Underpinning Meituan’s success is what the company calls “abundant labor supply.” The cost of paying workers for each food order is about $1, or 20 percent of the expense incurred by delivery services in the U.S. An average order takes about 35 minutes, versus more than an hour in America.
For that, China’s urban consumers can thank the army of rural migrants who have crowded into cities in search of work. A deep pool of more than 280 million such workers exists to service the needs of middle-class city dwellers, enabling fast e-commerce and offline-to-online businesses.
But don’t take them for granted. Soon, there may be no cheap labor left in China’s large cities.
To fight pollution and traffic jams, mega-cities have started to restrict and even kick out migrant workers. Beijing plans to cap its population at 23 million in 2020, only 1.3 million more than its current size. Meanwhile, Shanghai has a target of 25 million by 2035, leaving room for only 800,000 newcomers. Meituan, which is battling Alibaba Group Holding Ltd. for food delivery customers, alone deploys more than half a million of delivery riders daily, over half of whom are based in the four tier-1 cities of Shanghai, Beijing, Shenzhen and Guangzhou.
As the author above states it can be pretty cozy to live in China’s major cities. The quality of restaurant food is excellent and deliveries, which are essentially free, means you do not have to wait in line. However, this situation is predicated on cheap labour and even in China that is an exhaustible resource.Click HERE to subscribe to Fuller Treacy Money Back to top