Meituan, operator of China’s largest food delivery and local service platform, reported a second consecutive quarterly loss as the company expands into community group-buying business that relies heavily on subsidies.
Detail: Meituan reported a total revenue of CNY37 billion in the quarter ended march, representing a year-over-year increase of 120.9%, the strong revenue growth was driven by outstanding performance in its food delivery, hotel and travel business.
However, it reported a net loss of CNY4.85 billion, widening from a loss of CNY1.58 billion a year earlier, mainly due to heavy spending on retail and community group buying business.
Meituan noted that it could continue loss-making for several quarter as it expands into community group buying.
Its food delivery business surged 116.8 percent year-over-year to CNY20.6 billion in the first quarter, mainly driven by higher commission revenue as its daily average number of food delivery transactions totaled 32.3 million last quarter, surging 113.5 percent from a year earlier.
Meituan’s order volume jumped 111.2 percent compared to same period of last year thanks to China’s economy recovery from the Covid-19 pandemic.
Context: Meituan has dealt with a series of regulatory investigation as China crack down on monopoly practices of Chinese tech companies. Starting in April, the State Administration of Market Regulation has investigated on whether Meituan forces merchants to use its platform exclusively, a practice known as “pick one from two”.
Meituan also faces social media criticism for its bad treatment to delivery riders, some of Meituan’s riders said their salary package do not cover basic social and medical insurance.
In response, Meituan CEO Wang Xing said the company has set up a special team to fully cooperate with the regulator’s investigation and the company has stopped forcing merchants to sign exclusive partnerships.