The various levels of lockdown and quarantine across China haven’t proven a golden opportunity for the biggest food delivery and bookings company, a warning for on-demand service providers elsewhere as more of the world stays at home to avoid the coronavirus.
Meituan Dianping says it will post a loss for the first quarter ending Tuesday following a decline in revenue. The Beijing-based company’s business consists of three main divisions — food delivery, restaurant and travel bookings, and other services such as car hailing, bike rental and groceries.
Bookings, which account for around 23% of revenue, took the biggest hit. That was predictable. Consumers aren’t keen to take a seat at a restaurant or a night at a hotel amid a deadly disease outbreak, and widespread travel curbs meant moving around China wasn’t an option.
Food was more of a surprise. Two months ago amid the Lunar New Year break, I theorized that such deliveries — at 56% of Meituan’s revenue — might bounce back quickly as customers opted to stay in rather than eat out. I was wrong.
Thousands of vendors on Meituan’s platform were forced to close either voluntarily or by mandate, and thus couldn’t provide meals. Those who did stay open were often met with fear and complications on the demand side.
Many customers had concerns not only over the safety of meals coming from restaurants, but the drivers who delivered them. Those still willing to order online were met with layers of challenges as local governments, neighborhoods and buildings exercised strict controls over who could come and go. There was no supply bottleneck for drivers; Meituan noted plenty of capacity on hand.
Three weeks ago, Alibaba Group Holding Ltd. said that its own courier and food delivery services, Cainiao and ele.me, were back to full staffing. But the food business was still down because many restaurants remained closed.
An upside has been grocery delivery. Meituan’s two services, self-operated and marketplace, have seen strong growth during the crisis, a trend that echoes what Alibaba experienced with its Freshippo service. In many cities, consumers either cannot or prefer not to step out to shop. They’re apparently less afraid of groceries brought to their door than fresh-cooked meals.
Even as China returns to a certain level of normalcy, food delivery may struggle for another few months. Most companies are maintaining degrees of isolation, such as working from home or rotating shifts. Taking lunches to places of business is normally an important part of the consumption scenario.
As investors start to ponder the outlook for Delivery Hero SE, Just Eat Takeaway, and GrubHub Inc., they’d do well to look at how their China peers have fared during the virus battle. Collectively, these companies get most of their revenue from Western markets that are now imposing lockdowns to battle the pandemic. They’re implementing contact-free and non-cash deliveries to make customers feel safe.
That may not be enough. While it’s true that people still have to eat, China’s experience shows that this doesn’t mean consumers will necessarily order delivery or that restaurants can supply them. Tim Culpan, Bloomberg