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Alibaba, Tencent, Meituan: the Internet giants step up the layout of SaaS market in the food and beverage industry
With investment waning in the wake of the epidemic, the enterprise service market has instead seen a spring in its step.
The data shows that the enterprise services market accounted for one-sixth of the 634 investments in the new economy field in the first quarter of this year. In April, Zhu Xiaohu, known as the unicorn catcher, also made a public statement: "The emergence of SARS 17 years ago boosted the growth of e-commerce, and this year's epidemic could also be a turning point for the business services industry. Enterprise Services SaaS is a long cycle for the next 10 years."
The epidemic is a test of how "digital" the industry is. While offline dominated industries such as tourism, aviation, and traditional retail have been severely impacted by the epidemic, and industries such as online healthcare, online education, short video and telecommuting have achieved rapid growth with low customer acquisition costs.
The epidemic objectively accelerated the process of digitalization of China's industry. In the face of the epidemic, companies in all segments have embarked on a digital model, and the industry with high-frequency and low-cost is favored by the capital markets.
"This is an opportunity for valuations to come down and return for quality companies in general, and especially for quality catering companies, which usually have very strong cash flow well. Most of them don't require investment, and there may be an opportunity now, probably the best opportunity of a lifetime." Song Xiangqian, founding partner and chairman of Harvest Capital, said.
When food and beverage enterprises are favored by the capital market, the giants are also step up the layout of SaaS market in the industry. In the view of Hulianwangjianghu (ID: VIPIT1), the food and beverage market could be reduced to a cake for the giants to fight over.
A party dominated by giants
In March 2018, Meituan had also led a $200 million Series C funding round for Acewill, a Software-as-a-service (SaaS) provider targeting the catering industry. And Acewill subsequently acquired another catering service provider Tianzixing in May 2018, in which Meituan had participated. In May 2018, Meituan's wholly-owned acquisition of catering SaaS provider Passiontec.
Under the impact of the epidemic, acquisition moves are even more pronounced. Tencent-based Weimob acquired Yazuo in February 2020.
The head company of this track, Keruyun, was listed on the National Equities Exchange and Quotations (NEEQ) at the end of 2015, but it took off the stock in 2018. The financial report showed that in the two fiscal years of 2016 and 2017, Keruyun lost about 150 million yuan. In February 2020, Keruyun joined the Alibaba's business operating system ecology, and Shishi Tongyun Technology became a wholly-owned subsidiary of Alibaba's local life, according to Tianyancha.
In June 2020, the data shows that the subject company of the catering SaaS service provider Hualala underwent a number of business changes.
The food and beverage SaaS track gradually becomes a gathering place for giants.
1. The essence of food and beverage SaaS is connectivity, not management tools
Figuring out this essence makes it easy to understand why the giants are so on board.
Catering SaaS means that the service provider provides software for the catering industry such as reservation system, ordering system, cashier POS system, takeaway system, membership management system, queuing system and so on. They are all about empowering technology to increase the efficiency of restaurants and improve the customer's dining experience.
It is ostensibly a management tool, but essentially a connector. While Meituan and Alibaba local life are connections in the form of public domain traffic, SaaS is connections in the form of private domain traffic, which is the operational hub of the restaurant-user relationship.
The platform is responsible for the diversion, the food and beverage SaaS system is responsible for the flow operation, from the ecological level, the two together is a complete closed loop.
2. Behind the food and beverage SaaS scuffle is the battle for the local life track
Food and beverage SaaS is an important part of the traffic operation, and the scramble behind it is essentially a battle for the local living track.
The local life track is full of smoke, Alibaba local life and Meituan are in a fierce battle in C-side market, but it's hard to turn the tide in the short term.
The B-side is different, acquisitions and mergers can quickly improve market competitiveness, just like Keruyun. In March, Alipay announced its transformation into a local life service platform.
In addition, the local life track is a typical bilateral market with a high overlap between the food service SaaS community and local life's B-side catering merchants. What the local life is gra is not just users, but businesses.
"Under the giant ecological layout, no industry is immune . The battle is never a local battle but a systematic battle, and behind the systematic battle is the battle of the giants."
"In fact, food and beverage SaaS is a great track, and the O2O boom has avoided the most glaring frontage lanes. It is a good time to choose B-side services when the giants have no time for them, and then move to B-side when the C-side falls, at that time, the company has grown. It's also a blessing to be acquired by a giant," an investment institution business manager said.
3. Catering SaaS with the attributes of strong stickiness and weak root
Objectively speaking, the customer base for catering SaaS software is still very sticky and merchant renewal rates are high.
