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Meituan Hits Back at Charges of Exploiting Restaurants

By Ding Yi / Apr 14, 2020 02:19 PM / Economy

Photo: VCG

Photo: VCG

Chinese food-delivery company Meituan Dianping has hit back at allegations that it is charging hefty commissions for its delivery services, as the country’s catering industry struggles to recover from a coronavirus-induced downturn.

On Friday, the Guangdong Restaurant Association published an open letter to Meituan urging the delivery giant to cut its commission rates by at least 5% for all Guangdong restaurants and drop its exclusivity clause forbidding restaurants from working with other delivery service providers. In the letter, the association also criticized Meituan for “charging up to 26% commission to new restaurants” in what it called a “ratio surpassing what most restaurants can tolerate.”

Meituan told Caixin that more than 80% of restaurants on its platform paid commissions of between 10% and 20% in 2019, figures that “were much lower than the rumored numbers.”

The company added that its average profit per delivery order was less than 0.2 yuan ($0.03) in the fourth quarter of 2019, accounting for just 2% of its revenue.

In a separate statement, Meituan senior vice president Wang Puzhong said that the company’s delivery unit had lost money for five consecutive years since its establishment and that it only moved into the black in 2019.

The company promised to engage in talks with restaurants to find a solution that could help them out of their current troubles.

A person from a large restaurant chain, who asked not to be named, told Caixin that Meituan hiked up their company’s commission charges by a large margin in 2019. “(Restaurants) are becoming more reliant on the platform as it generates more and more traffic,” he said, without specifying how much commission his particular restaurant pays for each delivery. Rival delivery firm Ele.me also raised their commission rate a few days after Meituan, the person added.

According to its most recent earning report, Meituan’s food delivery revenues increased by 42.8% year-on-year to 15.7 billion yuan in the fourth quarter of 2019. However, the company projected that it would suffer revenue decline and operating losses due to the novel coronavirus outbreak in the first quarter of 2020.

This isn’t the first time that Chinese food-delivery companies have come under fire for their business practices. In February, several catering associations from the city of Chongqing and the provinces of Hebei, Yunnan and Shandong separately called on Meituan and Ele.me to reduce commissions for deliveries when the coronavirus led to many restaurants having to close to the public.

Contact reporter Ding Yi (yiding@caixin.com)

Related: Meituan Feuds with Italian Startup Over Offloaded Mobike Assets


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