Policy boots fall, can Meituan catch it?

Policy boots fall, can Meituan catch it?

The long-hanging boots of the food delivery industry finally landed.

On July 26, 2021, the State Administration of Market Supervision and other seven departments jointly issued the “Guiding Opinions on Implementing the Responsibilities of Online Catering Platforms and Effectively Protecting the Rights and Interests of Food Delivery Staff” (hereinafter referred to as the “Guiding Opinions”) to supervise the food delivery platforms and third-party partners Participate in social insurance for takeaway food delivery personnel, and support other food delivery personnel to participate in social insurance.

As soon as the “Guiding Opinions” was released, Meituan’s stock price responded quickly. By the close of the market on July 27, Meituan’s stock price had plummeted by 17.66%, which was “horrible”.

Policy boots fall, can Meituan catch it?

In fact, the response of the secondary market to the “Guiding Opinions” of the catering industry is so great, which is related to the recent successive introduction of China’s concept stock supervision policies.

Two days after Didi’s listing (June 30) , due to serious violations of laws and regulations regarding the collection and use of personal information in the “Didi Travel” App, it was announced by the Cyberspace Administration of China that it was removed from the shelves. So far, the number of related apps that Didi has been removed from the shelves has reached 25 .

Policy boots fall, can Meituan catch it?

The policy-level “strike” has also triggered turbulence in Didi’s share price-compared with the opening price, the share price has been cut in half.

Immediately afterwards, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the “double reduction” policy. It is clearly stipulated that existing subject training institutions are uniformly registered as non-profit institutions, and subject training institutions shall not be listed for financing, capitalized operation, and advertising are strictly prohibited.

Affected by this, the share prices of listed companies in the education sector suffered a cliff-like decline. In just four days, the market value of listed companies on the track evaporated more than 200 billion yuan.

So, excluding the panic factor in the secondary market, how much does the release of the regulatory opinions on takeaway riders have on the fundamentals of Meituan’s business?

1. The compliance cost of takeaway platforms has risen, and the market has already expected

Judging from the results of stock price feedback, the market seems to classify the nature of the three things Didi, the education industry, and food delivery into one category. But in fact, the policy impact in the food delivery sector is different from the previous two.

For example, it is different from the suddenness of Didi and the education industry: Didi only takes two days from the announcement of the investigation to the removal of the app; the education and training industry is the second. The expectation that “takeaway platforms may be regulated” has long been there.

Since the large-scale outbreak of the “takeaway rider” incident in September last year, both the policy side and the enterprise side have attached great importance to it. As far as the policy is concerned, documents related to the rights and interests of food delivery staff have been issued successively since the beginning of this year. Specifically:

  • On April 30, 2021, the Nanjing Municipal Human Resources and Social Security Bureau promulgated the “Guiding Opinions on Regulating the Labor Employment of Catering Online Delivery Workers under New Employment Forms (Trial) ” notice on the protection and management of the labor rights of “takeaway riders” Etc. to make provisions.
  • On July 22, 2021, the eight departments jointly issued the “Guiding Opinions on Safeguarding the Labor Security Rights and Interests of Workers in New Employment Forms” (hereinafter referred to as the “Opinions”) , which aims to protect the rights and interests of laborers in the new employment forms.

The release of this series of early strategies has given the market time to react and prepare.

The launch of the “Guiding Opinions on Implementing the Responsibilities of Online Catering Platforms and Effectively Protecting the Rights and Interests of Food Deliverymen” is nothing but “boots have finally landed.”

At the same time, the relevant documents of the food delivery industry tend to guide the direction, focusing on “listening to the opinions of platforms, riders, merchants, users, etc., encouraging the industry to improve the system, protecting the rights and interests of employees, and gradually improving industry standards.”

The “step-by-step” policy implementation method has given companies a certain buffer and preparation period, and theoretically will not shake the core development logic of the food delivery platform.

Of course, this is an expectation based on long-term growth, but it is undeniable that the short-term impact still exists-the increase in the cost of the food delivery business may bring uncertain risks.

2. What is the impact on the cost of Meituan by paying insurance to riders?

Next, we carefully interpret the policy, use the data to speak, and see how much impact the recent policy on the rights of riders will have on the cost side of Meituan?

In fact, although the new trend of “flexible employment” is prosperous, it has always been hovering in the “grey area”. For example, those with contracts are called labor relations, self-employed self-employed are called civil relations, and “flexible employment” does not have uniform regulations and guarantees.

The “Opinions” issued on July 22 put forward the concept of incomplete labor relations, and classified workers in new forms of employment such as riders, online ride-hailing drivers, truck drivers, and Internet marketers as such.

Based on this, as far as the takeaway is concerned, the market’s general interpretation is that regardless of whether it is a special delivery, a happy running or a crowdsourced rider, the platform must bear the bottom-line responsibility for professional injury protection.

