Tencent, the Chinese tech industry giant is looking for new horizons. After conquering the social networks, instant messaging and even finance fields, Tencent wants to move towards a more gourmet direction. Indeed, the Internet company has recently invested heavily in the start-up Meican, specializing in food delivery.
Dianping is also investing
Dianping, the Chinese counterpart of Yelp (which also happened to be 20% owned by Tencent) has also invested in the food delivery company, Meican. Meican remains a relatively small company, which do not generate sufficient profits to its sustainability. Their margin system is based on commissions earned when customers order from their partner restaurants.
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The concept of food takeaways is having a great success in China. Dianping and Tencent continue to show their will to dominate that market. As with the investment made in 2014 in favour of the largest Chinese food takeaway website, Ele.me.
Tencent is massively investing
Tencent wants to dominate the market and shows it! The company makes high investments towards many start-ups of the sector. The food delivery company, Line0, was able to benefit from this investment and improved its coverage rate from 5 cities covered (Nanjing, Shanghai, Shenzhen, Suzhou, Wuhan) to 20 cities where the service is available. All investments made by Tencent show their strong willingness to keep the market on lockdown in order to operate the highest market shares.
The demand in delivered dishes
The demand for delivered meals is becoming increasingly important and is growing especially among young people and young professionals from the white-collar category, probably missing time to cook by themselves. The growth of this market is extremely profitable for small and medium structures which do not have the financial capacity to implement their own delivery systems.
Moreover, marketing Online to Offline (O2O) strategies are in constant development in China and work wonderfully among Chinese consumers. Why? Simply because you can blend the unique experience of a physical environment with the ability to offer competitive prices to customers, the most important element for Chinese customers.
Restaurants destined to deliver food
A while ago, we saw the emergence of a new Beijing service called “Call a Duck,” which is no more than a meal service delivered at home, but specialized in preparing the famous Peking Duck. Sichuan province, known for its cuisine, prepared the offensive by launching “Call a Chicken”, which received nearly 2 million dollars of investment, the start-up development seems ensured. The particularity of these two models is that orders are exclusively done through WeChat, the famous application of Tencent.
These 2 restaurants are not even bothered by the establishment of a real website. Indeed, the strategy is relevant, if young people are the main consumers of this type of cuisine, so it is normal to get and target them where they are, that is to say social networks.
The home delivery market is promised to a great future in China, and even attracted major players in the Chinese economy, like Tencent. Business and Social Media seems to be a winning strategy on the Chinese market. In China, platforms such as Sherpa are a real success and the fact that great entities like McDonalds begin to deliver at home reflects the importance and the potential of the market.
The originality of Tencent’s strategy lay in the abscence of a website, often used to showcase products. A 100% social network strategy.
Why is it interesting?
Accordint to their findings about Wechat users released earlier this year, 80% of the 500 million users follow official account, at 41 % to stay up to date with the latest news of their favorite brand/services. In addition, 33% of the total spendings using wechat are on shopping and through official accounts, amounting to a whopping $580 million in spending.
Tencent being the master of social networks in China with two of the most successful social network in China, it is not so surprising that the giant wants to rely only on its own strength to take over the food delivery market in China.