Brands add new services
to strengthen difference
Specialists evolve into super apps
Lifestyle platforms act as the fulcrum balancing the online and offline worlds. The ability of lifestyle platforms to offer products and services on mobile apps and fulfill orders rapidly has transformed the way Chinese, especially young people, shop, order food, buy concert tickets, hail cars, and conduct other daily activities.
Three of the four ranked brands—Meituan, Ele.me, and Dianping—began as specialists in one area and have expanded into new businesses to become super apps, the kind of one-stop shop that Chinese consumers prefer because it simplifies smartphone navigation and maximizes convenience. Simultaneously, the brands have attempted to differentiate.
In this already fiercely competitive market some of the lifestyle platform brands, like Meituan, faced an unanticipated challenge early in 2020 with the spread of COVID-19 and a lockdown that shut restaurants, retail, and other out-of-home events, including theater and travel—the businesses that certain lifestyle platforms depend on for revenue.
Food delivery business remained relatively steady during the home quarantine, which also drove higher hygiene standards and business innovations. Ele.me provided software to help restaurants transition into takeout. Along with Meituan and other food delivery platforms, Ele.me also introduced contactless delivery to ensure safety. And instead of focusing on delivering ready-to-eat food, Ele.me and Meituan adopted new offerings to deliver groceries.
Most of the lifestyle businesses, other than travel, began to recover by spring. In a hybrid of e-commerce and instant delivery, Meituan added sales of Huawei smartphones to its offerings. Like many other brands, Meituan also developed a Community Group Purchasing model in which neighbors or families buy groceries together to earn a discount price. Despite the pressure of the pandemic, the lifestyle platform category increased 28 percent.
One BrandZTM newcomer appeared in the ranking, 58.com, a marketplace for classified ads for consumers and small businesses that features 58 different products and services, which are primarily aggregated around search for jobs and real estate. The other search areas are local services, and sales of used cars, existing homes, and other second-hand merchandise.
The brand is well positioned to benefit in several ways from China’s slower economic growth. First, as people worry more about their finances, China’s smart shoppers are more inclined to look for bargains. Second, 58.com provides an added income stream for anyone with merchandise to sell, such as hobbyists who want to promote their creations.
To increase penetration in lower tier markets, 58.com introduced a related site called 58 Town.
Ele.me, the food delivery brand of Alibaba Group Holding Ltd., expanded into more delivery categories, including grocery, to add new revenue streams as delivery revenue growth slows. Improved economies of scale followed its integration with Alibaba Group Holding Ltd.’s Koubei.
It launched a new revenue-driving business, providing data analysis to merchants. The Ele.me app has a leisure and entertainment information channel, similar to what Dianping provides.
Food delivery competitor Meituan also expanded into grocery. Having launched in 2010 as a Groupon-like business, Meituan merged with Dianping in 2015. Meituan has evolved into an O2O super app that, along with food delivery, operates in these areas: in-store, hotel and travel; bike sharing; ride hailing; movie and show tickets; and other services.
Food delivery drives over half of Meituan Dianping’s revenue, while in-store, hotel and travel accounts for almost three quarters of its profit. One year after its IPO, in September 2018, Meituan Dianping experienced strong stock appreciation and turned a profit for the first time because of economy of scale improvements and ad revenue. Its stock surged as China emerged from the pandemic, making Meituan one of China’s leading internet stocks, valued at over $100 billion.
Meituan’s sister brand, Dianping, has expanded into new areas, including wedding planning, beauty, and home decoration. To fortify and differentiate the brand, Dianping is building on its core business. Originally known as a restaurant review site, Dianping aspires to become the authority on restaurant recommendations. It is developing a rating system that will measure and communicate restaurant performance. Its Black Pearl guide lists high-quality restaurants.