How Meituan Misplaced Its Grocery Gamble

Group group searching for (CGB) refers to a model the place residents in a neighborhood collectively purchase groceries and day by day necessities at bulk reductions, with a neighborhood coordinator (a “group chief”) coping with orders and next-day pickup for the group. This model took off spectacularly in China spherical 2018–2020, pushed by the promise of ultra-low prices and luxury. Platforms wanting to faucet lower-tier cities and suburban markets offered steep subsidies – as an illustration, one platform supplied a 500g pack of eggs for beneath ¥1.99 (about $0.30), beneath wholesale worth, exemplifying the fierce price wars . The approach labored to shortly entice clients (along with many aged and rural buyers new to e-commerce) with the lure of “low price + consolation.” By 2020, China’s neighborhood group-buying platforms had been fulfilling over 100 million orders per day, and the market dimension surpassed ¥100 billion (∼$14B) . The COVID-19 pandemic further accelerated this progress – all through metropolis lockdowns, group searching for turned a lifeline for household offers, cementing its recognition.

Behind the frenzy, nonetheless, cracks had been already exhibiting. The explosive progress led to a “hundred regiment battle” of competing startups and tech giants, all burning cash to grab market share. Homogenized decisions and subsidy-fueled progress meant platforms competed not on service or prime quality, nonetheless on who could provide deeper reductions . This set the stage for an eventual reckoning as quickly as regulators and economics caught up with the enterprise.

Meituan – acknowledged for meals provide and native suppliers – jumped into neighborhood group searching for in mid-2020 with a model new unit known as Meituan Youxuan (“hottest selection”). The strategic intent was clear: Meituan observed CGB as a big new progress avenue previous meals provide, notably to penetrate China’s smaller cities and rural markets. Group group searching for was initially touted as a “good reply” for bringing latest grocery e-commerce to low-tier cities , aligning with Meituan’s mission to meet frequently shopper needs. By leveraging its huge present group of provide riders and retailers, Meituan built-in Youxuan into its ecosystem. For example, many Meituan meals provide couriers and mom-and-pop retailer householders turned group leaders for Youxuan, and the Meituan app funneled web site guests to group-buy provides. This synergy gave Meituan an edge – its purchaser acquisition worth for group searching for was reported to be about 30% lower than opponents, because of the efficiencies of piggybacking on Meituan’s high-frequency service platform .

Meituan Youxuan expanded shortly nationwide, and at its peak it was coping with a serious amount of orders. Really, by 2021–2022 Meituan Youxuan and Pinduoduo’s Duoduo Maicai emerged as the two dominant avid gamers (a duopoly) in China’s neighborhood group searching for space . Meituan’s group-buy GMV (gross merchandise amount) reportedly reached the “hundred-billion-yuan stage” at its peak. Nonetheless, after the preliminary land-grab half, Meituan began pulling once more from aggressive progress. Based mostly on agency disclosures, Meituan’s new initiatives part (which contains Youxuan) gathered ¥77.7 billion (~$11B) in losses from 2020 to 2022, and Meituan Youxuan’s annual transaction scale shrank from the peak ¥100+ billion fluctuate proper right down to about ¥70–80 billion . In several phrases, progress had stalled and the cash burn was turning into robust to justify.

After pouring sources into neighborhood group searching for for a variety of years, Meituan is now dramatically downsizing and refocusing Meituan Youxuan – efficiently exiting most areas. Quite a lot of key parts drove Meituan to this decision:

• Sustained Losses and Unviable Economics: The neighborhood group searching for model proved terribly arduous to income from. Meituan’s financials current big cumulative losses – over ¥80 billion (>$11B) misplaced on its group-buying operations over only a few years . No matter scale, the unit economics remained poor: “the income per order was beneath ¥1”, which suggests break-even was virtually inconceivable . Extreme operational costs (from chilly chain logistics, labor, warehousing) and thin margins on low value produce made the enterprise a money pit. After investing huge sums, Meituan observed no clear path to profitability for Youxuan.

• Regulatory Stress on Subsidies and Pricing: China’s regulators intervened as quickly because the subsidy wars spiraled uncontrolled. In March 2021, the State Administration for Market Regulation issued new tips (“9 Nos”) explicitly banning below-cost selling and completely different unfair practices in neighborhood group searching for . This was a turning degree that “dropped the regulatory sword of Damocles” on the enterprise . With predatory pricing curtailed by regulation, platforms might not provide absurdly low value provides to hook clients. Meituan and its rivals abruptly misplaced their key shopper acquisition system (ultra-low prices), and the worth profit vanished, inflicting many bargain-seeking purchasers to lose curiosity . In short, the regulatory crackdown ended the interval of “burn cash for progress,” forcing a pivot from growth-at-all-costs to a sustainability focus .

