Ele.me loses confidence.

Author | Wang Chi

Editor | Yang Zhou

According to "City Phenomenon", Ele.me's group buying business is about to make new progress. Multiple Ele.me takeout operators stated that the platform is launching a new traffic entrance, called "Te Tuan", and will open a prominent position on the App's homepage for it.

Ele.me's group buying business was launched in 2022, similar in logic to Meituan's Pinyin Group Buying. Both products are quite similar in terms of page display, ordering process, and meal types, all adopting the model of "popular meals + group buying + unified delivery", where users place orders collectively, merchants prepare meals in batches, and riders deliver them collectively.

Compared to Meituan's rapid progress and growth path in Pinyin Group Buying, Ele.me has seen slow progress in this area over the past period, with many users still lacking the group buying entrance on the Ele.me App's homepage. The upgraded Te Tuan entrance may further increase user coverage.

According to LatePost, someone from Ele.me once referred to Pinyin Group Buying as an "additional question for top students", believing that Ele.me failed to replicate Pinyin Group Buying for two reasons: lack of user data to accurately define demand, and a low market share resulting in a lack of bargaining power with merchants.

However, a former Ele.me employee told "City Phenomenon" that the main reason for the failure to replicate was the unclear prospects of the early Pinyin Group Buying business, which did not receive sufficient market validation or internal attention. Now, revisiting this business may be due to the success of Meituan, leading to new internal judgments.

Following Meituan's footsteps is becoming the norm for Ele.me this year. At an internal learning session in April, an investment manager mentioned, "Profits stem from stable scale growth, and investment in new tools is essential. In 2024, we must prioritize universities, forward warehousing, and group buying for growth."

The emphasized growth directions of universities, forward warehousing, and group buying correspond to Meituan's business innovations of student exclusives, instant retail, and Pinyin Group Buying, respectively. Benefiting from progress in these areas, Meituan has further explored its business potential in the local lifestyle sector, gaining more room for growth.

This growth has even widened the gap between Ele.me and Meituan. According to Quest Mobile data, in terms of platform-side traffic, Meituan's user activity has grown strongly, with a MAU of 464 million in May 2024, a year-on-year increase of 15.64%, while Ele.me's MAU declined by 0.42% year-on-year.

From the supply side, the merchant activity of Ele.me and Meituan has also begun to diverge. In May 2024, the MAU growth rates of Meituan Waimai Merchant Edition and Meituan Kaidianbao reached 9.99% and 41.85%, respectively, far exceeding the year-on-year growth rates of 4.52% and -24.68% for Ele.me Merchant Edition and Alibaba Local Pass.

In the past, the competition between Meituan and Ele.me mainly centered around takeout market share, eventually reaching a stalemate in 2020 with a 70-30 market split that has barely changed over the years. However, with Douyin disrupting the local lifestyle market, Meituan has re-entered the fray with live streaming, low prices, and retail, strengthening its competitive position.

However, Meituan, invigorated by Douyin, has also begun to exert competitive pressure on Ele.me, with the takeout market share gradually tilting towards Meituan. Now, activating user orders, incentivizing merchant operations, and maintaining long-term platform vitality have become new challenges for Ele.me to maintain competitiveness in the existing market after the takeout wars.

01 Following the Competitor's Footsteps

"It's the same old stuff, basically the same as Meituan's Pinyin Group Buying, with a fixed-price model at its core," said an Ele.me business manager about the upcoming "Te Tuan", showing little excitement. In his view, with Meituan's Pinyin Group Buying already in the market, Ele.me's follow-up is merely to meet the demand for low-cost takeout.

Moreover, in terms of supply diversity, Ele.me's entry may not bring more differentiated low-cost takeout options to the market. According to some institutions, there were 13.9 million Meituan takeout merchants in June 2023, roughly twice the number of Ele.me merchants. Meanwhile, 5.6 million merchants were present on both platforms, accounting for 41% of Meituan's total takeout merchants but 94% of Ele.me's merchants.

This means that only about 6% of merchants are exclusive to the Ele.me platform, while Meituan has 59% exclusive merchants. The difference in merchant diversity directly affects the differentiated takeout options available through promotions. Some consumers have complained on social platforms about the limited options available on Ele.me's group buying, with many people unaware that Ele.me even has a version of "Pinyin Group Buying".

For merchants, the addition of new features is barely noticeable. Some merchants believe it's worth a try to see if it works. Zhang Xun, a takeout operation training instructor, said: "This feature is suitable for new stores to increase orders, as these orders are counted towards the store's cumulative orders, allowing for a quick buildup to 10,000 orders, and orders placed here cannot be reviewed."

In terms of Te Tuan's operating mechanism, Ele.me, which follows its competitor's footsteps, is clearly more mature. Previously, Meituan encountered pitfalls in the operating mechanism of Pinyin Group Buying.

Initially, sales and reviews on Meituan's main site and Pinyin Group Buying were linked. If merchants wanted to boost sales through Pinyin Group Buying to increase order rates on the main site, the increase in negative reviews on Pinyin Group Buying often negatively impacted store exposure and order volume.

After optimization, Meituan now stipulates that after 90 days of a new takeout store's launch on Pinyin Group Buying, data such as order sales and reviews will no longer be recorded on the takeout store's page.

Following Meituan's footsteps involves more than just low-priced takeout in the Pinduoduo model.

In September this year, Ele.me officially launched the "Student Edition". When students switch their delivery address to a specific university and complete student account verification, Ele.me will display a customized student edition homepage and exclusive student benefits. This takeout benefit focusing on campus scenarios has been offered by Meituan for four years.

