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(Bloomberg) -- Megvii Technology Ltd.’s revenue growth dissipated in the second half of 2019 after it joined Huawei Technologies Co. on a U.S. trade blacklist, underscoring the extent to which White House sanctions are hurting China’s technology leaders.The company backed by Alibaba Group Holding Ltd. grew revenue a mere 2.7% in 2019’s second half after more than tripling sales in the first six months of the year, according to unaudited numbers for investors seen by Bloomberg. On a full-year basis, Megvii fell short of its target for 2.9 billion yuan ($409 million) in sales by almost 28%, a person familiar with the matter said, asking not to be identified discussing internal targets.Megvii and its biggest competitor, SenseTime Group Ltd., had been among China’s fastest-growing startups but are now under scrutiny after the Trump administration blacklisted them over alleged involvement in human rights violations against Muslim minorities in China. The surprise action in October encompassed several leading players in the field of artificial intelligence, a key area of contention between the world’s two largest economies.Megvii suspended certain operations while it determined which parts of the business may violate the blacklist, which prohibited the export of American technology, and that delayed some orders or shipments in the second half, another person said. To re-energize the business, the AI giant is now developing new revenue streams, including temperature detection solutions deployed to help China curb Covid-19 this year.U.S. sanctions helped tank Megvii’s attempt to go public, a $1 billion deal regarded as the unofficial coming-out party for China’s burgeoning AI sector. Megvii, backed also by Alipay-operator Ant Financial, ICBC Asset Management and Lenovo Group Ltd., this year allowed its application for a Hong Kong IPO to lapse, throwing its future plans into question. Megvii representatives declined to comment.Read more: U.S. Blacklisting Undermines Megvii IPO, China’s AI Ambition China’s advances in AI have unnerved Washington because both countries are vying for leadership in a technology at the heart of everything from autonomous driving and robot waiters to facial recognition. Chinese names like Megvii and SenseTime are joined by established players including Huawei, Tencent Holdings Ltd. and Didi Chuxing in a race with the likes of Google and Microsoft Corp. to develop systems fundamental to future modern economies.The company, last valued at about $4 billion according to people familiar with the matter, generates most of its revenue from products that combine software and sensors to help government agencies and other clients enhance public safety and optimize traffic management. Megvii disclosed in its August IPO documents that sales from that business, which it labeled “city IoT solutions,” jumped 270% to 694.8 million yuan in 2019’s first six months. It said in its prospectus that it served 112 cities in China, 38% of the country’s total, as of June.It also sells face-scanning systems to companies from iPhone-maker Foxconn Technology Group to Lenovo and Ant Financial, the payments affiliate that supports Alibaba’s e-commerce business. The company generated 207.2 million yuan from the segment it dubs “personal IoT solutions,” or 22% of its revenue. Its third major business line, solutions for logistics that deploy AI-empowered robots and sensors, made up some 5% of revenue.Megvii lost 3.4 billion yuan in 2018, partly due to changes in the value of preferred shares, according to its prospectus. It listed 1.4 billion yuan in cash, equivalents and bank balances at the end of June, while it used nearly half of that for operations in the first six months of the year. Its term deposits, which refers to short-term bank deposits with maturities of three to twelve months, stood at 3.3 billion yuan as of June, according to the IPO document.(Updates with ICBC as an investor in the fifth paragraph. A previous version was corrected to remove China Mobile as an investor.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Chinese artificial-intelligence giant Megvii Technology Ltd. is facing additional queries from the Hong Kong bourse ahead of its planned initial public offering, people familiar with the matter said.Some questions relate to public complaints about whether the company adequately disclosed risks related to U.S. sanctions, the people said, asking not to be identified because the information is private. Megvii, which met Hong Kong Exchanges & Clearing Ltd.’s listing committee Thursday, will need to address the concerns before it receives formal clearance to go ahead with the share sale, the people said.A recent online campaign has been encouraging people to send complaints to the listing committee and HKEX Chief Executive Officer Charles Li, lobbying the exchange not to approve Megvii’s listing application. A letter circulated online said Megvii breached the listing rules by failing to make adequate disclosures of sanction risks.Megvii filed its IPO documents in August. The exchange’s queries aren’t necessarily an indication it will block the listing, and in some previous cases it has allowed a deal to go ahead after receiving a company’s explanations. A representative for Megvii declined to comment.The IPO could be the unofficial debut on global stage for China’s artificial intelligence industry. The AI startup is among several Chinese companies that the Trump administration blacklisted over alleged involvement in human rights violations against Muslim minorities in China.Megvii has said it “strongly objects” to the blacklisting and that the company complies with all regulations in the markets in which it operates.Any deal will add to the $34.3 billion raised in Hong Kong IPOs this year, according to data compiled by Bloomberg. The startup counts Alibaba Group Holding Ltd. and its financial affiliate Ant Financial and Lenovo Group Ltd. as strategic investors.Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. are the joint sponsors of the deal, according to a preliminary prospectus.(Corrects story from November to remove reference to China Mobile as an investor in the penultimate paragraph. A previous version of this story corrected the spelling of Megvii’s name in the first deck headline.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Megvii Technology Ltd. for the first time revealed the stunning growth fueled by a nation’s obsession with security.The Alibaba Group Holding Ltd.-backed startup tripled revenue to 949 million yuan ($133 million) in the first half. It generated more than 73% of those sales from AI services for major clients like government agencies, hospitals and real estate developers, the company said in a filing to the Hong Kong Stock Exchange.Seven-year-old Megvii is said to be angling to raise as much as $1 billion in its initial public offering, becoming the first of China’s fast-rising AI stars to debut and beating Sensetime Group Ltd. to the punch. Its share sale however will run up against a host of uncertainties from violent pro-democracy protests that’ve gripped Hong Kong to the Trump administration’s increasingly aggressive campaign to contain China’s tech champions.Megvii is moving forward even as other companies pump the brakes on their Hong Kong listing ambitions, wary of the turmoil. Its fundraising will further Beijing’s effort to lead the sector by 2030. That’s in turn prompting the Trump administration to sound the alarm about investment into Chinese technology.Megvii generates the bulk of its revenue from products that combine software and sensors to help government agencies and other clients enhance public safety and optimize traffic management. Sales from that business, which it labeled “city IoT solutions,” jumped 270% to 694.8 million yuan in 2019’s first six months. Megvii said it served 112 cities in China, 38% of the country’s total, as of June. It posted 5.2 billion yuan in losses for the first half, while adjusted profit reached 32.7 million yuan.‘IPOs‘ have been pretty disappointing in the past few months, but since AI is a hot category at the moment it could gain more traction,” said Mark Tanner, founder of Shanghai-based research and marketing company China Skinny.Read more: China AI Startup Files for Hong Kong IPO Despite ProtestsThe filing kicked off the formal process for an IPO, though it could be months before Megvii’s actual debut. The offering faces particular challenges. Washington has upped its rhetoric about inspection of investment into Chinese technology, which may erode the interest of U.S. money managers in the country’s AI startups.In a list of risk factors, Megvii warned of possible economic and trade restrictions similar to curbs imposed on Huawei Technologies Co. Should that happen, it would prevent the company from procuring technology, and impair its ability to develop solutions. The company stressed that it’s made sure it’s compliant with relevant restrictions, while making contingency plans to minimize the negative impact of potential curbs.Read more: Trump Aides Say He Has Power to Force Companies From China (2)Megvii also warned that sanctions on sales of American technology to Huawei may roil industries from consumer electronics to telecommunications. “Prolonged restrictions against Huawei could cause a turmoil to all such industries, which may in turn materially and adversely affect our business,” it said.Megvii also sells face-scanning systems to companies from iPhone-maker Foxconn Technology Group to Lenovo Group Ltd. and Ant Financial, the payments affiliate that supports Alibaba’s e-commerce business. The company generated 207.2 million yuan from the segment it dubs “personal IoT solutions,” or 21.8% of its revenue. Its third major business line, solutions for logistics that deploy AI-empowered robots and sensors, made up some 5% of revenue.Megvii counts Alibaba and its financial affiliate Ant Financial and Lenovo Group Ltd. as strategic investors. Alibaba indirectly held 14.3% of its shares, while Ant Financial indirectly held 15.1%.Read the IPO filing here.(Corrects story from August to remove reference to China Mobile as an investor in final paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Jack Ma Foundation announced today it has officially launched the second edition of the "Africa’s Business Heroes" (ABH) prize competition with applications now open to African entrepreneurs from all 54 African countries, as well as every sector, age group, and gender. Applications will also now be available in both French and English.
