FB Pixel no scriptMeituan's relationship with dining sector sours as COVID-19 tests restaurants' bottom line | KrASIA

Meituan’s relationship with dining sector sours as COVID-19 tests restaurants’ bottom line

Written by Song Jingli Published on   3 mins read

Trade associations demand the company discontinue exclusive cooperation agreements and lower commission fees.

Meituan-Dianping (HKG: 3690), China’s leading food-delivery company which already expects an operating loss for the first quarter of 2020 due to the novel coronavirus outbreak, is now jeopardizing its relationship with restaurants, which account for nearly 60% of its entire revenue in the fourth quarter of last year.

The Guangdong Restaurant Association (GRA), along with another 32 trade associations, asked Meituan to remove “monopoly clauses” in its agreements and to lower commission fees by at least 5% for its member companies, according to written complaints published via the GRA’s WeChat account on Friday.

These associations, without detailing these monopoly clauses, said that Meituan’s commission rate of 26% for new restaurants registered on the platform exceeds what most can bear.

Restaurant operators which sign exclusive agreements to be listed only on Meituan’s platform could enjoy a commission rate of only 16% while those which have chosen other platforms as well are charged a commission rate of 21%, Zhou Bo, a source close to the hot pot industry in Guangdong, told Chinese media outlet Shidai Caijing.

Multiple restaurants in Guangzhou contacted by the Chinese media outlet confirmed Meituan’s commission structure as 16% for exclusive partners, 21% for non-exclusive partners, and a whopping 26% for newcomers to the platform. For comparison, the restaurants on Alibaba’s rival service Ele.me abide by a commission fee structure of 10%, 13%, and 16% depending on the restaurant’s scale, with no differentiation by exclusive partnerships.

Meituan’s average commission rate, which is the ratio of total commission revenue divided by all food-delivery sales, has increased from 1.1% in 2015, to 8.9% in 2016, and further to 12.6% between 2018 and 2019, according to a report from 36Kr Research analyst Cecilia Xu.

“Most dining companies did not pay specific attention to the commission fee but became dissatisfied and even furious as Meituan has not made any material changes amid the COVID-19 pandemic,” said the Guangdong Restaurant Association, adding they have received various complaints about Meituan from hundreds of companies.

Hit hard by the COVID-19 pandemic, many restaurants need more than one food-delivery platform to seek additional sales, said these associations, alleging that Meituan may have violated China’s anti-monopoly laws. Meituan currently accounts for between 60% and 90% of Guangdong’s food-delivery market.

Meituan also occupies a roughly 70% market share in food-delivery across China, indicating merchants will not break ties with Meituan, especially during a public health crisis, unless they can get an equivalent order volume from other channels including Ele.me and mini programs on WeChat, according to Xu.

Meituan announced that restaurants providing delivery services in Wuhan, capital of central China’s Hubei province that was the epicenter of the coronavirus outbreak, would have all commission fees waived in February, but did not grant such benefits to merchants located elsewhere.

The coalition led by the GRA demanded Meituan respond to their requests by April 17, adding that they may team up with restaurants and dining associations nationwide to protect their rights if Meituan declines to respond or adjust policies. This is the GRA’s second attempt to get better treatment from Meituan since it first issued written requests to the company as early as March 10, which received no response.

“Even in 2019, when we broke even for food-delivery services, the average profit per delivery order was less than RMB 0.2 in the fourth quarter, accounting for 2% of the revenue,” said Puzhong Wang, Meituan senior vice president who oversees the company’s food-delivery business, in written statements to KrASIA on Monday.

36Kr Research’s Xu told KrASIA on Monday that Meituan’s statements do not respond directly to these associations’ two key requests.

36Kr is KrASIA’s parent company


Auto loading next article...