The more you try to do, the more enemies you’ll make.
Meituan Dianping has learned this lesson through experience. In its early days, the company organized discounted group purchases; later on it became an online movie ticket retailer. Over the years it also tried its hand at takeout, catering and travel services. More recently, Meituan has snaked its way into the taxi market, digital payment services and brick-and-mortar retail. Its involvement in such diverse fields has made it difficult to accurately define what Meituan actually does. One thing is certain: it is constantly expanding and reaching out. Among its opponents are China’s powerful Internet giants, its most popular start-ups, and a few of the oldest listed Internet companies. From time to time, Meituan‘s operations make it a suspicious target for these ‘opponents’.
Meituan does not seem to be afraid of war. In fact, it’s doing well in every field. Its 2016, annual transaction volume sat at 240 billion yuan, an increase of 50 percent over the same period in 2015. Meituan expects the transaction volume in 2017 to reach 360 billion yuan. The company rebounded from running a deficit to become profitable in May: it now has 20 billion yuan in cash in its account.
Meituan is an unusual company in terms of the Chinese Internet. Most companies grow vertically before they start to expand, and when they do expand they follow the trends of their industry segment and have a clear end goal and boundaries. Meituan, on the other hand, considers the circulation of goods to be its core business. From Meituan‘s perspective, the core is the transaction; from the customer’s perspective, the core is the service. Meituan‘s business model is horizontal. That is why Wang Xing’s thought process is unlike that of most CEOs. The head of Meituan possesses a broader, cross-field style of thinking as evidenced by his views on business and competition. He does not believe in monopolies or an end to ‘competition’. He believes acceptance of competition is the new normal, and that thinking too much about boundaries and final results is a flawed approach. “There is no such thing as a true end,” he said.
In May, Wang spoke with Caijing Magazine. It’s had been a year and a half since the magazine’s last interview with Wang. Upon careful comparison, one can see the evolution in Wang’s thinking over this period.
The following is a selection from the interview.
Enemies and friends
Caijing: Have you read the series of recent articles on Meituan?
Wang Xing: I’ve read some, but certainly not all.
Caijing: Do you think these reports are neutral, or are they trying to cast you in a negative light?
Wang Xing: Some are relatively neutral. Others are definitely malicious, and there is no line they won’t cross.
Caijing: If a competitor continues to slander you, and you know who it is, how will you deal with it?
Wang Xing: I will communicate with the other party. But very often, this does not solve the problem. Back in 2005, I remember reading an article in Time magazine or the New York Times about Amazon. It said the company had been running for more than a decade, but that it was still comparable to a defective plane—whether it would fly or fall, no one could knew. But a decade later, we all know how impressive and far-sighted Amazon is. So being subject to suspicion is normal. I am only against those who downright lie through their teeth and make personal attacks.
Caijing: Some people joked that half of the Internet is Meituan‘s enemy.
Wang Xing: The number of competitors isn’t a problem. We are a customer-centered company, and we are not about making enemies with others. Having opponents is like driving. You have to look at the rearview mirror occasionally, but you can’t just stare in the rearview mirror all the time.
Caijing: Most excellent companies are customer-centered, but they tend to focus on one or two fields.
Wang Xing: Not all of them. Amazon has made cellphones, created a search engine, and introduced their Prime service, which is considered Netflix’s strongest rival. They are a very comprehensive competitor.
Caijing: What is an enemy in your views? What about a friend?
Wang Xing: I don’t like using the word ‘enemies’; I prefer ‘peer companies’. A friend is a company that can work with us.
Caijing: Who are your friends on the Internet?
Wang Xing: Tencent. They are, at the same time, one of our very important shareholders.
Caijing: Who do you respect most among your opponents?
Wang Xing: Respecting one’s ability to compete and believing in one’s competitive spirit are two very different things. As Chairman Mao once said, “Strategically we should despise all our enemies, while tactically we should take them all seriously.” From the perspective of competitive ability, Alibaba is very strong. But if they had more of a bottom line on all fronts, I would respect them more.
Wang Xing: It’s not how simple or easy things are. But Tencent, regardless of the founder’s personality, the team’s temperament or its strategy, is more capable of making alliances with others.
Wang Xing: This is a misunderstanding. In fact, after Meituan and Dianping merged in October 2015, I specifically went to visit Jack Ma and Daniel Zhang. I thought we could learn from the successful merger of DiDi and Kuaidadi—Alibaba and Tencent fought endlessly. Eventually they shook hands and made up, and now they are both shareholders of DiDi. And so I told Alibaba that Meituan sincerely hoped it could receive support from both Tencent and Alibaba, but they said: “You are completely mistaken. We think the consolidation of DiDi and Kuaidadi was a failure. We will not make the same mistake again.”
Caijing: How did you respond?
Wang Xing: I said, “Tencent has promised further investment in Meituan Dianping.” Alibaba responded, “We can invest in you. If you want $1 billion – even $2 billion – we can make it happen. But you can’t accept any more investment from Tencent.” But Tencent was a very important shareholder and a friendlier ally. I didn’t want things to turn out this way.
