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source|Tech Planet

arts|Lin Jing

Meituan's "Pinhaofan" is penetrating into first-tier cities such as Beijing, Shanghai and Guangzhou. Taking Beijing as an example, the price of dishes in the "Stir-fried Vegetables and Rice" category of Pinhaofan is around 16 yuan, and the price of a Kung Pao Chicken Rice is as low as 12 yuan. New users can also enjoy a 6.9 yuan discount on all dishes.

Recently, Pinhaofan launched the "offline self-pickup" function across the country. For example, the same "seven meat and eight vegetarian" maocai meal from the merchant costs 17.6 yuan for takeout from Pinhaofan, while the offline self-pickup price is 12.4 yuan. In comparison, in offline street shops in Beijing, a serving of maocai costs at least 20 yuan.

Tech Planet learned that in April last year, Meituan set up a separate business department for Pinhaofan under the food delivery business department, which belongs to Meituan's "core local business" sector. People familiar with the matter revealed that Pinhaofan once accounted for 12% of the total local food delivery orders in some cities. Meituan said it would not respond to this.

Affected by various costs such as fulfillment and operation, the price of takeout has continued to rise in the past few years. In the fourth quarter of 2021, according to the financial report disclosed by Meituan, the total transaction volume (GTV) of Meituan's takeout business was 188.6 billion yuan, and the number of takeout orders reached 3.9 billion. It can be roughly estimated that the average customer unit price is around 48 yuan. The following year, Meituan launched the Pinhaofan business. In contrast, the Pinhaofan business, where the customer unit price is generally less than 20 yuan, can help Meituan's takeout attract more price-sensitive users, break through the growth ceiling, and deepen the moat.

However, unlike other standard products, Chinese food has numerous SKUs and is difficult to standardize, and consumers also have higher trust requirements. Behind Meituan’s layout of Pinhaofan, what is the future growth potential of low-priced takeout?

Meituan follows Pinduoduo's lead in the explosive product model

Unlike Meituan Waimai, which sorts and recommends merchants by store name, Meituan Pinhaofan displays directly by product combination. A person close to Meituan said that Pinhaofan is to some extent inspired by Pinduoduo's hot product model, which can not only enhance consumers' sense of value, but also reshape the traffic distribution logic on the merchant side.

An employee of Pinhaofan told Tech Planet that, unlike Meituan Waimai, Pinhaofan's assessment of BD is more inclined towards operations, and the assessment is based on the sales data of popular products. They will regularly help merchants to optimize store names and pictures, as well as lower prices. The traffic distribution of Pinhaofan's homepage is also based on the order conversion rate, that is, the ratio of user views to actual sales. Generally speaking, the higher the ranking, the higher the store is.

The above-mentioned employee said that the current willingness of merchants to participate is much higher than that in the early days of the city’s opening, especially with many brand merchants settling in in large numbers. However, for merchants, the more confusing issue is that under Pinhaofan’s low-price model, the profit margin of meals is too low.

On the Pinhaofan page, a series of hot products are testing the merchant's product combination ability and price reduction. A merchant involved in Pinhaofan told Tech Planet that, taking the three braised chicken and rice sets he sells as an example, one of them is a traffic-generating product, priced at 12 yuan, and usually some green vegetables and fish tofu are used instead of chicken nuggets to reduce cost pressure. The prices of the other two sets are actually not much different from the prices in the store and will not drop too much.

The above-mentioned merchant revealed that if the sales volume does not meet the target, the business manager will communicate with the merchant to lower the price again. For example, she finally lowered the price of the lead product to 10 yuan. "Later, (the business manager) came to me to lower the price again, and I firmly said that I would not lower it again."

In addition, the traditional Meituan takeaway is like Taobao, where merchants on the platform list goods and participate in various activities on the platform, and the actual income is deducted from red envelopes, technical service fees and commissions, etc. Pinhaofan is more like Pinduoduo, where the platform directly displays goods, and catering merchants report a low price to the platform that can cover costs and determine profits. The platform calculates service fees and delivery fees before showing it to users.

Taking a bowl of chicken leg rice that costs 11.5 yuan as an example, the merchant estimates the cost price to be 7 yuan and gives the platform a price of 9 yuan. No matter what factors affect the subsequent situation, or if the platform pricing and the price paid by users change, the merchant will maintain a fixed income.

Pinhaofan is not a new business. Meituan has been testing it in some cities since 2022, initially positioning it as a low-priced takeout for the sinking market. Now, Pinhaofan has gradually expanded to first- and second-tier cities. Four years after its launch, when cost-effectiveness occupies a more important position in users' consumption decisions, it has entered a new stage of development.

An employee of Pinhaofan said that the number of Pinhaofan users and orders has seen a significant increase in the past two years. Pinhaofan will set different goals in different cities. For example, in Chengdu, it once accounted for as much as 12% of the local Meituan takeout, and it also performed well in Nanning, Heilongjiang and other cities.

At present, the entrance to Pinhaofan is not obvious. On the Meituan takeaway page, it is listed alongside icons such as "desserts and drinks" and "afternoon tea". However, some users who have ordered Pinhaofan found that on the homepage of their Meituan APP, Pinhaofan's position exceeded Meituan Live and Meituan's "Special Price Group", occupying a more prominent position on the homepage.

Game between platforms, merchants and riders

Behind the extremely low prices, the key to Pinhaofan is the scale effect. By group-ordering, the platform combines scattered small orders into large orders, thereby reducing the cost and time of logistics distribution, and allowing merchants to achieve small profits but quick turnover.

Areas near universities and office buildings have a relatively large number of Pinhaofan orders. A Meituan rider near a university town told Tech Planet that 90% of Pinhaofan's orders here are handled by Changpao riders, and a small number of orders are taken over by Lepao, crowdsourcing, and some part-time special delivery riders during the summer vacation.

