Meituan downsizes fresh grocery business a year after launch
Apr 17, 2019
Meituan is closing five offline Ella Supermarket stores after debuting the brand just a year ago, as the Chinese mega lifestyle platform seeks to pare losses.
A total of five stores located in the eastern Chinese cities of Wuxi and Changzhou will be shut down on Wednesday. In a statement sent to TechNode, Meituan said that the closures are due to mismanagement, and that its two Beijing stores will continue to operate.
The company is reducing its store portfolio but is sticking to fresh produce as one of its main businesses strategies over the long term. Meituan will concentrate its resources and focus on revenue growth, improving the shopping experience, and operational efficiency in its two remaining stores, said the company.
The pullback comes nearly a year after Meituan launched the Ella Supermarket initiative in May 2018, a pilot program offering offline fresh produce in Beijing. Similar to Alibaba’s retail markets, Hema, the Ella brand offers as many as 6,000 consumer products, of which more than half are imported. It also features online ordering and 30-minute delivery service within a three mile radius.
Two months after launch, the Beijing-based company expanded its portfolio with two 4,000-square-meter stores in Wuxi, followed by three more in Changzhou in October. However, Meituan relies heavily on subsidies to gain traffic, offering coupons with discounts as high as 50% to boost sales, according to the recent user comments on Dianping, Meituan’s restaurant review and services app.
Chinese internet giants have stumbled in efforts to gain traction in the offline fresh produce segment, which is proving to be an expensive endeavor due to logistics and traffic acquisition costs. SF Express shuttered its high-end grocery stores that operated under the SF Best brand in a number of Chinese major cities including Shanghai and Xi’an in March. Super Species, a fresh produce store launched by Chinese retail giant Yonghui and backed by Tencent, suffered record losses exceeding RMB 1 billion (around $150 million) from 2017 to 2018, reported 21st Century Business Herald.