Richard Robinson, founding partner of venture capital firm nHack.(Photo: CGTN)

The impending listing of e-commerce firm Meituan Dianping comes amid rising market volatility – in the thick of broader trade tensions – and sell-offs of technology stocks.

Meituan, which is China’s equivalent of Groupon, merged with lifestyle services platform Dianping in 2015. It filed for an initial public offering in Hong Kong at the end of June. 

Essentially, you can order food, check for reviews for restaurants and bars, book a bike, hotels, movie tickets, all on this one mobile app. However, competition is also rife within each of these segments. 

But for, Richard Robinson, a technology entrepreneur who has been in China for two decades, it is exactly this reason why Meituan Dianping needs to raise funds from the public market to fend off competition in China. 

“When is the timing ever right? Can you really ever time the market? This is the second longest recession that we have ever seen historically and we’re probably due for a correction,” Robinson said.

“Other companies are also raising money, so you should raise the same time as other competitors are raising so you also are not caught out without a war chest but you should also try to raise before the market tanks,” he added.  

Liu Chunsheng, associate professor at the Central University of Finance and Economics, commends Meituan Dianping’s accumulation of advantages over the years, which are reflective of choices of the market. 

However, he is of the view that the company’s listing – at a high valuation – isn’t timely. 

Operating losses cut 

Liu said Meituan Dianping has to make a profit as soon as possible, having been in the Chinese market for 8 years now, as “it’s impossible for investors having to wait that long.” 

“If they can continue to focus on their core business and advantages, protect themselves, block their competitors or newcomers to their field, I think they can make a profit one day,” Liu said, however. 

“I think in the future Meituan Dianping should build some unique competitiveness. They have to input a lot of money in R&D, for AI, big data or even robots to deliver food to people because our labor cost is increasing.” 

The company’s food delivery segment accounted for 62 percent of overall revenue in 2017.

In its financial year ended Dec 31, 2017, Meituan Dianping’s revenue more than doubled to 33.9 billion yuan, from 13 billion the year before. This comes as gross transaction volume increased as its number of transacting users rose. 

Meanwhile, operating level losses have come down to 3.8 billion yuan from 6.3 billion previously.

In 2017, Meituan Dianping served 310 million annual transacting users (up from 259 million in 2016) and 4.4 million annual active merchants.

Robinson is less concerned about Meituan Dianping’s losses. 

“It’s a growth story right now, they need to reinvest back into R&D and marketing to be able to grab more share. They are already in thousands of cities but as disposable income and sentiments of those cities rise, they need to grab that,” he said.

Robinson contends there is a huge opportunity for Meituan Dianping to take its model and bring that into other markets – organically and through acquisitions – and become a global player in this space. 

Company to boost R&D 

Meituan Dianping has yet to announce its listing price, but media reports state it is looking to raise 4 billion US dollars. Already, its present valuation at 30 billion makes it the world’s fourth most valuable startup, according to CB Insights. 

According to its prospectus, Meituan Dianping plans to use 35 percent of its proceeds to upgrade technology and enhance research and development capabilities, 35 percent to develop new services and products, and 20 percent to selectively pursue acquisitions or investments. 

Bruno Lannes, a partner with consulting firm Bain & Company, said a lot of advertising can be built on this business as people are keen on reviews and that creates “stickiness.” 

“I think the whole digital economy is built around creating this closed feedback loop between the consumer and the provider of services. If you continue to do this well, you have a great model,” Lannes told CGTN. 

Already, China’s cashless society is giving the rest of the world a run for its money, with WeChat Pay (under Tencent Holdings) and Alipay (under Alibaba Group) dominating the mobile payment field. 

It will be interesting to see how these other “emerging” unicorns such as Meituan Dianping rise to the occasion on a global scale.