China’s largest on-demand delivery company, Meituan-Dianping (HKG: 3690), is testing a group-buying feature called Pinhaofan, 36Kr reported on Thursday.
This feature is available only inside the WeChat mini program of Meituan Waimai, one of Meituan’s apps, not inside Meituan’s main app or mini program. It is only open to users in some regions, 36Kr wrote, without elaborating where.
A Meituan user can order a meal inside the WeChat mini program of Meituan Waimai, share the food link to another WeChat user to form a group. If the purchasing group is formed before a deadline, both can enjoy a discount, and sometimes free delivery.
To promote this new feature, Meituan is subsidizing free meals for first time app users if they join a group of three people or more for a group buy.
Meituan did not comment when contacted by KrASIA on Friday.
“This feature can definitely enlarge Meituan’s market penetration rate, but it is hard to tell how it will effect the company’s profitability,” Cecilia Xu, an analyst of 36Kr Research, the market research unit of 36Kr, told KrASIA on Friday.
Meituan had 448.6 million transacting users in the first quarter of this year, up 8.9% year-on-year. However, the company generated RMB 9.5 billion (USD 1.3 billion) in food delivery services in that quarter, down by 11.4% YoY, due to the COVID-19 pandemic.
Operating losses for its food delivery business in the first quarter of this year reached RMB 70.9 million, narrowing 54% year-on-year but representing a reverse from its RMB 482.8 million operating profits for the fourth quarter of 2019.
“Moving on to the remainder of 2020, we expect that factors including the ongoing pandemic precautions, consumers’ insufficient confidence in offline consumption activities and the risk of merchants’ closure would continue to have a potential impact on our business performance,” said the company in its Q1 earnings release.