China's leading group-buying site Meituan is projected to have RMB100 billion (approx. US$16 billion) in transactions this year. Its CEO Xing Wang confirmed it raised US$700 million in its latest financing round and the company’s valuation is estimated to be US$7 billion.
Meituan recorded RMB46 billion (US$700 million) in transactions in 2014 with its service attracting 200 million smartphone users and active in 1,006 Chinese cities. It is leading in cinema ticketing, hotel booking and takeout segments, with its cinema segment recording RMB5 billion in transactions, accounting for 16.9% of China’s RMB29.6 billion total box office sales. Its takeout segment records 1.5 million orders daily.
Mr. Wang said he doesn’t intend to list Meituan in the next two years: “We are taking a low profile and making good use of our additional funding,” he said. One use for Meituan’s windfall is to gear up for stiff competitions from rivals 55tuan and Dianping, both are preparing for IPOs. .
Meituan's meteoric rise to the rank of companies worth billions of dollars has brought challenges of retaining efficient management. Rumors of some founding members of the management team being sidelined circulated following the departures of senior executives including its vice president of sales.
“We haven’t been going by the book in our learning process, rather we’ve learned through trial and error,” Mr. Wang responded. “Meituan’s management is well known for its transparency and efficiency which is the result of having the right people in the right positions, so we don’t see executive turnover as a bad thing at all.”
Although Meituan reached its set annual target of RMB1.9 billion net revenue in 2014, its margin is still low at only 4.13%, according to Mr. Wang. In the end of 2013 Meituan had announced it was close to breaking even but the price war in 2014 threw a spanner in the works.
Despite its financial boost, Meituan will still face tremendous pressure this year from its rival Dianping’s IPO boost and the challenge of O2O startups such as ete.me carving into Meituan's share in each of its market segments.(Translation by David)
