack Ma retracted his promise to US President Donald Trump. Alibaba will not be bringing 1 million jobs into the US and the reason is the ongoing trade conflict.
– Xiaomi failed to meet the much-anticipated expectations when it went public. Pinduoduo was off to a roaring start, only to find itself battling with fluctuating share price and increasing public scrutiny over the authenticity of the products listed on its platform.
– China’s heavyweights like Alibaba and Tencent are still seeing a decline in their share price. Many of Alibaba’s new businesses are diluting its earnings, according to Citi Research. Tencent, on the other hand, is facing a bigger problem. Its core gaming sector has taken a huge hit given the recent change in the Chinese government stance.
In addition to all of these, perhaps the biggest ‘threat’ that rocked the market is this: the merger of Ele.me and Koubei. With Alibaba and SoftBank channelling more cash into this new entity, it makes investors wonder if Meituan can outcompete given that China’s food delivery space is probably all about the subsidies. More importantly, this new entity has made its intentions clear and that is: it is prepared to do all it takes to acquire 50% of China’s food delivery market share.
Nonetheless, it is pertinent to highlight that Ele.me, in this case, is really only playing catch up. Its earlier acquisition of Baidu Waimai did little to change the status quo and this new move has yet to account for any material change in China’s lucrative food delivery market that has exceeded RMB 297 billion (US$46.5 b) by end-2017, according to Meituan-Dianping’s Catering Report in 2018.
Interestingly, Wang Xing, founder of Meituan, is not too fixated on market share. He believes that the focus should be on increasing efficiency with the help of technology.
Wang once pointed out a major problem with the bike sharing market to Hu Weiwei and that is: the players have failed to consider the importance of higher operation efficiency and were only glued on the fight to get a bigger market share.
Ultimately, costs of raising funds will come back to haunt startups that are only aiming to fight just for a larger slice of the market. Plans and developments have to be constantly in place to pursue efficient systems, even as companies expand.
This could be the lesson for upcoming tech giants in the Southeast Asia region to learn, as we are already seeing some battles heating up amongst the unicorns of this region.
– Go-Jek is rumoured to be seeking additional funding to prepare itself for a costly fight with Grab, and some of its executives are said to be looking to cash out.
– Indonesian new on-demand coffee startup is also replicating China’s Luckin Coffee/Coffee Box strategies in the region.
It would certainly be beneficial to look at more mature tech markets to glean from, rather than to learn from the school of hard knocks.
Read on to find out more interesting stories from last week, and feel free to tip us if you have news clue or you just want to talk with us, email us at firstname.lastname@example.org and we are looking forward to hearing from you.
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