It has been more than a decade since Wang Xing quit school to found his own company, and the 36-year-old serial entrepreneur has had his share of failures. In 2005, Wang and his two friends copied Facebook and launched social networking site Xiaonei in China. But they were forced to sell it in less than a year due to financing problems (It was renamed
It was in 2010, when the undaunted Wang Xing launched group-buying site Meituan, a decision inspired by the online-discount site
Last year, Meituan sold $7.4 billion of deals and vouchers, almost tripling the amount from 2013. The rapidly increasing transaction volume gives the company a 60% share in China’s fiercely competitive group-discount sector, which has attracted deep-pocketed investors like search engine operator
The company’s rivals include Dazhong Dianping, a Yelp-like business that also sells vouchers. The Tencent-backed China Dianping Holdings is reportedly seeking $800 million from investors, in a deal that would value it at around $4 billion. Another competitor is 55tuan, a Beijing-based, group-discount site seeking to raise up to $69 million on the Nasdaq Stock Exchange.
Groupon chose to team up with Tencent to grab a slice of the growing market. But the company, which has run into quality and personnel problems in China, is now just a minor player.
Wang Xing is confident that Meituan will maintain its leading position. With enough cash sloshing around, he plans to expand the site’s offerings-including hotels, food deliveries and movie tickets- in more than 1,000 cities throughout China. This year Wang wants to increase revenues to more than 130 billion yuan, as Meituan’s 6,000-strong sales team works fervently to link more merchants to the site.
The goal, he says, is not a lofty one. Internet penetration in China’s lifestyle service sector, which includes restaurants, hotels, Spas, KTVs and movie theaters, still stands at less than 2%. That means there is plenty of room, especially in China's lower-tier cities, to bring those businesses online and connect them with the country’s 648 million Internet users.
The growing number of smartphone users will accelerate the process. More than 83% of China’s Internet users access the web through mobile devices, exceeding for the first time the number of people using computers to get online, according to the official China Internet Network Information Center. That helps Meituan to accumulate more than 200 million mobile users, and their purchases through mobile devices accounted for more than 90% of last year’s sales, the company says.
“Although we are growing really fast in the past few years, we are still a small player in this trillion dollar market,” Wang says.
Meituan currently works with about 900,000 merchants and charges them a commission fee of about 5%, lower than Groupon’s 40%, according to the firm. The company has an internal rating mechanism that cuts off business with merchants that consistently score low grades.
“Our gross profit margin is low,” he says. “But you get a bigger chunk of the market this way.”
The Tsinghua-educated Wang Xing launched Meituan with college friend Mu Rongjun, and his roommate Wang Huiwen joined later. Wang Huiwen was with Wang Xing in 2005, when they launched Xiaonei in a rented office near Tsinghua's campus. The team had about $50,000 in funding.
Wang Xing’s entrepreneurship started in 2003, when he quit a Ph.D. program in computer engineering at the University of Delaware and returned to China. In the two years before 2005, he had tried dozens of projects before focusing on Xiaonei.