Consumer Discretionary
2Q24 results to beat consensus forecasts driven by resilient catering demand and easing competition. Catering is the bright spot under the current weak consumption environment and Blue Lotus expects Meituan’s on-demand orders to increase 15.5% Y/Y in Q2 with average profit per order up 2% Y/Y, following successful marketing campaigns via Shen Qiang Shou and Pin Hao Fan. They also observed two catalysts that positively impacted the OPM of Meituan’s in-store business: 1) The competitive environment further eased as Douyin began to raise commission rates. 2) Integration of its “super membership” started to convert users from low margin food delivery into high margin in-store. Meituan is their top pick in the e-commerce / O2O sector. TP HK$160 (50% upside).
Edition: 191
- 26 July, 2024
China: eCommerce forecasts for 2024-2028
Highlights from RedTech’s 22-page report include: 1) Online sales growth will range from ~7-10% from 2024 through 2028, based on ~4-7% overall retail sales growth. 2) High penetration implies slower growth for apparel, while lower penetration suggests more opportunity in electronics / appliances and in groceries. 3) These product dynamics do not favour Alibaba, particularly with more competition. 4) Expects the fastest growth from PDD and even more so Douyin. 5) JD should see gains, but it has been overtaken by newcomers outside of its core electronics and appliances. 6) Alibaba has the most to lose and it will continue losing share.
Edition: 184
- 19 April, 2024
1Q24 eCommerce Consumer Survey
Consumer Discretionary
While consumers are more pessimistic in RedTech’s latest quarterly survey, last order trends and grocery preferences highlight continued disruption under the surface of eCommerce. Short video continues to make clear gains with Douyin leading the way, while CGB and local service are again advancing. The gains for short video are almost exclusively driven by Douyin, with Kuaishou making no progress in recent surveys. PDD and Meituan are also making gains in their corners of the eCommerce landscape while Alibaba, the biggest incumbent, continues its inexorable decline.
Edition: 179
- 09 February, 2024
eCommerce
RedTech’s 3Q23 merchant survey takes a closer look at longer-term growth prospects for Douyin, which is again the most promising destination for online advertising and eCommerce in China. RedTech also asked their merchants several more detailed questions about the strategies they are pursuing on Douyin, as well as how they see things changing and playing out on the big eCommerce incumbents. Douyin is expected to nearly double its share of merchant sales by 2026 to ~19% with Douyin Mall a key driver. While the response to date from Alibaba's Tmall and JD has been lacklustre, opinions on how they should respond are divergent.
Edition: 170
- 29 September, 2023
Pinduoduo (PDD US) & Dada Nexus (DADA US) US
Consumer Discretionary
Revenue growth has been the driver for both stocks, but they are facing tough top line growth comps in 2H23. For PDD, the slowing growth may not be temporary, as F&B delivery is likely to become a smaller part of the business with people out of quarantine, user saturation may be reaching its limit and merchants / consumers may be switching to JD.com’s offer. Felix Wang is also flipping DADA from long to short, as near-term catalysts are shifting. A critical part of his long pitch stemmed from support from short video disruptor, Douyin. However, Douyin surprisingly encountered major obstacles in local life services, including food delivery, in Q2. Competition for DADA is also heating up.
Edition: 166
- 04 August, 2023
Meituan manages the Douyin threat
Communications
Every time Douyin enters a new sector, the incumbents suffer - RedTech’s 2Q23 local services survey is more evidence of that trend but with a slight twist. After more than a year of making inroads in local services, Douyin is winning share but so is the top player, Meituan. The biggest loser is Alibaba. RedTech’s survey includes responses from 1,000 online consumers in tier 1-6 cities. The sample city tier weightings are 20%/20%/30%/30% for tiers 1/2/3/4-6.
Edition: 165
- 21 July, 2023
Consumer Discretionary
With its positioning in the low-end and lower tier geographies, PDD has more opportunities to expand in eCommerce than Alibaba and JD.com, and the lowest risk of having somebody encroach on its turf. Douyin and Kuaishou only have niche eCommerce operations and will not focus on the average guy in some rural township. Modest improvements in trust among China’s middle class suggest PDD can steal some growth from its upmarket rivals, but no one believes it will enjoy the kind of success in the mid- and upper-tiers of the market that it does now in low-tier markets, and with ~900m customers that will continue to find value in that for the foreseeable future, that’s just fine.
Edition: 161
- 26 May, 2023
Communications
The shares reacted positively to quarterly results, but Shifara Samsudeen has questions over the sudden increase in losses booked under unallocated items (c.RMB2.0bn in 2Q22 vs. RMB381m in 2Q21) as well as the company not disclosing the key operating matrices for core businesses. Going forward, Shifara also expects Meituan to face severe competition from Ele.me as the latter has formed a partnership with ByteDance’s Douyin to create a take-out mini-app on the video sharing platform. Shifara is also keen to emphasise the fact that the regulatory probe on Meituan is still far from over.
Edition: 143
- 02 September, 2022
Douyin eCommerce: From strength to strength
Against a background of widespread pessimism about the macro-environment for 2022/23, merchants in RedTech’s 2Q22 eCommerce survey highlighted Douyin, and to a lesser extent Pinduoduo and JD.com as winners, while Alibaba underperformed. Merchants liked Douyin’s eye-catching content, which delivers excellent performance on ad KPIs, resulting in rising sales and an even greater chunk of merchants’ ad spending. They also noted Douyin’s strong potential for sales in lower tier cities. Alibaba on the other hand has hit its peak, user growth is stalling, costs for merchants on the platform are high, and competitors in both the high and low end loom large.
Edition: 140
- 22 July, 2022
China: e-commerce grassroots surveys
Community group buying e-commerce competition landscape further optimised - JD.com shrinks, while Meituan Select, DuoDuo Grocery and Tao CaiCai’s market shares improve. Meituan Select and DuoDuo Grocery are clearly better positioned in terms of order volume, with a combined market share of c.80%. More details on traditional e-commerce business, live streaming e-commerce competition between Kuaishou and Douyin, and express industry dynamics are available in Horizon Insight's quarterly survey report.
Edition: 137
- 10 June, 2022
China E-commerce Q3 Local Surveys: Industry Competition Has Intensified
Horizon Insights' quarterly surveys pointed out that traditional e-commerce lost share due to increased competition.
Live-stream e-commerce continues to evolve. Douyin and Kuaishou have different business models, both have high GMV growth. More brands are establishing relationships with different hosts, using livestreaming as an online ”distribution channel” to gain sales volume. Kuaishou predominantly focused on influencer live-stream; this model has strong stickiness and high conversion. Horizon Insights believes Kuaishou's model will generate larger sales volume in the future.
In the community group buying space, top three players have emerged: PDD, Meituan & Alibaba.
Edition: 124
- 26 November, 2021