Meituan is going out to sea, and there have been new moves recently.Recently, according to sources close to Meituan, Meituan is still exploring the Middle East market and may be more focused on the Saudi Arabian region.Going abroad will become Meituan's next phase of business focus.
On February 2, 2024, Wang Xing, the founder of Meituan, announced a major organizational restructuring in an internal letter. Wang Puzhong will be responsible for Meituan's platform, in store, in home, and basic research and development. SaaS, cycling, and power bank businesses will be managed by Zhang Chuan, while he is considering directly overseeing drone delivery and overseas operations. This change is regarded by the outside world as the largest organizational restructuring of Meituan since its establishment.Wang Xingqin led his own team and pointed to the overseas market, which means that the priority of technology and international business has been raised. In the mature period when domestic consumption is weak and the dividend of mobile Internet traffic is reaching its peak, going to sea is undoubtedly a key strategy for Meituan to open up a new growth potential. The strategic direction adjustment of Meituan also confirms this point.
At present, Meituan's business strategy has evolved from the "retail+technology" proposed in 2021 to four keywords: "local, retail, technology and internationalization".Compared with other leading Internet manufacturers in China, Meituan has always been extremely cautious in the field of sea going. It was not until May 2023 that Meituan's brand KeeTa officially took the first step in exploring overseas markets when it landed in Hong Kong, China.
According to previous reports by 36Kr, from October 2022 to mid-2023, Zhu Wenqian, the head of Meituan Strategic Investment's overseas department, visited the Middle East region multiple times. In addition to understanding local business policies,
the most core task was to investigate the competitive status of the local food delivery business. During this period, several core executives such as Wang Xing and Wang Pu also visited the Middle East. Meituan also attempted to form a Middle East team and considered setting up the first pilot city in Riyadh, but the project was subsequently put on hold.Now, Meituan is once again exploring the Middle East market, and what kind of competitive environment and local challenges will it face? Why can the Middle East attract Meituan to join?
1：Why does Meituan set its sights on the Middle East when going abroad?
"At the end of 2018, the average market price for express delivery in the Gulf countries of the Middle East was $13 per order, while the average order price on some luxury e-commerce platforms even reached $280. This data gives us an unusual feeling." Jessica Wong, managing partner of Yida Capital, once shared her observations of the potential of the Middle East consumer market with Xia Guang.The Middle East region is known as a prosperous land flowing with milk and honey. The per capita GDP of the six Gulf countries ranges from 42200 US dollars to 124800 US dollars, all of which are above the benchmark of developed countries (per capita GDP of 20000 US dollars). The super per capita consumption capacity makes social entertainment, e-commerce retail, financial technology and other Internet business models driven by high ARPU (average income per paying user) users have great development potential in the Middle East.
In the gaming industry, according to game market research company Newzoo, the ARPU of Saudi game users is as high as $270, ranking first in the world. 12% of users will engage in heavy consumption in mobile games, with nearly 29 million paying players. "There are even some game studios in Beijing that customize games specifically for Middle Eastern 'tycoon' players, with only a few dozen or hundreds of players, but each player is generous enough to support a studio." Mr. Zheng, who has been operating games locally in the Middle East for a long time, told Xiaguang Society.
In the field of financial technology, PayerMax, dedicated to emerging market payment solutions, shared with Xiaguang that the per capita GDP of Middle Eastern Gulf countries is comparable to Europe and America, and the bank card holding and consumption capacity are quite high; The emerging trend in the Middle East lies in its relatively low penetration rate of online payments (with e-commerce cash on delivery accounting for 70% -80% of the entire market), which is vastly different from the European and American markets. The real opportunity for cross-border payment here lies in how to transfer offline consumption behavior to online, which is much greater than grabbing market share from competitors.
The high ARPU user density also makes the Middle East food delivery market attractive and imaginative. Taking Saudi Arabia, the largest economy in the Middle East, as an example, according to the estimation of the data platform Statista, the total revenue of the Saudi food delivery market is expected to reach 11.74 billion US dollars in 2024, with a user penetration rate of 44.2%. The average revenue per user in the Saudi grocery delivery market is 627.00 US dollars; As the world's largest food delivery market, China is expected to have a user penetration rate of 54.5%. In contrast, the Saudi food delivery market still has significant growth potential.
