China's Online-to-Offline Behemoth Pulls $4 Billion in Fresh Funds - eMarketer
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China's Online-to-Offline Behemoth Pulls $4 Billion in Fresh Funds

Meituan-Dianping now has the fourth largest valuation in the world

October 20, 2017 | Retail & Ecommerce

China’s juggernaut of an online-to-offline (O2O) platform Meituan-Dianping just announced a new funding round that puts an additional $4 billion in its pockets. The new investment gives the company a valuation of $30 billion, making it the fourth most valuable startup in the world by CB Insights’ accounting, behind only Uber, China-based ride-hailing giant Didi Chuxing and smartphone manufacturer Xiaomi.

But what did Meituan do to earn a spot among the pantheon of the world’s unicorns? The firm has emerged as China’s dominant O2O service, an aspect of the ecommerce sector loosely defined as the digital purchase of goods or services that are then consumed or claimed offline.

In practical terms that means people use Meituan for anything from ordering prepared food for delivery, purchasing movie and entertainment tickets, booking travel services and even ordering manicures. It also incorporates discounted deals into its apps, much like Groupon used to do in the US.

O2O ecommerce sales in China are pretty significant. They’re projected by iResearch Consulting Group to hit RMB521 billion ($78.4 billion) this year and grow to RMB626 billion ($94.2 billion) in 2018.

Online-to-Offline (O2O)* Ecommerce Sales in China, 2011-2018 (billions of Chinese yuan renminbi and % change)

The latest round of investment in Meituan was led by Tencent, the parent company of China’s killer app—the messaging platform WeChat, which has grown to become something close to a mobile operating system among smartphone users in the Middle Kingdom.

Meituan’s services have a clear overlap with WeChat, which lets its users do any number of things without ever leaving the platform, such as ordering food, reserving hotel rooms and making bill payments.

But Meituan also increasingly encroaches on services offered by China’s other tech giant, Alibaba. The ecommerce firm is a backer of food delivery platform Ele.me, which recently acquired the food delivery service Baidu Waimai in a sign of consolidation in the sector.

Alibaba also offers users another highly localized platform called Koubei, a joint venture with affiliate company Ant Financial that’s designed to cater to consumers’ on-demand whims.

With its new cash infusion, Meituan and its investors appear to be heading into a fight for control of China’s O2O sector.

Rahul Chadha

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