China’s Meituan Cuts Commissions After Regulatory Guidance

 

Chinese food delivery giant Meituan said on Tuesday it would lower commissions for merchants on its platform, including capping fees for around a million small and medium-sized merchants facing operational difficulties at 5% this year.

It would also cut half of commissions, capping at one yuan per order, for catering vendors in pandemic-hit areas, Meituan said, adding that it aimed to achieve full nationwide transparency in charging commissions this year.

Chinese regulators last month issued guidance for online food delivery platforms to reduce service fees to help to lower operating costs for catering businesses, in order to promote a faster recovery from the pandemic in the services sector.

The proposed policy had wiped as much as $26 billion off the market capitalisation of Meituan, China’s dominant food delivery platform, on the issuing day.

The market had overreacted to the government’s guidance, as the policy was not intended to target the platform economy, a Chinese state-run newspaper Economic Daily said in a commentary last week.

Meituan currently charges around 12% in commissions for its food delivery business, a unit accounting for more than 50% of its total revenue, according to analysts estimates.

Meituan is expected to experience a short-term operational pressure as its food delivery business’ profit margin is already thin, according to a research report published by SPDB International last month.

Other major food delivery platforms in China include Alibaba-owned Ele.me.

 

• Reuters with additional editing by Jim Pollard

 

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