In the instant retail business, at the 2024 Meituan Instant Retail Industry Conference, Meituan announced that it aims to reach 100,000 Meituan Lightning Warehouses by 2027. Just a week later, Ele.me announced the same goal. At the 2024 Instant E-commerce Future Business Summit, Ele.me launched the "Near-field Brand Official Flagship Store" project, planning to open 100,000 official flagship stores in the next three years.

02 Ele.me Loses Its Original Traits

Following the competitor's growth is becoming a new direction for multiple Ele.me businesses this year.

Industry insiders point out that as the second player in the local lifestyle industry, following the market leader's footsteps can help Ele.me avoid many trial-and-error costs. However, everything has two sides. While following Meituan's footsteps avoids high-risk costs, it also means Ele.me will lose more possibilities for high returns.

Dramatically, in a 2016 internal speech during a cultural tour in Shanghai, Ele.me founder Zhang Xuhao discussed the pros and cons of innovation and following strategies.

At that time, he believed, "Innovation is in our DNA. Today, we see Meituan and others, and their strategies are clear to us. They mostly follow, imitating across various industries, from their previous work on Xiaonei.com, which was a deep copy. I won't evaluate the good or bad of this strategy. I think it's sometimes good, using operations to compensate and gain an advantage later. The following strategy is like drafting in a bicycle race, hiding behind the second place because the first place might take many detours. The second place gains momentum later, compensating through operations. I think it's a smart strategy, but it's their DNA, not ours. Our DNA is definitely continuous innovation."

However, due to changes in rankings in the local lifestyle sector, Ele.me and Meituan's DNA have switched. Ele.me, no longer willing to take risks, seems to have lost its potential for overtaking on curves.

In 2022, Ele.me changed its corporate vision from "Creating a globally leading lifestyle platform through innovative technology" to "Promoting technological innovation and advancing with the ecosystem; order with confidence, arrive on time, making life simpler and happier". Under the new corporate vision, global leadership is no longer mentioned.

Changes in DNA also affect a company's development direction. Meituan has officially set its corporate vision as "a globally leading local service platform that helps everyone eat better and live better", beginning to explore overseas growth. As Meituan's overseas projects are still in the validation stage, Ele.me, which follows its competitor's footsteps, has not yet shown ambition to go overseas by following its competitor.

As a business segment within the Alibaba Group, compared to the organizational stability of its competitors, Ele.me has undergone multiple organizational adjustments, welcoming its fifth CEO and a new management team. Under these changes, Ele.me's past directions have often focused on small innovations rather than large market opportunities.

For example, in 2021, Ele.me launched seasonal marketing based on the 24 solar terms, and in 2022, it introduced free meal activities, both of which have continued to become the platform's marketing IPs. However, these marketing ideas often only address symptoms rather than root causes, with Ele.me lagging behind Meituan in user stickiness and merchant activity in the takeout business.

03 No Longer Willing to Lose in Instant Retail

Some believe that compared to the short-term focus on Pinyin Group Buying, Ele.me's long-term priority in the coming years should still be instant retail.

The low-price business model and capabilities of group buying, once mature, could also be used for instant retail. In the past, Pinduoduo in the e-commerce sector has proven that low prices are not only a market demand but also a traffic generation capability. Based on a low-price product strategy, Pinduoduo has leveraged WeChat traffic, leading to another market segmentation in the mature e-commerce market.

Just as seen in the e-commerce market, low prices are always the most direct way to shift scale. With the cost-effectiveness of Pinyin Group Buying, Meituan effectively blocks the possibility of changes in takeout order scale from the source. Recently, Meituan has also made it clear that its takeout goal has shifted from GMV to order volume.

Among the three most popular competitive tracks in the local lifestyle sector, within the Alibaba Group, the on-site group buying business was eventually transferred to Gaode after multiple attempts, becoming a destination-based business. As Ele.me's core business, takeout dining has long been stuck at a 30% market share. Only instant retail, with an unset landscape, still holds the greatest variability.

Seizing this opportunity and winning this battle have become heavy responsibilities for Wu Zeming's team, which took office in March this year.

In March this year, Alibaba Group CEO Wu Yongming announced in an internal letter that Yu Yongfu, Chairman and CEO of the Local Life Group and Ele.me, stepped down from his local life management duties. Wu Zeming, CTO of the Local Life Group, succeeded as Chairman of Ele.me, and Han Liu, head of Fengniao Delivery, succeeded as CEO.

The new management made it clear from the outset that they would adhere to the platform strategy of "openness" and "ecology" in the long term. In this direction, the recent Instant E-commerce Conference also proposed a strategic plan for 100,000 stores in three years. However, some instant retail practitioners have criticized these as empty words.

This criticism is not entirely unfounded. According to Guosen Securities data, Meituan accounted for 47% of instant retail sales in 2023, occupying half of the market. When combined, Ele.me and Alibaba's share accounted for 17% of market sales, nearly three times less than Meituan's.

Before this conference, Ele.me's Double Hundred Plan last year aimed to help 100 brands achieve 100% growth on Ele.me within two years.

This year's sudden leap may stem from new judgments about the growth rate of the instant retail sector. According to the growth rate forecast by BOCI International based on GMV, Meituan Flash (20%) > JD.com Daojia (18%) > Meituan Maicai (17%) > Ele.me (16%) in terms of platform growth in 2024.

Achieving a leap in instant e-commerce is not easy. Over the past three years, Ele.me's main business goal has been to focus on reducing losses, and it has recently withdrawn from its high-end takeout brand Xingxuan. Faced with new market opportunities, the question of whether to prioritize scale, growth rate, loss reduction, or profit is not one that a new team's "open ecology" can answer alone.