Wang Xing: There are still a portion remaining. It was the reason why last year they sold our old shares. It was to interfere with our financing. If they weren’t optimistic about us, they would just sell off everything. We already found a potential buyer for their stake, but Jack Ma refused the buy-out. He insisted on retaining a small portion of the shares, maybe so that he could make trouble for us in the future.
Wang Xing: We would face greater competitive pressure. On the catering front they might make a lot of trouble for us, especially since Alibaba is a heavy investor in Elema (another catering and delivery company) and can spend billions of dollars per year. But in the end, it will all come down to who can provide a better service to consumers. Without that, even if you were to burn billions of dollars your market share would still shrink.
Caijing: Does this mean that you cannot establish yourself as a monopoly in the field of catering?
Wang Xing: A lot of people misunderstand this. We are not trying to pursue a monopoly. Our competition against Alibaba will continue into the long term.
I’ve talked to many people about the 4-3-2-1 monopoly strategy. The theory goes that the process of elimination will reduce an industry to four players, and then two, and then one. Many becoming four is similar to the Hundred Regiments Offensive, or the the Hundred Auto War and Hundred Broadcast War. When new opportunities arise, masses of people rush forward and fight. After a period of time, four establish themselves as the initial winners. These are usually Baidu, Alibaba or Tencent plus a few entrepreneurial winners, and this is the situation today. But it’s not stable structure, so eventually one loses and another follows. We’ve already seen Baidu Takeout get “taken out”. You have to be like WeChat, a super-strong business with a national network, or it is unlikely you will achieve a monopoly in a given field. There will always be consumers who enjoy other brands, such as Coca-Cola and Pepsi or Nike and Adidas. Companies do not want to have only one supplier. I think having two competitors is very normal.
Caijing: Your colleague Wang Huiwen said Meituan wants to be like Russia, a strong and independent nation, capable of surviving in places where others can’t.
Wang Xing: There are limits to all examples and metaphors. I would compare Meituan Dianping to China, while Alibaba and Tencent prefer to compare themselves to the United States. I’d say Tencent more comparable to the United States. China’s relationship with the United States and Soviet Union a few decades ago is much like our relationship with Tencent and Alibaba.
Focus and diversification
“In the first half of a technological change, the risk is very high. That’s why it’s better to explore with a small team. But in the latter half, the dividends diminish and pave the way to revenue. It’s precisely at this time that multi-service companies gain an advantage over single business companies.”
Caijing: What’s the logic behind entering new markets for Meituan Dianping?
Wang Xing: Our mission statement is, “We help people eat better, live better.” Under this mission statement, we think that whatever is going to happen will happen. We will choose the most suitable angle of entry. At this stage, Meituan Dianping is expanding.
Caijing: Where does Meituan see its boundaries on services and business? Is there no business area the company won’t enter?
Wang Xing: There are too many people who box themselves in and neglect the core of their business. You can think of boundaries like gravity. Each object’s existence itself creates gravity, and their attraction affects all other substances. The farther away from the core you are, the smaller the influence it may impose.
There is no such thing as a simple boundary for anything in existence. That’s why I don’t think it’s good to limit oneself. As long as we have a clear business core. Who are we serving? What services do they want? As long as we can clearly answer these questions, we can continue to try anything.
Caijing: What do you think is the relationship between diversity and focus?
Wang Xing: I’ve been thinking a lot about this problem. The start of any new technological area is very high risk. That’s why it’s best to explore with a small team. But in the latter half, the dividends diminish and pave the way to creating revenue. It’s precisely at this time that multi-service companies gain a definitive advantage over single business companies.
Caijing: Meituan Dianping offers a myriad of services including takeout, wines, taxi, catering, movie tickets and more. Why pursue after so many businesses at the same time rather than focusing entirely on one business?
Wang Xing: We can look to 2003 and 2004 for an example. At that time, Taobao made a monumental decision to become a large platform that sells virtually everything, rather than focusing on only women’s essentials or home appliances. If Meituan only focused on selling movie tickets, it would be impossible for it to win.
Caijing: Are you capable of supporting so many businesses at the same time?
Wang Xing: You never know until you test your limits. How would one judge a company’s ability to support multiple businesses? The only standard is to assess whether the various businesses were done well. At present, each of our businesses are operating well, and we have plenty of cash reserves.
We’re ranked first in terms of takeout and catering. We have about 56 percent of the market, and our efficiency is much higher than our opponents’. Dining In and Cateye are also ranked first in their respective fields. For our wine business, the number of nights that have been booked surpasses those of Ctrip. I estimate in about one to two years, the number of customers booking nights through our app will surpass Ctrip, Elong and Qunar together. Another important field that we’re investigating is the development of a platform for food and living. However, it’s still too soon to say anything. Discussing what’s first or second is a little meaningless.
Caijing: While testing your limits on this front, you’ve also strengthened your enemies.