For Changpao riders, taking a Pinhaofan order is no different from other food delivery orders. They earn about 4 yuan per delivery order, and they mainly earn more by delivering more orders at a short distance. For Lepao riders, they can usually earn the same as one ordinary food delivery order by delivering two or three orders.

A Lepao rider told Tech Planet that the primary factor for accepting Pinhaofan orders is that they are easy to deliver, such as orders that can be placed directly on the takeaway rack or in the takeaway cabinet without climbing stairs. In other cases, riders actually put in more labor to earn the same income. But he also said that the rider market is now seriously saturated and more inward-looking. When there are no orders, they will take Pinhaofan orders as a second choice.

However, due to the different stages and scales of development of Pinhaofan in various cities, on social platforms, users in some cities’ complaints about Pinhaofan are mostly concentrated in the delivery link, including slow delivery time, the need to go downstairs to pick up the food, and poor attitude of riders.

From the merchant side, although Meituan has a certain bargaining power over merchants due to its leading market share, in addition to low prices, the combination and quality of Pinhaofan's food also directly determine the user experience, which depends on the merchant's choice under low-profit operations.

Zhang Yuan, a merchant who participated in Pinhaofan in the early days, told Tech Planet that in the early days, many small and medium-sized merchants wanted to get more traffic and sales, and blindly offered low prices, which ultimately made it difficult to sustain. Merchants who want to operate for a long time still have to calculate the costs. For example, merchants with more remote store locations can help get more traffic by participating in Pinhaofan, and are willing to lower prices. Merchants with better offline store business have an advantage when "negotiating" prices with the platform. As long as the price is lower than the psychological price, they will not go on Pinhaofan.

Now the attitudes of merchants who mainly do takeout towards Pinhaofan are also changing. Zhang Yuan said that on the one hand, the takeout market has also undergone great changes. The merchant backend he showed showed that for a meal priced at 29 yuan, after deducting red envelopes, commissions, delivery service fees, etc., the merchant actually received 11.65 yuan. For a Pinhaofan meal priced at 17 yuan, the merchant has a fixed price of 9.9 yuan. The difference between the two is not that big.

On the other hand, the price of Pinhaofan has increased. In the past, the price of Pinhaofan set meals was generally no higher than 12 yuan, but now prices of 17 yuan and 18 yuan can also be offered.

When it comes to the selection of pallets, a store manager of a leading chain milk tea brand told Tech Planet that they chose unpopular products in the store when launching Pinhaofan, and they also faced the problem of ingredients expiring and needed to be sold as soon as possible. The production process of the product must also be simple, such as jasmine milk tea, in order to save labor costs.

This also represents the common choice of some merchants. They all told Tech Planet that when they go online to Pinhaofan, they will choose dishes that can be served quickly and will avoid hot-selling products in the store because they are worried that it will affect the normal price system in the store.

Moreover, as the number of participating merchants increases, it becomes more challenging to create hot products. Zhang Yuan said that in the past, a package would quickly become popular, but now consumers have more choices and competition has become more intense. What he is most worried about is the low price. "When a merchant of the same type launches a package with a lower price, should we follow suit?"

Low prices rolling up to local living?

As users pay more attention to cost-effectiveness, low prices have almost become a direct "weapon" for platforms to enhance user stickiness. In the past six months, e-commerce platforms such as Taobao and Douyin have also once regarded low-price strategy as an important goal. Will low prices sweep local life?

As early as 2022, Ele.me also launched similar "group buying" activities in some cities. From the Ele.me APP, we can see that there is a "group buying" icon on the homepage in cities such as Shijiazhuang and Guangzhou. After clicking in, it is also displayed in the form of product combinations. The ordering experience is almost the same as Meituan's Pinhaofan. It is not yet online in cities such as Beijing and Shanghai.

From Meituan's perspective, in its first quarter performance report for 2024, Meituan mentioned for the first time the "Pinhaofan" app that had already been launched. Meituan's financial report stated that the peak daily order volume of Pinhaofan hit a new high in the first quarter. At the shareholders' meeting held by Meituan in May this year, Wang Xing also affirmed the achievements of Pinhaofan and reiterated the "three highs and three lows" principle of Meituan's start-up period, the first of which was "high quality and low price."

A person close to Meituan told Tech Planet that judging from the platform data, the merchants with good sales on Pinhaofan are mostly non-branded catering stores, that is, mom-and-pop stores. They lack online operation capabilities, and after Pinhaofan changed its model from "merchants" to "commodities", it can more easily acquire users through its cost-effective advantages.

However, unlike other categories, users have higher requirements for food, and how to improve user trust in low-priced takeout is still a challenge. Many users said that when they ordered Pinhaofan, they would click to see the details of each store, which showed stall-style merchants, and they would feel uneasy when placing an order.

In addition, the Pinhaofan business is now also being differentiated from the main food delivery business. A Pinhaofan employee told Tech Planet that in the early stage, in order to encourage merchants to participate, Pinhaofan's sales were included in the total sales of the merchants' food delivery stores, which could help merchants improve their weight and ranking. But now, except for the first 90 days, Pinhaofan's sales are no longer included in the sales of Meituan's food delivery stores, and the business backend business data of merchants are also displayed as food delivery modules and Pinhaofan modules. This is a good thing for merchants who mainly do Pinhaofan, and it can also help the platform screen out target merchants.

In addition to Pinhaofan, in the past year, whether it is the "super popular" live broadcast room, super membership, or special group purchase, low prices have been continuously expanded to Meituan's in-store and home delivery business scenarios. Overall, Meituan is accelerating the promotion of the low-price market and deepening its moat.

(Note: Zhang Yuan is a pseudonym in this article.)