Regarding this, Zheng Jiale, the business manager of Wenchao Online Platform, which provides local lifestyle services such as takeout in the United Arab Emirates, told Xiaguang News: "Currently, local lifestyle platforms in the Middle East are still in the early stages of development, and users have strong purchasing power, making it a relatively profitable market.". While Meituan has visited Southeast Asia before, because it is adjacent to China, Chinese Internet companies will first go to Southeast Asia to test the effective play methods. The local takeout competition has been quite fierce, and the user's consumption capacity is limited, so it is difficult to make profits in a short term only by taking out. I personally believe that Meituan's decision to go to the Middle East first was a correct one
Moreover, in terms of digital infrastructure, the Internet penetration rate of Saudi Arabia and the United Arab Emirates, the two most dynamic economies in the Gulf countries, exceeded 99%, ranking third and fourth in the world respectively; The epidemic has accelerated the online migration of daily consumption and lifestyle in the Middle East. Statista's data shows that in 2020, when the pandemic began, Saudi Arabia's takeout revenue began to accelerate and is currently rapidly expanding the market at a compound annual growth rate of 6.02%.
"After the epidemic, ordering takeout has become a part of the daily life of many Middle Eastern people," Zheng Jiale explained.In addition, the secularization and economic diversification transformation promoted by the government in Middle Eastern countries such as Saudi Arabia also provides opportunities for the outbreak of local life tracks such as food delivery.In 2021, the Saudi Communications and Information Technology Commission signed an agreement with the Social Development Bank to fund self-employed workers to purchase private cars for delivery services.
In October 2023, the Meituan drone system officially completed its first overseas public test in the United Arab Emirates. Regarding this, Thani Al Zeyoudi, the Minister of State for Foreign Trade of the United Arab Emirates, said, "Meituan's decision to conduct business in our market highlights the friendly environment we have created for cutting-edge companies. We look forward to working with them to fully integrate their logistics systems into our existing infrastructure, providing truly beneficial technology for the UAE and its people."From the perspective of natural environment and climate, the Middle East is located in a tropical and subtropical desert climate zone, with summer temperatures sometimes reaching up to 50 ℃ and unbearable heat. The demand for online ordering by Middle Eastern consumers is even greater than in other regions, and it is still in a growth dividend period that urgently needs to be developed.
2：Is the Middle East food delivery market easy?
A key issue to face when making takeout in the Middle East is the extremely high COD (cash on delivery) ratio. Due to inadequate infrastructure, inadequate platform and merchant services, and consumer distrust of digital payments, only about one-third of retail transactions in the Middle East are conducted through electronic payments. Therefore, in many cases, the order is considered completed only when the rider delivers the delivered food to the customer and the customer pays cash to the rider.
Zheng Jiale introduced to Xiaguang Society that riders can settle their meal expenses with the company after completing a day's delivery, but the company generally does not dare to advance too much cash to riders, "this scale is not easy to grasp."; Moreover, there are almost no smart food delivery cabinets available domestically in the Middle East, which greatly affects the efficiency of food delivery.
In addition to COD, operating takeout business in the Middle East also requires attention to Islamic halal dietary rules, traditional customs such as Ramadan, and even local climate conditions can have an impact on the fulfillment and execution of takeout delivery. During Ramadan, Muslims are prohibited from eating and drinking between sunrise and sunset, and Islamic restaurants also close during this period, affecting the delivery status of riders.
And sandstorms often occur in the Middle East. If the drought lasts too long, the government will arrange artificial rainfall, and the city's drainage system is not perfect enough, which can lead to the collapse of the food delivery system due to accumulated water. "The sudden climate conditions in the Middle East, or some rules of Islamic civilization itself, can pose challenges to food delivery and e-commerce platforms, which is a unique feature of the Middle East market," Zheng Jiale said
The complexity of the population structure in the Middle East region is also what sets it apart from the Chinese market, which undoubtedly puts higher localization requirements on Chinese overseas enterprises. Taking the United Arab Emirates as an example, among the nearly 10 million population, the proportion of its citizens is about 11.6%; The largest ethnic group is South Asians from India, Pakistan, and Bangladesh, accounting for 59.4% of the total population of the United Arab Emirates; In addition, the other two larger ethnic groups are Egyptians and Filipinos, accounting for 10.2% and 6.1% respectively.
The complex population structure poses challenges for local collaboration. Zheng Jiale introduced that in the Middle East, few companies will build their own logistics and distribution teams, and more will cooperate with third-party distribution teams. However, the local delivery riders are mainly Pakistani and Indian, and the management culture of Chinese companies is not highly compatible with workers who have grown up in religious cultural backgrounds. Chinese companies need to gradually adapt and optimize their collaboration and management with them.
The expensive labor costs are also a significant challenge for operating food delivery platforms in the Middle East. "Due to the high cost of living in the Middle East, the delivery fees for riders are also correspondingly high. Indian and Pakistani riders need to pay a management fee of approximately 1500-2000 RMB per month (including visa, clothing, equipment, etc.), with a living cost of around 3000 RMB. In addition, they need to save about 3000 RMB to send to their families, and their monthly income needs to reach 7000-8000 RMB," said Zheng Jiale.Compared to the United Arab Emirates, Saudi Arabia has relatively lower labor costs. According to insiders, Saudi Arabia has relatively low labor costs, which is more favorable for Meituan's small profit but high sales business model for takeout, and is also a key reason for Meituan's attention to the Saudi region.
Moreover, in order to achieve economic diversification and create more job opportunities, Saudi Arabia officially announced the "Regional Headquarters Plan" in February 2021. Starting from 2024, government agencies will restrict business with foreign companies that do not have regional headquarters in the country, aiming to reduce economic outflows and attract foreign investment. The impact of measures such as the "regional headquarters" plan can be seen as immediate. On November 8, 2023, according to Saudi Minister of Investment Khalid Al Faih, Saudi Arabia has issued licenses to 180 international companies. To capture the market share of Saudi Arabia, the largest economy in the Middle East, and truly land the team in the Saudi region, is also a practical choice for Chinese companies.
3；The Middle East is strategically located at a global crossroads, with numerous immigrants and diverse cultures, and immigrants from different countries have their own dietary and lifestyle habits. Therefore, it is difficult for a single food delivery platform to cater to all consumers, and it is more likely to focus on a specific niche track for deep cultivation and refinement. For example, Wen Chao Waimai and Please Please are the two major delivery platforms in Dubai that focus on the Chinese community.As anthropologist Peng Zhaorong said in his book "Dietary Anthropology": Food has an indicator value of cultural identity, which can and may serve as a judgment and explanation of "who I am"; On the contrary, people also exhibit and express a certain collective consciousness in specific dietary systems, which in turn generates a loyalty to their respective culture.
This kind of identification and loyalty can be more intuitively displayed in the offline living space of Zhongdong. Dubai, as an international financial center in the Middle East, has its own independent living spaces and social shopping venues for local Arabs, Indo Pakistanis, Filipinos and other Southeast Asian people, as well as Chinese.
Based on the situation of ethnic diversity and cultural heterogeneity in the Middle East, Zheng Jiale predicts that the food delivery market in the Middle East will not be left with only two giants, Meituan and Ele.me, competing like China; It is more likely that each platform is deeply rooted in its own user group, with multiple factions competing side by side.Because the Middle East market is wealthy enough to support multiple platforms. In my personal judgment, as different players enter the market, competition will become increasingly fierce, but it will not be as fierce as the Chinese market. The Middle East food delivery market is still in a process of gradual development and evolution for each platform. This evolution will focus on providing more services and deepening business development, as well as expanding into more ethnic markets. The population in the Middle East is facing rapid growth, and it is very important to quickly grasp the methods of expanding diverse users
Looking back at the development history of Middle Eastern takeout, as early as 2004, Talabat, a local online food ordering company in the Middle East, was established in Kuwait; In 2016, Talabat was acquired by European food delivery giant Delivery Hero, becoming the largest online food ordering company in the Middle East. Delivery Hero has also successively acquired Zomato's UAE business, Carriage and other small platforms, and established its own food delivery kingdom in the Middle East.
In addition to Delivery Hero, other food delivery players in the Middle East also include the global food delivery platform Deliveroo from the UK, ride hailing platforms Careem and Uber, which have launched their own food delivery services Careem Now and Uber Eats, respectively. The rising e-commerce giant Noon in the Middle East has also launched Noonfood delivery and NoonGrocery fresh grocery delivery services. In the largest market in Saudi Arabia, a local food delivery giant named Jahez has emerged, covering more than 50 cities including Saudi Arabia with over 1.3 million users.
From this, it can be seen that another unique feature of the Middle East food delivery market is that delivery platforms are likely to not only focus on food delivery business, but will gradually extend to comprehensive services such as local life, e-commerce retail, etc. This is because the market size in the Middle East is limited, and the relatively wealthy Gulf countries have a population of about 50-60 million, making it difficult to match the market size of China. This "low ceiling" makes it difficult for the platform to simply delve into a single field, and it is necessary to explore the diverse needs of users as much as possible.The entry of Meituan will undoubtedly bring mature operational experience and performance capabilities verified by the Chinese market into the Middle East. Can Meituan truly land in the Middle East region, where it has been observing for a long time, and even catch up from behind? Guangzhou Sudege will continue to monitor the latest developments of Meituan overseas.