AI companies have immense potential to aid in surveillance and antidote search amid the coronavirus outbreak. Here are three stocks to keep a close watch on
(Bloomberg) -- Another activist investor has bought a stake in SoftBank Group Corp., betting the recent stock plunge makes it a bargain that’s too good to ignore.Asset Value Investors Ltd., a U.K. money manager known for its activist campaigns at smaller Japanese firms, has invested about 5 billion yen ($46.6 million) in Masayoshi Son’s company, Chief Executive Officer Joe Bauernfreund said. That comes after Elliott Management Corp. took a large position and called on SoftBank to buy back shares.SoftBank was sucked into the coronavirus sell-off, losing more than half its value from a high in mid-February before paring some of the decline. The reversal came as founder Son decided to do what investors had been urging for years -- sell holdings to fund shareholder returns and pay down debt.“It’s very, very cheap,” Bauernfreund said in an interview. “It trades at a massive discount to the value of its assets. And on top of that, the planned asset disposal and buyback will be massively accretive to the net asset value.”AVI has become known in the Japanese investment community for its activist campaigns at companies including Tokyo Broadcasting System Holdings Inc. and Teikoku Sen-I Co., both of which it has urged to increase shareholder returns.SoftBank is too big for AVI to make shareholder proposals at annual general meetings, Bauernfreund said. AVI started buying SoftBank shares in February and continued to build its position throughout March, he said.Still, AVI has prescriptions for SoftBank, and they sound very similar to Elliott’s suggestions. It has written to SoftBank directors to express its views, Bauernfreund said.Buybacks, Governance“They should be selling down some of their investment portfolio, using the money to buy back shares,” he said. “They should be improving their corporate governance by improving the board structure, and by having more transparency in their investment portfolio, in particular in the Vision Fund.”SoftBank declined to comment.SoftBank currently trades at about a 70% discount to its net asset value, Bauernfreund said. The company has a market value of about $73 billion, even though it has equity holdings worth more than $208 billion, including a huge stake in Alibaba Group Holding Ltd., according to data compiled by Bloomberg.“The discount won’t stay at the current level,” Bauernfreund said. “It’s mathematically impossible, really, for the discount to stay at these wide levels.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Follow Bloomberg on LINE messenger for all the business news and analysis you need.Singapore’s government urged residents to consider ordering their groceries online rather than going to the shops. That just became tougher.Alibaba Group Holding Ltd.’s Lazada Group SA is temporarily suspending new grocery orders in Singapore after strict physical distancing measures and rising coronavirus cases triggered a surge in orders.RedMart, Lazada’s online grocer unit, will not take new orders until it resumes on April 4, the company said in a notice to customers on Thursday. RedMart will use this time to make changes to the range of products available and prioritize daily essentials such as rice, flour and eggs, it said, adding that it will fulfill existing orders.Lazada’s RedMart and other grocery delivery services such as Amazon.com Inc.’s Prime Now have been kept busy amid harrowing economic times in Singapore. These companies have been trying to cope with surging demand as about 5.7 million people in the densely populated island increasingly turn to online grocery shopping, part of Singapore’s S$7.5 billion ($5.2 billion) grocery market estimated by Euromonitor.“These companies now have to deal with a new situation where demand for essential items outpaces operational capacities,” said Yinglan Tan, founding managing partner of Insignia Ventures. “Players that manage shorter supply chain may be more equipped to handle the stress.”While the number of coronavirus cases has mounted to 1,000, the city-state has refrained from ordering a full lockdown of daily life and business, preferring to implement an ever-more-stringent set of rules and guidelines to restrain activity and curb the spread. Among the new cases was an employee working at a branch of a local supermarket chain NTUC FairPrice.And while lockdowns in neighboring Malaysia may have disrupted food supply into Singapore, government officials have assured the nation it won’t run out of food or basic necessities.NTUC FairPrice on March 27 imposed online purchase limits on items such as rice, instant noodles, vegetables and cooking oil.Read more: Singapore Grocery Delivery Demand Surges Amid Virus Curbs: ChartSingapore’s government advised the public on its official WhatsApp channel to order groceries online instead of venturing out, while also pushing more companies to make staff work from home. To help address a shortage of delivery slots, taxi and ride-hailing drivers are now allowed to make food and grocery deliveries.Separately, the city-state said Thursday it’ll support 90% of the cost for local retailers going online in order to help them diversify their sales channels beyond traditional brick-and-mortar.