• Shifting Consumer Habits: Chinese language language buyers’ habits spherical on-line grocery have superior. All through the expansion, many consumers flocked to irrespective of platform had essentially the most value efficient provides. Nonetheless as quickly as heavy reductions subsided, loyalty proved skinny – clients wouldn’t stick spherical with out subsidies. Moreover, post-pandemic, buyers started valuing prime quality and immediacy additional. A present survey found that 60% of consumers now prioritize product prime quality when choosing grocery suppliers, whereas these prioritizing lowest price fell to 30% . The core promise of neighborhood group searching for – next-day pickup in commerce for barely lower prices – turned a lot much less fascinating as on-demand grocery provide (in beneath 1 hour) turned additional widespread. The consolation gap narrowed, and clients grew a lot much less eager to plan purchases a day prematurely merely to avoid wasting plenty of a small amount.

• Inside Cannibalization by On the spot Provide: Meituan confronted a strategic battle between its private corporations. In parallel with Youxuan, Meituan has a thriving rapid provide service (by way of Meituan app’s “Meituan Flash” and completely different on-demand retail companions) that delivers objects from shut by retailers inside 30–60 minutes. Every suppliers ultimately objective the an identical grocery and FMCG needs, nonetheless one promised next-day pickup (group buy) and the other offered same-hour dwelling provide. Notably, spherical 80% of the product courses in type in neighborhood group buy (fruits, greens, snacks, day by day requirements, and so forth.) overlap with these in Meituan’s on-demand retail product sales . And from a shopper perspective, prepared until tomorrow morning versus getting it now isn’t an infinite distinction for a lot of routine needs . This meant Meituan’s two fashions had been efficiently competing with each other for the same purchasers and orders. As one analysis put it, Meituan Youxuan’s shutdown is principally to steer clear of “left hand vs correct hand” interior opponents between next-day group searching for and rapid provide . Persevering with to run parallel grocery corporations with such overlap would solely set off helpful useful resource “interior friction” and duplication. Shutting down the weaker one (Youxuan) to cope with the higher-growth, additional atmosphere pleasant rapid retail enterprise turned the logical different .

• Structural Flaws inside the CGB Model: Previous Meituan’s specific state of affairs, the neighborhood group searching for model itself confirmed structural weaknesses. It turned out to be a heavy-asset, superior operation barely than the sunshine model initially envisioned. To satisfy next-day orders, Meituan and others wanted to rearrange multi-layered warehouses (central depots feeding metropolis “grid warehouses” proper right down to native pickup components), incurring extreme fixed costs in rent, chilly storage, and manpower . Evening time-time sorting of latest produce and last-mile distribution to tons of of pickup spots added to the related price. Spoilage and waste had been very important – latest fruits and veggies had extreme loss prices, which ate into margins . Moreover, neighborhood buy platforms found it arduous to maneuver previous merely produce and a restricted SKU selection, capping each order’s price . And till an area had very extreme order density, provide effectivity stayed low and costs extreme . All these parts meant that even after the preliminary shopper progress, the model struggled to scale profitably. Meituan’s retreat is an acknowledgment that this “heavy” model is unsustainable with out numerous cash burn.

In essence, Meituan Youxuan turned a story of tremendous intentions colliding with harsh economics. The company launched in June 2025 that it’s going to shut down or droop Meituan Youxuan operations all through most of China, exiting all nonetheless only a few core areas, and reassigning workers to completely different objects . Meituan framed it as a strategic restructuring: consolidating sources into additional promising ventures (like rapid retail and its core provide enterprise) and pulling out of persistently unprofitable markets . This marked a definitive end to Meituan’s neighborhood group searching for experiment at nationwide scale.

Meituan was faraway from the one tech huge that jumped on the neighborhood group searching for bandwagon. Inside the 2020–2021 progress, practically every most important Chinese language language e-commerce or on-demand platform launched a CGB service – and most have since scaled once more or shut these efforts. Proper right here’s how Meituan’s key opponents fared:

