Twice a year the men gathered at headquarters to yell “victory or death”, before downing bowls of baiju and smashing them on the ground to seal their pledge.
The ritual, inspired by military generals fighting battles in ancient China, was adopted by managers at Chinese internet start-up Meituan when it was in fierce competition with rivals, according to a former senior executive who witnessed the exercises.
There was one important concession to modern times. While the ancient generals committed suicide if they failed, Meituan business managers who fall short of their targets either resign or are denied bonuses.
At most start-ups, superiors set lofty targets that subordinates try to negotiate down. Not at Meituan. Managers at the Beijing-based company’s food-delivery unit pledge to a target as high as they think they can stomach. The higher the target, the bigger the potential reward.
As employee No 10 when he joined Meituan in 2010, Shen Peng, deputy head of the meal-delivery unit, was able to witness first hand how a ragtag group assembled by co-founder Wang Xing grew into one of China’s biggest internet platforms. The company, which provides on-demand consumers services, plans to raise as much as US$4.4 billion in an IPO set to kick off in Hong Kong on Friday. The stock is expected to start trading in the city on September 20.
While the IPO will undoubtedly make millionaires of many Meituan managers, the road to riches will have been long and hard. “During the crucial few months when the fight for market share with Ele.me was very close, we came up with the ‘fight until death’ slogan and filmed ourselves shouting it,” Shen said in a wide-ranging interview. “It was no different from leading an army. You need to be resolute, and be prepared to die rather cede any ground.”
There’s no way you can encourage ‘independent thinking’ among 6,500 managers
Shen Peng, deputy head of Meituan’s meal-delivery unit
Shen, who oversaw 6,500 people as deputy head of the food-delivery business until he left in 2016 to start Waterdrop Inc, a self-help and crowdfunding community for critical illnesses and emergencies, said there was good reason to run things in military fashion.
“There’s no way you can encourage ‘independent thinking’ among 6,500 managers. You’d never win the war,” he said. “Only when we know what each business unit in each business district is doing can we make targeted strategies for them to follow.”
In the four months of this year Meituan employed an average of 539,000 delivery riders each day and average daily food delivery transactions reached 14.1 million in the same period, according to its prospectus.
Meituan operates in 2,800 cities and counties in China and competes primarily with Alibaba Group’s Ele.me in on-demand delivery and Ctrip.com in hotel bookings.
Competition is set to intensify with Alibaba, the parent company of the South China Morning Post, planning to merge its Ele.me and Koubei units and boosting their war chest with US$3 billion in new funding. That kind of muscle could strain Meituan’s resources, with the company posting losses for the past three years, its IPO filing showed.
China’s internet industry is famous for its 996 work culture – 9am to 9pm, six days a week. At Meituan, not even Sundays are sacred – at least for senior management. To minimise interference with daily work and to test the commitment of job applicants, Saturdays are usually reserved for back-to-back job interviews, Shen said.
Sundays are spent at Beijing headquarters going through weekly operating data to identify weak spots. Managers whose regions failed to meet targets have to explain why to the group. Takeaway food is the order of the day (using Meituan, of course), including breakfast, lunch and sometimes dinner.
It is an intense culture in an intense industry. Shen himself remembers working seven days a week for three-and-a-half years to get the food-delivery service up and running.
The Beijing-based start-up competes in what is called in industry parlance the online-to-offline industry, or O2O, sometimes also referred to in shorthand as on-demand local services, where the company connects consumers with merchants through its app and helps dispatch the order with an army of delivery men and women.
Formed from a merger with Dianping, which started out as a Yelp-like restaurant review site, the combined Meituan-Dianping has had to compete with deep-pocketed rivals on multiple fronts. In ride-hailing, Meituan has to square up against Didi Chuxing, which is facing a safety crisis after a second passenger was murdered in recent months and a review of court verdicts showed a trail of sex crimes involving its drivers.
In meal delivery, Meituan competes with Ele.me, which was acquired in April by Alibaba and recently stated its aim to win at least half of the industry market share. In hotel and flight booking, Meituan faces Ctrip.com, which has been profitable for every year except for one since its IPO in 2003.
Founded in 2010 by Tsinghua alumni Wang Xing, Wang Huiwen and Mu Rongjun, Meituan started as a Groupon-like group-buying website before merging with rival Dianping in 2015 to create China’s largest lifestyle platform.