(Adds FairPrice online purchase measures in 8th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- SoftBank Group Corp. needs to cut and run on its entire WeWork investment, not just the shares. Covid-19 and the economics of a prolonged crisis necessitate strict pragmatism.As recently as two weeks ago, it seemed that a move to renegotiate the Japanese conglomerate’s $3 billion purchase of equity in The We Co. from existing shareholders, including founder Adam Neumann, was savvy and cunning. Today, that looks ill-advised, which is why it decided not to consummate the tender offer, Bloomberg News reported, citing a statement from a committee advising WeWork's board.After a $1.5 billion lifeline late last year, the next step in SoftBank’s bailout of the office rental company — predicated on completing the share purchase — was to be a further $5 billion in debt financing. Masayoshi Son, opportunistic venture capitalist that he is, should walk away from that deal, too.With WeWork bonds trading at around 36 cents on the dollar and the global economy in upheaval over the coronavirus pandemic, there’s no price in the world that could have made SoftBank’s double-down on the shares look smart. Pouring $5 billion into WeWork debt would be a poor use of its funds.SoftBank has bigger problems at the moment.Last week, Moody’s Corp. cut its debt by two notches, citing SoftBank’s planned offload of assets that amounts to little more than a fire sale. Son wants to monetize them through sales or loans to repurchase the company’s own shares and pay down debt. SoftBank fired back at Moody’s. It claimed that the downgrade would “cause substantial misunderstanding,” and then asked Moody’s to remove its rating altogether. That temper tantrum merely proved the ratings provider correct.Despite a broad portfolio that includes its stake in the Vision Fund, its domestic telecommunications operator, a U.S. telco, and a semiconductor company, the only asset that SoftBank has of significant value is its 25% stake in Alibaba Group Holding Ltd. Those shares aren’t very liquid and could take months to sell. Son doesn’t have time. Many Alibaba investors believe that the e-commerce company has gotten through the worst of the Covid-19 crisis and will benefit from a return to normalcy in China.What they aren’t reckoning on is an unavoidable global slowdown that could have a profound impact on the spending power of Chinese consumers, who drive revenue. We’re in the eye of the storm now, where things seem calm but soon won’t be. Selling a massive chunk of Alibaba shares at any price is going to become more difficult.Bad as things might get for an internet giant, they’re going to be a whole lot worse for a shared office company. Co-working spaces are anathema to the wave of social distancing that’s sweeping the world. Many of WeWork’s clients are freelancers or startups and likely to be hardest hit in any downturn. The company is trying to soften the blow by seeking rent reductions from its own landlords, who are showing reluctance. Walking away from its pending $5 billion investment in WeWork debt is not only an honest verdict on that outlook, it also means $5 billion of shares in Alibaba that SoftBank doesn’t have to sell to cover its funding needs. Ask any investor in the world where they’d prefer to put a chunk of money right now, and I am sure WeWork bonds won’t be their choice.Masayoshi Son isn’t the type to follow what others might do, but perhaps this time he should.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alibaba Group Holding (BABA) reportedly plans to invest in a courier firm, Yunda, in a bid to expand its presence in the growing express delivery industry.
(Bloomberg) -- China’s consumers are shopping online again. But their purchases signal they plan to stay indoors for the foreseeable future, dashing hopes for a spending recovery as the nation contemplates its post-virus world.Lunch boxes saw 120 times more searches in the last 30 days as the virus pushes people to prepare their own food even after returning to the office, according to March 26 data from Index.1688, which collects information from Alibaba Group Holding Ltd.’s shopping sites.Portable tableware, foldable spoons and work clothing also surged in popularity, while items typically given as gifts or used for travel and outdoor activities haven’t shown signs of recovery.Yoga mats and hula hoops for home exercise also climbed in demand, a bad sign for gyms waiting for the return of patrons.The data undermines predictions of a V-shaped recovery in the world’s biggest consumer market that has seen more than 80,000 infections and 3,000 deaths from Covid-19. While big operators like Starbucks Corp. and Yum China Holding Inc. have been reopening outlets, they face a public that’s preferring to stay home after work and continue to social distance, even though official data indicates China’s number of new infections fallen to zero.China’s experience may prove an important indicator for how the rest of the world recovers. Even after outbreaks are contained, lingering fear is likely to change consumer behavior for longer than expected.“Consumers are still cautious about going out and many of those venues are not yet back to full working mode,” said Jason Yu, Shanghai-based general manager of Kantar Worldpanel. Items for a return to work, such as instant coffee, hair and skin-care products, are recovering ahead of the market, he said.Other products to post a spike in searches include contact-less thermometers, suits and stationery, according to Index.1688.A report by JD.com Inc.’s research center also shows work-related consumption speeding ahead of other categories. China’s second-largest e-commerce company sold five times more lunch boxes in late February than a month earlier, while powerbanks, office equipment and stationery are also high up the list.