• Pinduoduo (Duoduo Maicai): Pinduoduo, which constructed its success on group purchase provides in e-commerce, naturally expanded into neighborhood grocery searching for with Duoduo Maicai. Pinduoduo’s technique leveraged its deep roots in agriculture and rural present chains. It established a farm-to-table logistics group – as an illustration, working instantly with cooperatives so that latest mushrooms picked in Yunnan might attain purchasers the following day . This direct sourcing gave Pinduoduo an edge in controlling latest produce spoilage to beneath 5%, versus ~8% enterprise frequent . Pinduoduo moreover ran a leaner operation: it adopted a relatively asset-light model, outsourcing lots of its warehousing and provide to third occasions, which saved working costs ~15% lower than Meituan’s additional labor- and warehouse-intensive model . By 2023, Pinduoduo’s Duoduo Maicai and Meituan Youxuan had been the ultimate two giants standing in an in some other case shaken-out sector . Pinduoduo has continued to persevere in neighborhood group searching for, nonetheless even it has flip into additional cautious. Notably, in 2022 Pinduoduo redeployed very important workers and sources from Duoduo Maicai to assemble its new worldwide e-commerce app Temu – indicating that Pinduoduo sees elevated progress options elsewhere . (Based mostly on a HSBC report, Temu already contributed 23% of Pinduoduo’s full earnings in 2023 .) Nonetheless, Duoduo Maicai stays operational nationwide, serving the shoppers it acquired, though Pinduoduo shouldn’t be growing the service aggressively the least bit costs.

• Didi (Chengxin Youxuan): Expertise-hailing agency Didi Chuxing made an daring foray into neighborhood group searching for in 2020 with “Chengxin Youxuan” (additionally known as Orange Coronary coronary heart). Didi had hoped to capitalize on its big shopper base and driver group to diversify into native commerce. Chengxin Youxuan expanded shortly in 2020, working in dozens of provinces at its peak. Nonetheless, it turned one in every of many earliest casualties of the CGB bubble. In early 2021, regulators’ admonishments regarding the price wars (and Didi’s private regulatory troubles in its core expertise enterprise) put heavy stress on Orange Coronary coronary heart. By September 2021, Didi began shutting down Chengxin Youxuan’s operations all through cities, and by the highest of 2021 it had efficiently exited the neighborhood group buy sector completely . Didi’s short-lived experiment ended with heavy losses and layoffs, illustrating how robust it was for even a cash-rich tech company to crack this market. Orange Coronary coronary heart’s quick demise moreover foreshadowed the broader shake-out of smaller and non-core avid gamers as quickly because the golden days handed.

• Alibaba (Taocaicai / Taobao Maicai): Alibaba approached neighborhood group searching for by way of a variety of iterations. Initially, its grocery-focused arm Freshippo (Hema) dabbled in neighborhood group purchases (by way of “Hema Jishi”), and Taobao launched a grocery group-buy service (“Taobao Maicai”). In 2021, Alibaba merged these initiatives proper into a loyal enterprise known as Taocaicai (“淘菜菜”), beneath its Taobao Provides division, signaling a extreme push to downside Meituan and Pinduoduo. Taocaicai tried to emulate the Meituan/Pinduoduo playbook, nonetheless Alibaba confronted interior coordination points. The company’s sprawling building meant overlapping teams and channels all attempting to do on-line groceries. Based mostly on one former Taocaicai employee, a single produce supplier wanted to interface with three fully completely different Alibaba divisions for comparable grocery packages – an inefficient and expensive setup . This lack of interior synergy saved Taocaicai’s costs extreme and its execution sluggish . By 2022, Taocaicai was dropping momentum. Alibaba began retrenching the enterprise, and in early 2023 it shut down Taocaicai’s next-day pickup service in plenty of provinces, marking a retreat from neighborhood group searching for. Alibaba has since shifted focus to completely different grocery retail fashions (for instance, supply produce from origin wholesale markets to buyers, and leveraging its Ele.me platform for on-demand grocery provide) . The Taocaicai mannequin nonetheless exists nonetheless on a quite a bit smaller scale after these pullbacks.

It’s value noting that completely different avid gamers moreover fell by the wayside. JD.com launched “Jingxi Pinpin” for neighborhood group buys nonetheless folded it by 2021–2022. Startup contenders like Shihuituan, Tongcheng Life (Tongcheng Maicai), and others each went bankrupt or had been acquired when the bubble burst . Xingsheng Youxuan, a regional pioneer from Hunan province, managed to survive by specializing in its dwelling turf, nonetheless it too confronted immense stress by way of the price wars. In summary, practically all the “neighborhood group buy” initiatives that exploded in 2020 have each exited or scaled methodology once more by 2023. Pinduoduo’s grocery service is the lone big participant nonetheless standing in a serious methodology – and even Pinduoduo has diversified its bets previous this sector.

Meituan’s retreat from neighborhood group searching for alerts broader shifts in China’s on-line retail panorama. The rise and fall of CGB has ushered in a model new half marked by two most important developments: