China’s top delivery app Meituan Dianping has pushed back on claims that it is charging higher commission fees and enforcing exclusivity clauses at a time when restaurants across China are struggling to survive amid the impact of the coronavirus pandemic.
Last week, the Guangdong Restaurant Association published an open letter to Meituan, urging the Chinese delivery giant to slash commission charges for deliveries and to drop what it calls unfair terms requiring restaurants to sign exclusively with its platform.
“Meituan delivery has a market share of 60% to 90% in Guangdong province...It keeps increasing the commission ratio, and charges up to 26% commission for newly-opened catering merchants. It has exceeded what most catering businesses can endure,” the association said in the letter which it posted on its WeChat account on Friday.
The association asked Meituan to cut commission rates for all Guangdong restaurants by 5% and to cancel the exclusive clause immediately, allowing businesses to use the delivery services of other platforms to help them recover from the downturn caused by the pandemic.
Puzhong Wang, Meituan senior vice-president for its food delivery business, said in a statement issued Monday that the company lost money for five consecutive years after launching and only broke even in 2019.
“We need to invest most of our income to help merchants develop professional delivery services, acquire orders, and improve digital infrastructure,” he said.
More than 80% of businesses on its platform pay a commission of between 10% to 20%, figures that are “much lower than the rumored numbers,” according to the statement.
A recent report by data analytics platform the Data Center of China Internet (DCCI) found that almost half of China’s internet users used online delivery services last year, and 67% were regular users of Meituan.
It is not the first time that the leading delivery platforms have been the target of complaints from the catering sector. In February, restaurant associations in the southwest city of Chongqing, as well as in Hebei, Yunnan and Shandong provinces, all separately published open letters calling for commission reductions from Meituan and its main rival Ele.me, owned by Alibaba Group, the parent company of the South China Morning Post.
The letter from Shandong revealed that Meituan charged commission fees of 18% and 23% for restaurant chains and smaller catering businesses respectively, while Ele.me’s fees ranged from 15% to 20% per order. If restaurants want to work with other delivery platforms, the commission fee for Meituan increases by 3% to 7%, according to the letter.
Ele.me did not immediately respond to a request for comment sent on a public holiday in Hong Kong. However, in an announcement on its Weibo account on Monday, the platform said it has rented 40,000 advertising billboards in 80 cities across China, and placed advertisements through 100,000 hotel TVs and 4.8 million online programs, to promote mid-and small-sized restaurants at no cost to them.
The owner of a Japanese restaurant in Beijing, who requested anonymity for fear of retaliation, said Meituan charged 15% to 20% before the pandemic, but was now charging commission of 21% to 26%, which exceeded the company’s after tax profit margin of around 18% to 25% under normal business conditions.
“We won’t have any profit during the pandemic if Meituan keeps charging fees like this, but during the pandemic customers are not likely to have meals outside, so we have to depend on the online delivery,” the owner said.
The owner said he was told by a Meituan salesman that the rate could be reduced to 15% if the restaurant exclusively used Meituan’s services, but the owner declined the offer as he believes using multiple platforms is beneficial for his business.
Meituan’s 2019 full year revenue from its core food delivery business increased 43.8% year on year to 54bil yuan (RM33.13bil) while total revenue from fees, which include platform usage, technology service fee and delivery charge, was up 39% to 49.7bil yuan (RM30.49bil) in the same period. — South China Morning Post