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"It's not that we can't afford to order takeout that costs dozens of yuan, but that 'Pin Hao Fan' is more cost-effective." When the price of coffee and tea drinks rose to 9.9 yuan, Meituan's "Pin Hao Fan" business has quietly reduced the price of meals to 6.9 yuan, or even 50 cents.

Recently, a reporter from the Daily Economic News tested Pinhao meal delivery and found that with the new member red envelope discount, the price of a cup of lemonade from a brand chain store can be as low as 0.5 yuan, and the price of a signature meal from another chain restaurant is as low as 6.9 yuan. This business, which Meituan launched in 2020 for the sinking market, is now quietly popular in first-tier cities such as Beijing, Shanghai and Guangzhou, and has even become a new "survival guide" for workers.

In June, the media disclosed that the average daily order volume of Pinhaofan in the first quarter had rapidly increased to 5 million, which is almost 10% of Meituan's average daily order volume (57 million) for catering takeaway in the fourth quarter of 2023. At the same time, Meituan has expanded the business scope of "Pinhaofan" to more cities.

However, as Pinhaofan becomes more popular, some questioning voices have also been heard. "Can you eat takeout that costs a few dollars?" "Dine-in food in the pot, takeout food on the edge of the pot, and Pinhaofan that falls on the ground" and other jokes are popular on the Internet.

Zhuang Shuai, a retail e-commerce industry expert and founder of Bailian Consulting, told the reporter of "Daily Economic News" that judging from the data, it is obvious that the Pinhaofan business has indeed brought Meituan more traffic and business growth in the sinking market and even first- and second-tier cities, but Pinhaofan can only be a supplement to the existing takeout form. It is estimated that the ceiling will be 30% in a single quarter, and it is difficult to subvert the existing takeout business.

"In the future, the local life service market will definitely be a (development) trend of efficient collaboration between home delivery and in-store services. Business and product innovations like Pinhaofan will also emerge in this process," said Zhuang Shuai.

Reporter's test: A glass of lemonade costs only 50 cents

Merchants: Only some items can be sold in large quantities

Can I eat takeout that costs less than ten yuan without any delivery fee?

The reporter ordered a set meal and a normal takeaway meal from the same Meituan takeaway store. Compared with the large number of dishes to choose from on the store page, the categories of Pinhaofan are relatively few, and most of them are set meals, which are reduced compared to normal takeaway meal packages. Take the "Tian Lao Shi Braised Pork" store as an example. Pinhaofan only has a set meal with only one dish, "Braised Lion's Head Rice", which is priced at around 10 yuan. The normal takeaway meal in the store is paired with two dishes and is priced at around 20 yuan.

The reporter ordered a "braised lion head with rice" (6.9 yuan) and a regular-priced "braised lion head + braised eggplant set meal" (21.9 yuan). After receiving the takeaway, he found that the common parts of the two orders, namely rice, side dishes and braised lion head, were no different. The only difference was that the regular-priced takeaway set meal had an additional braised eggplant.

Reporters tested the difference between Pinhaofan and ordinary takeout. Image source: Photo by Zhao Wenqi, reporter of Meijing.com

It is worth mentioning that the braised lion head was originally a traffic-generating product for the store. On the takeaway page, adding a braised lion head only costs 0.99 yuan.

Lion head is originally a traffic-generating product. Image source: App screenshot

The delivery rider told the reporter from the "Daily Economic News" that the delivery fee between a Pinhaofan order and an ordinary takeout order only differed by 0.5 yuan for him. It's just that the Pinhaofan order needs to be picked up from the same restaurant and delivered to two recipients who are close to each other, but the overall difference is not that big.

In addition to catering brands, many milk tea brands have also participated in "Pinhaofan". The reporter placed an order for a cup of chain brand lemonade on Pinhaofan as a new user. The first order cost only 50 cents, and the product appearance and taste were no different from the actual products in the store.

New member benefits on Pinhaofan - buy lemonade for 0.5 yuan. Image source: Photo by Zhao Wenqi, reporter of Meike.com

The reporter of Daily Economic News randomly interviewed several merchants who put their products on Pinhaofan. A clerk told the reporter that there is no difference between Pinhaofan and ordinary takeout products. "This is an activity given by the platform. There are only a few items in a store that can be put on Pinhaofan. Since the products were put on the shelves, the number of orders has been quite a lot, and the growth is obvious." The clerk said.

Another individual merchant at a food stall told the reporter that since her store had just been listed on Meituan, she urgently needed a large number of orders, so she chose to put a few items on Pinhaofan. "Our store (products) are mainly handmade buns and egg pancakes, which take time to make and are difficult to sell in large quantities, so I put the Jiangxiang pancake online, which can bake three pounds at a time."

However, unlike other commodities, most consumers are still cautious about food. During the reporter's interview, many consumers said they "dare not eat" takeaways that cost only a few yuan. On social networking sites, many people also expressed concerns about the hygiene and food quality of low-priced takeaways.

"Why would we destroy our reputation? We would rather not lower the price than use bad food and be complained by customers," one merchant told the reporter. Several other merchants revealed to the reporter that most of these items are sold in large quantities in the store, which are quick to make and have large orders. Although they do not earn as much as a normal takeaway order, they are also an extra income when accumulated.

"It's just like Pinduoduo. If several people buy together, the price will be lower." A merchant told reporters.

How can food delivery implement the “Pinduoduo model”?

The reason why Pinhaofan is cheap is not only because of the small number of categories, but also because you need to "buy together". Similar to Pinduoduo, when using Pinhaofan to order takeout, consumers need to group order with orders that have already been placed on the platform, or initiate a group order on their own. If you don't want to group order, you can spend a few cents to buy a free group order benefit and place an order directly.

After interviewing several industry insiders close to Meituan, the reporter of "Daily Economic News" learned that within Meituan, they are not averse to the outside world calling Pinhaofan the "takeout version of Pinduoduo", because in terms of business model and rules of play, Pinhaofan and Pinduoduo do have many similarities.

An industry insider close to Meituan revealed to reporters that traditional Meituan food delivery is like Taobao, where merchants on the platform list products and participate in various activities on the platform, and the actual revenue is deducted from red envelopes, technical service fees and commissions. However, Pinhaofan is like Pinduoduo, where products are displayed directly on the platform, and catering merchants report a low price that covers costs and determines profits to the platform, which then displays it to users after adding service fees and delivery fees.

Take a chicken drumstick rice for example, which costs 11.5 yuan. The merchant estimates the cost price to be 7 yuan, and gives the platform a price of 9 yuan (the remaining 2.5 yuan is given to the platform and the rider, and the platform will also provide additional subsidies). The 9 yuan is what the merchant gets after selling an order. The merchant does not participate in the platform's various full-reduction red envelopes, and does not need to subsidize the shipping fee. The 2 yuan after deducting the cost is pure profit. Although the profit is not high, it is a case of small profits but quick turnover.

This means that in the past, Meituan Waimai has always sorted and recommended "merchants", while Pinhaofan uses "commodities" instead of "merchants" and completes all displays in the form of single products, which is also borrowed from Pinduoduo's "hot product model" to a certain extent. In addition to enhancing consumers' "sense of value", the "commodity model" will also reshape the traffic distribution logic on the merchant side.

Another person close to Meituan revealed to reporters that judging from the platform data, the products with better sales on Pinhaofan are still from non-branded catering stores, that is, white-label businesses (husband-and-wife stores).

"White-label merchants have their best dishes, but generally lack online operational capabilities and do not understand online business. Now, Pinhaofan's model has changed from 'merchant' to 'commodity'. Merchants only need to bring out their best dishes to capture young people with their cost-effectiveness and good taste. One of the purposes of Pinhaofan is to help small, unbranded shops and restaurants sell more orders at a lower cost and make more money." The industry insider revealed to reporters.

From a macro perspective, consumption has entered the era of "cost-effectiveness". Since the first half of this year, the average customer spending in almost all categories has declined. On the one hand, the catering structure has changed, such as the consumption ratio of fast food chain restaurants, tea and coffee has increased; on the other hand, market competition has brought about changes in the supply side, and merchants have actively adjusted prices to adapt to the environment. This is a structural change in the whole society.

Yin Sheng, a senior Internet observer, told the reporter of "Daily Economic News" that the business model of Pinhaofan is a form that Meituan must explore. If Meituan does not do it, other platforms may do it. Therefore, regardless of the scale and prospects, Meituan must do it.

However, he also mentioned that unlike the e-commerce products on Pinduoduo, the scale and standardization of catering are extremely difficult. Pinhaofan has brought considerable incremental space to Meituan at this stage, but as the scale continues to expand, whether the quality, taste of meals and the productivity of chefs can keep up in the future will also be a considerable challenge.

Can Pinhaofan become a new engine for Meituan’s food delivery growth?

In 2020, Pinhaofan was officially launched as a business of Meituan to explore the incremental space in the sinking market. At that time, the traffic growth of major e-commerce platforms tended to be saturated, and the neglected sinking market became a gold mine to be mined. Pinduoduo, which seized the potential economic opportunities, rose rapidly, and its unique group buying and social fission communication model also became a promotion tool for the sinking market.

Apart from the e-commerce industry, which other track can recreate Pinduoduo's miracle? This has also aroused expectations in the industry.

Now, after more than three years of development, Pinhaofan has not only expanded its business scope to first-tier cities, but will continue to expand in the future. It seems to be becoming a new growth engine for Meituan Takeout.

Meituan Pinhaofan business development timeline compiled by reporters based on public information

Zhuang Shuai told reporters that Pinhaofan mainly reduces the cost of merchants through economies of scale to ensure profits. However, riders cannot reduce costs through economies of scale, so Meituan needs to subsidize riders for this business. Then it can make profits through other businesses such as instant retail, hotel and travel, and in-store delivery.

However, he also mentioned that if he wanted to scale up the Pinhaofan business, he first needed merchants to provide support to meet a large number of demands in a short period of time, and secondly, he needed a large number of rider resources to achieve a satisfactory delivery experience. Both of these parts needed to be completed in just one or two hours, which was very difficult and not easy to replicate on other platforms.

In fact, Meituan's growth pressure comes not only from itself, but also from the market competition environment. With the entry of Douyin, the "catfish", into the market in 2023, the second half of the battle in the local life field has started in full swing. In the past two years, in addition to Douyin, Kuaishou has also begun to provide delivery-related support, and Xiaohongshu and Video Account are also increasing their layout in local life.

Newly entered platforms are increasing their subsidies. Faced with this competitive environment, Meituan’s core strategy in the first half of the year was low prices, with both the merchant side and the consumer side focusing on cost-effectiveness.

The reporter of Daily Economic News found that in the past two years, Meituan has launched a number of innovative projects in its core businesses such as food delivery and in-store delivery. Whether it is "Super Hot", "Pinhao Fan", or "Brand Satellite Store", they all focus on low prices and extreme cost performance.

"Low price is a very effective means of competition and a long-term development strategy for the retail e-commerce industry. But generally speaking, consumers have diverse needs, and low price is just one of them," Zhuang Shuai said. However, he also mentioned that the price war in local life will continue for a long time, on the one hand because of the intensified competition in the industry, and on the other hand, it is also an opportunity to expand new merchants and increase the coverage of local life. This also means that there will be more new stories in the battlefield of local life.

Daily Economic News