Wang Xing: As wise men once said, “After a critical self-assessment, even in the face of millions, I will carry on!” We must ask ourselves if what we’re doing is right. If it is, and if it’s something we should do, then its our duty to fight back even if our opponents outnumber us by the millions.
Caijing: What are you planning to do with the $20 billion in cash reserves? Will you still continue to seek financing?
Wang Xing: Catering is still of the utmost importance. We did not open a new round of financing, but there are some shareholders who own our old shares.
Caijing: When will the takeout business stop running a deficit?
Wang Xing: The losses will likely continue for a long time because lots of investments are needed, and there are many transformations that need to take place.
Caijing: How long will it be before the battles in each of Meituan‘s individual businesses end?
Wang Xing: It will be very difficult to turn the tables against us once our market penetration surpasses 50 percent and we haven’t made any foolish mistakes. We hope to establish ourselves as the top service in each area; or second place, at the very least. But we’re not expecting to completely destroy our opponents. Acceptance of competition by everyone is the new normal.
Caijing: Others in the industry are suspicious that there is no win or loss in any of Meituan’s business sectors, nor is there any chance of making a profit.
Wang Xing: We broke even last month. If we do not open up any new businesses, we can profit within a year. But short-term profit has never been our goal. In fact, the desire to discuss boundaries or a final outcome is a viewpoint problem. In reality, there is no such thing as a final outcome. Final outcomes exist in chess. In the real world, the board is constantly expanding.
Caijing: Will the expansion of multi-service businesses bring about insecurity?
Wang Xing: We can only obtain a sense of security through constant growth.
Caijing: Strategically speaking, what’s Meituan looking to do first and next, and to do or not to do?
Wang Xing: First, we must further expand the population we serve. China has 700 million Internet users, and we have 240 million active users. On the other hand, Alibaba has 450 million active buyers. So we can still grow to two or three times our size. Additionally, we are looking at long-term user retention. If users’ relationship with Meituan is shallow, it will be worthless.
So we are making deeper connections in all of our businesses by growing vertically. In dining, we provided the information first, then the transaction platform, and then the delivery service. We now provide enterprise resource planning systems back to restaurant owners. We’re now moving to deepen those ties. I think this is not something limited only to Meituan. All of those trying to establish long-term value for their company should do the same. As for making connections, Tencent alone is enough.
Wang Xing: Dining alone is already as big as Taobao. Search engines today are highly lucrative when they weren’t in the past. Everyone thought it was a dead business: Yahoo certainly thought so. We limit ourselves too often. We see ourselves doing something that’s currently hot, relatively popular or something that’s one step below what’s hot. Nobody expected this to be just a period of transition but something much greater.
Wang Xing: Baidu isn’t on the same level as Alibaba and Tencent. Meituan has the potential to become as big as Alibaba and Tencent because we’ve created enough value. Our catering, tourism and shopping in every category is worth more than tens of billions of dollars. But the time to develop this isn’t short; it’s a ten-year effort.
Caijing: What is the core business value of Meituan?
Wang Xing: Our core value is our mission statement: “We help people eat better, live better.” People are always used to using tools, portals, platforms and other concepts to measure the value of the company. It’s such limiting language. The value of a company ultimately depends on how many people you serve, and how much value you generate for them. Everything else is virtual.
Correctly defining and understanding something new is very difficult. You can create it, but it is hard for people to accept a concept that does not exist. In the past, everything was done by the United States first. All you needed to do was say “We’re the Chinese XX” and that was that. It was how Baidu, Alibaba and Tencent defined themselves. But the United States does not have a single company like Meituan that can be a reference point – at least not one that appears in any headlines.
Caijing: Is it creative to stick together such a variety of business models?
Wang Xing: We’ve also modified their usage. Meituan has changed the way we eat, the routes we take to dine out and the business models of millions of restaurants. Nothing in the world is ever really new, but the methods can be new.
Caijing: What kind of company would you like Meituan to become?
Wang Xing: A long-lasting, patient, and constantly growing company. A German thinker once said writers can be divided into three types: comets, planets and stars. It was true in the print era; it’s even more true in the digital era with the media, verified accounts and companies. Comets are gorgeous, but when they burn out they are gone. Planets can exist for a long time, but they don’t shine on their own. Stars glow, but they use a different combustion process to light up when compared to comets. Stars rely on nuclear fusion, so they must be large enough.
We are trying to be a star. Meituan has only been around for seven years, and Dianping has only been around for 14. We’ve only just begun.
Caijing: Do you think Meituan is irreplaceable to users?
Wang Xing: We’re not foolish enough to think we are irreplaceable. Currently, no other company can do what we do as well as we do it. On the other hand, nothing in this world is irreplaceable except for the world itself.
Caijing: It feels like Meituan is constantly rising to new heights, but each step seems more dangerous and risky.
Wang Xing: My understanding of the ‘danger’ we face is – we encounter a problem, but really, the problem is just a pointer to the next problem we’ll face. Born in adversity, die in peace. We are far from the day we can let our guard down and be happy.
This article by Song Wei originally appeared in Caijing Magazine and was translated by Pandaily.
Click here to read the original Chinese article.