On the one hand, as service software, the types of services and the prices tend to be roughly the same across products and services. It's all about queuing, member management, payment, etc. The experience is so homogeneous that it's hard for businesses to switch.
On the other hand, food and beverage SaaS does improve the user experience, and it's hard to opt out of it once you're using it, because the user experience is irreversible.
However, strong user stickiness does not mean that the share is irreversible; strong user stickiness should be built on a solid foundation of roots. Food and beverage SaaS has the attributes of strong stickiness and weak root.
And what companies should care more about than user stickiness is whether the foundation is strong and whether there is a possibility of being hit by a downgrade.
The race of the giants
After Tencent reached an internal consensus on investment in 2011, it took an 18.1% stake in the local life track. In addition to backing Meituan, the company became the largest single major shareholder of Meituan.
Based on the consideration of the latest industrial Internet transformation, Tencent's strategy for local life is to target the digital construction of B-side businesses.
Tencent's biggest bargaining chip is WeChat, which presents private domain traffic, and private domain traffic is undoubtedly the most over-ambitious for F&B businesses today.
Tencent can't escape its own ecosystem after all.
The biggest connection between WeChat and local life services is LBS-based infomercial advertising. Based on WeChat mini programs, subscriptions and other content and service ecosystem, it can help businesses better operate private domain traffic.
Higher traffic costs and commissions for food delivery platforms exacerbate the operating costs. Relying on a large platform and then building their own private domain traffic to a small center stage is a consideration for many catering companies. This overall demand objectively provides a strong external environment for Tencent to enter the local life.
Tencent's biggest challenge lies in the limited resources of its merchants, mostly belonging to the Alibaba and Meituan camps, and its own offline development ability is not outstanding.
Although the service is online, the catering companies are mostly offline enterprises, offline expansion capabilities need to be further improved in order to eat up the dividends of private domain traffic.
The biggest player in the food and beverage SaaS track is Meituan. Not to mention SaaS services, Meituan involves a series of links such as traffic acquisition, private domain traffic operations, distribution and even procurement, finance, recruitment, training and so on.
Meituan announced its 2019 financial results, showing that revenue from its new business and other segments reached 204 billion yuan, a year-on-year increase of 81.5%. Gross profit increased from a negative 4.3 billion yuan in 2018 to a positive 2.3 billion yuan in 2019, gross margin improved from a negative 37.9% in 2018 to a positive 11.5% in 2019. An important branch of Meituan's B-side business is the B-side merchant enablement service.
Meituan's biggest card lies in its ability to organize B-side merchants, which is reflected in the food and beverage SaaS, as well as in Meituan's borderlessness, which can descend into multiple fields.
The local life platform is to serve the merchants, how to reduce the operating costs of the merchants will be the biggest challenge for Meituan. The private domain traffic going out of fashion and Tencent benefit is the product of the lack of supply of the Meituan service.
SaaS restaurant software that empowers the B-side has become an important part of Alibaba. Unlike giants such as Tencent and Baidu, Alibaba is biased towards being a purely Internet company. The e-commerce ecology that Alibaba relies on to make his fortune is originally a subversion, transformation and upgrade of the traditional retail industry, accustomed to and good at the heavy model track. But service caterers are essentially like service retail sellers, and this is one of the most desirable factors.
Alibaba's momentum has been built more on buying and selling. But a robust corporate body is not just a physical sequence, but a chemical reaction that has to be coordinated. Alibaba's biggest challenge is organizational cohesion like how to bring the various factions and cultures together, and that's a tremendous learning curve.
Like the USG, despite the external battles, it's always the inside of the organization, not the outside, that determines victory or defeat.
Alibaba, Tencent, Meituan and other giants are essentially building platforms, pursuing coverage, with volumes relying more on width than depth. If food and beverage SaaS is simply a light model, the result can only be buried by the breadth of local life, digging deep and relying on a deep supply chain system to build its own moat.
Food and beverage SaaS has a typical strong sticky and weak foundation attributes, which relies on the supply chain to solid foundation. The local life platform has been extensive enough, Meituan, Alibaba local life also began to do progression to the depth.
For the giant or self-managed platforms, service depth and local living competition has increased, and Alibaba local life and Meituan may already be plotting a change for the supply chain track.
A new round of acquisition is about to play out, there are not many opportunities left for the catering SaaS platform.
This is an article from WeChat official accounts Hulianwangjianghu (ID: VIPIT1), written by Liu Zhigang, translated by Chris Yuan.