Douyin's presence prompts Meituan to re-emphasize its primary operations
Meituan, the Chinese tech conglomerate, has announced its financial results for the fourth quarter of 2023, revealing a mixed picture of growth and challenges. Meanwhile, Douyin, the Chinese version of TikTok, has unveiled its strategic plans for business development in 2024.
Meituan's Q4 2023 Financial Highlights
Meituan's adjusted net profit surged by an impressive 427.6% to reach RMB 4.37 billion (USD 603 million) in Q4 2023. However, the operating profit margin of its in-store business for the wine and travel category fell below 30%, marking a decrease from previous quarters.
The company's core local business, which includes food delivery and local services, saw a decline in its operating profit margin, dropping from 16.6% in Q4 2022 to 14.5% in Q4 2023. This decrease is attributed to increased subsidies and marketing expenses, with Meituan's marketing expenses reaching RMB 16.73 billion (USD 2.3 billion) in Q4 2023.
Meituan's in-house business, Meituan Shangou, reported a daily average order volume of 8.3 million in Q4 2023, representing a year-on-year growth rate of 27.7%. However, the business incurred losses, with a loss exceeding RMB 100 million (USD 13.8 million) in Q4 2023, and an average loss per order of about RMB 0.2 (USD 0.027).
Strategic Adjustments at Meituan
In an effort to reduce operating losses, Meituan plans to make strategic adjustments to its Youxuan business. The company also abandoned the agent-based model in lower-tier cities in Q4 2023 and transitioned to direct sales.
Meituan replaced Zhang Chuan with Wang Puzhong as president of its in-store business unit in February. Since Wang's appointment, Meituan's stock price has surged over 25%. However, the name of the new appointee who will lead the in-store units in 2024 is not found in the provided search results.
Meituan has initiated a review of the return on investment of its tactics in Q1 2024, with the internal goal of achieving an average penetration rate of 30% for its in-store merchants.
Douyin's 2024 Business Development Plans
Douyin, China's most popular short video platform, has set its primary targets for business development in 2024 on branded chain stores. The company is contemplating revising down its RMB 580 billion (USD 80 billion) GTV target for 2024 and prioritizing commercialization instead.
Douyin's quick commerce business has designed a cooperation framework worth RMB 300 million (USD 41.4 million) with domestic supermarket chain Yonghui Superstores. In Q4 2023, Douyin's GTV for its local lifestyle business exceeded RMB 100 billion (USD 13.8 billion) for the first time.
As Meituan and Douyin navigate the complexities of the Chinese market, their strategic adjustments and growth plans will be closely watched by investors and industry observers alike.
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