Lacking a comparable reference in the US, it is sometimes described as a mix of Yelp, Grubhub, booking.com and even Uber, as it officially launched ride-hailing services in December, before its acquisition of one of China’s two leading bike-sharing start-ups, Mobike, for US$2.7 billion in April. It is also a go-to-destination in the world’s most populous nation for booking movie tickets and having someone else run your errands.
Last year, Meituan completed 5.8 billion transactions worth 357 billion yuan, with the help of more than half a million delivery riders. The company has a user base of 340 million and an active merchants base of 4.7 million across cities and counties in China, according to its IPO prospectus.
Meituan's Beijing headquarters is not the glamorous space-age work space that might be expected from a tech giant, with artisanal pizza parlours, pool tables and pinball machines. Instead, workers inhabit a somewhat dour office with functional furniture. Not even CEO and chairman Wang Xing has an office – he sits himself in a corner of a big room.
Meeting rooms are named after cities that Meituan operates in. Executives travel cheap and stay in budget hotels, even the top managers.
Meituan’s software engineers have the most comfortable chairs, with back support, because they work long hours seated at their computers, according to Huang Yuanpu, O2O analyst and co-founder of tech information provider EO, who briefly worked as Meituan’s waimai (food delivery) strategy analyst in 2013.
The sales teams had in place a mechanism for cutting the worst performers, and the most competitive base salaries were reserved for engineers over operations or sales staff, Huang said.
It has never been our intention to rival with others just for the sake of it
CEO Wang Xing
A company’s culture comes from the top down, and CEO Wang Xing, who prefers to be called “brother Xing”, is analytical and a voracious reader, according to several people close to him.
“Most people may make hasty decisions off the top of their heads, but not him,” Shen said. “He is very logical and has to think it through before making a move. All his decisions are powered by statistics and methodologies.”
In a rare interview with Caijing Magazine last June, Wang was asked about his “all in war” approach. “Meituan is a customer-centric company. It has never been our intention to rival with others just for the sake of it,” he said. “My attitude to competitors is much like driving a car. You would check the back mirror from time to time, but you can't stare at it while driving.”
“Most people care about boundaries instead of the core,” he continued. “I believe there's no simple boundary for everything, so I won't set a line for myself, as long as our core is clear: whom we will serve? To provide what kind of services? We will keep trying all kinds of businesses?”
Wang cited Alibaba’s Taobao e-commerce platform as an example: “Taobao made a crucial decision in 2003/2004 to sell everything, instead of selling female attire or home appliances. Meituan can never win by focusing primarily on movie tickets.”
Wang is also an enthusiastic blogger on Fanfou, a Twitter-style microblogging platform he founded after returning to China from the US, where he obtained a master's degree in computer engineering from the University of Delaware in 2005. Fanfou was taken offline for over a year after the Xinjiang riots in July 2009, and now operates on a subscription-only basis without accepting new registrations.
Before founding Meituan, Wang started Xiaonei, China's first college social network website.
Wang Xing was not available for an interview. When asked to comment on its work culture as described in this story, Meituan representatives said they could not do so in time for the deadline.
The competitive environment Meituan faces now is different from when internet giants Alibaba and Tencent Holdings were starting out, according to Huang.
“Ahead of Meituan is a giant like Alibaba, which has an equally hardworking culture and has – more importantly – cash at its disposal, generated from other business lines,” Huang said. “With scale at the centre of the O2O business, Alibaba can keep Meituan from making a profit as long as it keeps investing.”
Indeed, Meituan’s net losses after adjustments were 5.9 billion yuan, 5.4 billion yuan, and 2.9 billion yuan respectively for the past three years, according to its prospectus.
China's food retail and service industry, worth 8.7 trillion yuan in 2017 with an online penetration of 13.4 per cent, is expected to grow to 14.1 trillion yuan with an online penetration of 29.5 per cent, Meituan noted in its prospectus, citing industry estimates from iResearch. The consumer e-commerce service market, worth 2.7 trillion last year based on gross transaction volume, is expected to grow at a CAGR of 19.8 per cent to 8 trillion yuan by 2023.
“Many other consumer services, such as hotel booking and entertainment, are expanding rapidly and moving online,” Meituan noted in the prospectus. “This is the result of the adoption of e-commerce and cross-selling through high-frequency and essential services such as on-demand food delivery.”
It looks like Meituan’s senior managers will need to keep up with the “victory or death” war rituals to stay on their toes in future.
This article Meituan’s war footing helps keep it on top in tough Chinese on-demand services market first appeared on South China Morning Post