“Consumption of staples is clearly outshining discretionary or luxury goods in what is still very much a lukewarm and uneven recovery,” Ned Salter, head of global research at Fidelity International, said in a statement. “We need to see more consumer confidence to sustain the improvement and that will depend on how well China deals now with imported cases to contain the virus fully.”A Coronavirus Vaccine in 18 Months? Experts Urge Reality CheckRetailers in China have been cautious in their forecasts since the virus emerged.Yum China Holding Inc., which operates KFC and Pizza Hut in the country, has said the second quarter will be “challenging” and patience is needed. Anta Sports Products Ltd., the country’s biggest sportswear maker, forecasts the first six months of 2020 will be “tough throughout”.About 60% of listed restaurant operators in China are at risk of running out of cash within six months, according to data compiled by Bloomberg and company reports.With the food and beverage industry reeling, local governments are trying to boost consumption by urging officials to dine out in restaurants and shop in malls. Vouchers are being given out by cities including Hangzhou and Nanjing as well as shopping platforms Meituan Dianping and Suning.com Co. to spur spending.While China’s new infection numbers have plunged, the pandemic is widening globally with cases worldwide now topping 786,000 and more than 37,800 dead. Chinese factories are experiencing a second shockwave as western clients cancel orders en masse.Luiz Chen, a 31-year-old auditor in Guangzhou, recently bought moisturizing masks and a new dress before returning to the office but said she won’t be treating herself to anything expensive after her employer froze bonuses for the past two months.“I’m scared to get a salary cut or even lose the job,” said Chen. “Economic crisis seems not far away. How can I have the good mood to buy buy buy?”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alibaba Group Holding Ltd plans to buy at least 10% of Yunda Holding Co Ltd, marking the e-commerce giant's fifth investment in a large courier, two people with knowledge of the matter told Reuters. Alibaba is looking to buy the stake from Yunda's controlling shareholders - founding couple Nie Tengyun and Chen Liying - who own 52.19% of Yunda through their wholly owned firm Shanghai LuoJieSi Investment Management, said one of the people. The other person said China's dominant e-commerce firm could go beyond 10% and buy up to 15% of Shenzhen-listed Yunda.
(Bloomberg) -- Meituan Dianping surged as much as 10% after the internet services giant said its food delivery business began to recover in March, when shuttered restaurants re-opened and much of China returned to work.Meituan, backed by Tencent Holdings Ltd., told analysts on a conference call Monday that demand for food delivery picked up this month, putting it on track for a longer-term recovery after Covid-19 froze a swath of the world’s second largest economy. But it also projected an operating loss and revenue decline this quarter, and warned that the full extent of fallout from the pandemic -- particularly on its travel and ride-sharing businesses -- remained uncertain in 2020. Its stock was up roughly 7% in early trade after Daiwa lifted its price target and said Meituan should return to growth in the second half.Meituan joined sector bellwethers from Sony Corp. to Apple Inc. and Twitter Inc. in emphasizing the difficulty of parsing an unprecedented event and its impact on their business. The Chinese company is one of the most exposed of the country’s major tech corporations to the spread of Covid-19. The company’s outlook is further clouded by China’s worsening economy, which may contract this quarter for the first time since 1989, denting consumer spending.“Although we have seen gradual recovery from March especially for food delivery business, the active merchants of our in-store service category remain at a very low level as of late March,” Chief Financial Officer Chen Shaohui said on the call. “We expect consumers will need more time to build their consumption confidence for local consumption especially those discretionary consumption scenarios in our in-store business.”What Bloomberg Intelligence SaysDespite mild improvements in Meituan’s local services in late March as the virus outbreak subsided in China, the timing of a full operational recovery remains highly uncertain. Its food-delivery business may stay slow, with many restaurants still closed and consumers wary of interactions with delivery personnel. Its in-store, hotel and travel businesses may take even longer to recover, as users stayed home. Strong 42% sales gains and 117% gross-profit expansion in 4Q suggest Meituan’s longer-term growth drivers are intact. The company plans to maintain strategic investments in B2B food distribution and restaurant management systems.\- Vey-Sern Ling and Tiffany Tam, analystsClick here for the research.Read more: Chinese Abandon Food Delivery Fearing Drivers Will Spread VirusThe coronavirus dealt an as-yet unquantifiable blow to a company that, before the outbreak erupted in January, was on track to take its place among the country’s most influential technology corporations. While Meituan’s stock has taken a pounding like every other Chinese internet firm, a 2019 rally secured its position as China’s largest publicly traded internet firm after Alibaba and Tencent.