As for the part of social security, the “Guiding Opinions” mentioned that all localities should open up the household registration restrictions for flexible employees to pay basic pension and medical insurance, so as to ensure that all the insurance should be covered. Enterprises should guide and support workers in new forms of employment who do not fully comply with the conditions for establishing labor relations, and participate in corresponding social insurance according to their own circumstances.

This part is more interpreted by the market as: companies have to purchase social insurance for riders on all platforms, which will cause a sharp increase in the cost side.

However, we believe that this document is not a final word, and it is more hope that the entire industry will gradually take responsibility .

my country divides the employment relationship of new forms of employment into three categories. According to the classification of special delivery, crowdsourcing, and happy running riders in the industry, most of the delivery model belongs to the second type of labor relationship. In the opinion, the social security attitude for this group of people is “guide and support”, and there is no compulsion. In fact, some of these franchisee riders have already paid social security.

Lepao and crowdsourced riders are classified into the second or third type of labor relationship (that is, those that do not fully comply with the labor relationship situation but the enterprise manages the labor of the employees, and the individuals who rely on the platform to independently carry out business activities and engage in freelance work) . For this part of riders, there is still room for specific definitions.

More importantly, the “Guiding Opinions” are more about guiding companies to pay occupational injury insurance for the second and third categories. It is expected that pilot projects and large-scale rollouts will be required. As for the special delivery part, the discussion on the insurance system part should continue, and there is no conclusion yet.

So, how much pressure will the occupational injury insurance payment of riders on all platforms put on the cost side of Meituan?

According to data from the Trustdata mobile big data monitoring platform, the activity of dedicated riders during peak hours is about twice that of crowdsourced riders. According to China Securities Investment, there are currently more than 1 million daily active riders in Meituan, of which dedicated riders account for approximately Is 40%. Therefore, we roughly assume that 40% of Meituan’s riders contributed about 70% of the order.

Policy boots fall, can Meituan catch it?

Based on the performance data of Meituan in 2020, after paying occupational injury insurance, the cost of a single takeaway increased to 0.029 yuan; the gross profit of a single takeaway decreased by 5.3%; and the net operating profit decreased by 18.6%.

Policy boots fall, can Meituan catch it?

Although the 18.6% reduction in operating net profit is not low, compared to the 40% to 60% reduction in profit on the Internet, we believe that this social responsibility will not be a “fatal blow” to Meituan.

3. “Algorithm” is targeted, how to calculate the loss

The more stringent stipulation in the “Guiding Opinions” is that takeaway platforms must not use the “strictest algorithm” as an assessment requirement and require “algorithm to be selected.”

It can be seen that under the strict algorithm recommendation, the deduction and deduction caused by overtime and the weird long-distance dispatch and other public opinions have been criticized, which has given birth to this regulation.

To meet the policy requirements, the platform needs to relax the delivery time limit and overtime penalty system for takeaways, and at the same time set the daily work limit for takeaways, increase holiday subsidies, etc., to protect the rights and interests of riders.

These measures will affect the delivery efficiency of food delivery to a certain extent.

Consumer demand for food delivery remains unchanged, and delivery efficiency declines, which means that the platform needs to increase the number of riders to meet demand, and the cost of riders will increase as a result.

Policy boots fall, can Meituan catch it?

In addition, the “scale” pace of platform rider costs may also be affected.

Since 2016, Meituan’s scale effect has brought rider costs as a percentage of revenue has been declining year by year. However, after the implementation of the policy, the efficiency of platform riders’ distribution will decrease, which may limit the scale of rider costs.

However, these are not the conditions faced by the Meituan family. The introduction of this policy is an external factor that has an impact on the industry as a whole, including food delivery platforms, restaurants, food delivery riders, and related third-party cooperation units.

Relatively speaking, under the same external conditions, due to the larger number of US organizations and the more obvious advantages of scale, its ability to absorb cost increases will be easier.

Of course, to promote the real implementation of the documents and promote the healthy development of the industry, it also requires the cooperation of all related parties to achieve this.

summary

The recent release of the “Guiding Opinions” for catering platforms is leading the catering takeaway industry to standardize.

In this process, it will inevitably bring certain growth risks to the entire industry, and will also bring cost growth risks to Meituan, slowing down the growth of Meituan’s performance.

However, from the outside and the outside, this cost growth risk is relatively controllable and expected for Meituan.

On the one hand, policy guidance is more hoping to guide the industry to give riders more opportunities to speak out and gradually meet their basic rights and interests, but there is no final conclusion; on the other hand, the gradual improvement of rider welfare can actually improve the industry. Enter the barriers to consolidate the moat of existing enterprises.

From this point of view, the current stock price fluctuations of Meituan seem to be more caused by market panic; as to the extent to which compliance will slow down the growth of Meituan’s business, it depends on the understanding and implementation of the policy on the entire platform.

This article is from the WeChat public account: outside and inside (ID: excel-ers) , authors: Zhou Xiao, Zhang Ranran, He Jinyi, editors: Fu Xiaoling, Mu Mu, Hu Jiawen

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/policy-boots-fall-can-meituan-catch-it/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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