“Market expectations were very low as investors have seen the damage COVID-19 has inflicted on offline service providers,” Nomura analyst Shi Jialong wrote.Meituan on Monday reported a better-than-expected 42% jump in revenue to 28.2 billion yuan ($4 billion) in the three months ended December, compared with the 26.5 billion-yuan average of analysts’ estimates. It booked a profit for the quarter of almost 1.5 billion yuan, versus expectations for a loss.The company still harbors ambitions well beyond its current core business. Meituan had been diversifying from takeout, investing in other online services including travel, competing directly against Alibaba Group Holding Ltd. But others are elbowing their way into Meituan’s turf. Ride-hailing giant Didi recently launched a delivery service similar to Uber Eats across major Chinese cities, while Alibaba-backed Alipay is also morphing into an all-in-one online services platform that allows everything from restaurant booking to car-hailing.Executives on Monday stressed the company will keep investing in new initiatives from bike-sharing to online groceries, an e-commerce segment that accelerated sharply after the pandemic forced millions to work -- and cook -- from home. Meituan said it’s setting up the logistics to support that business while exploring ways to roll out the business to more Chinese cities.“The pandemic has already caused severe disruptions to the daily operations of our merchants, including restaurants, local services merchants and hotels, which in turn resulted in downward pressure on our own operations for the first quarter of 2020,” Meituan said in its filing. “Due to the high uncertainty of the evolving situation, we are unable to fully ascertain the expected impact on full year 2020 at this stage.”Read more: Virus Outbreak Exposes $46 Billion Rift in China’s Tech IndustryFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The various levels of lockdown and quarantine across China haven’t proven a golden opportunity for the biggest food delivery and bookings company, a warning for on-demand service providers elsewhere as more of the world stays at home to avoid the coronavirus.Meituan Dianping says it will post a loss for the first quarter ending Tuesday following a decline in revenue. The Beijing-based company’s business consists of three main divisions — food delivery, restaurant and travel bookings, and other services such as car hailing, bike rental and groceries.Bookings, which account for around 23% of revenue, took the biggest hit. That was predictable. Consumers aren’t keen to take a seat at a restaurant or a night at a hotel amid a deadly disease outbreak, and widespread travel curbs meant moving around China wasn’t an option.Food was more of a surprise. Two months ago amid the Lunar New Year break, I theorized that such deliveries — at 56% of Meituan’s revenue — might bounce back quickly as customers opted to stay in rather than eat out. I was wrong.Thousands of vendors on Meituan’s platform were forced to close either voluntarily or by mandate, and thus couldn’t provide meals. Those who did stay open were often met with fear and complications on the demand side.Many customers had concerns not only over the safety of meals coming from restaurants, but the drivers who delivered them. Those still willing to order online were met with layers of challenges as local governments, neighborhoods and buildings exercised strict controls over who could come and go. There was no supply bottleneck for drivers; Meituan noted plenty of capacity on hand.Three weeks ago, Alibaba Group Holding Ltd. said that its own courier and food delivery services, Cainiao and ele.me, were back to full staffing. But the food business was still down because many restaurants remained closed.An upside has been grocery delivery. Meituan’s two services, self-operated and marketplace, have seen strong growth during the crisis, a trend that echoes what Alibaba experienced with its Freshippo service. In many cities, consumers either cannot or prefer not to step out to shop. They’re apparently less afraid of groceries brought to their door than fresh-cooked meals.Even as China returns to a certain level of normalcy, food delivery may struggle for another few months. Most companies are maintaining degrees of isolation, such as working from home or rotating shifts. Taking lunches to places of business is normally an important part of the consumption scenario. As investors start to ponder the outlook for Delivery Hero SE, Just Eat Takeaway, and GrubHub Inc., they’d do well to look at how their China peers have fared during the virus battle. Collectively, these companies get most of their revenue from Western markets that are now imposing lockdowns to battle the pandemic. They’re implementing contact-free and non-cash deliveries to make customers feel safe.That may not be enough. While it’s true that people still have to eat, China’s experience shows that this doesn’t mean consumers will necessarily order delivery or that restaurants can supply them.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Covid-19 test kits donated by the Jack Ma Foundation and the Alibaba Foundation arrived in Vientiane at Wattay International Airport on March 28.
As companies around the country and world suffer from the effects of the deadly novel coronavirus, some businesses are stepping up to help alleviate some of the economic impact. Here’s a list of some of their efforts so far. We’ll continue to update this list as more companies contribute to the relief effort.