Meituan Youxuan is shutting down operations in multiple regions while retaining business in areas such as Guangdong and Hangzhou, according to multiple independent sources. The decision, finalized on June 23, had been under internal discussion since last week.
Many members of the Youxuan team are now shifting to support a newly launched offline retail initiative under Xiaoxiang Supermarket, internally referred to as the “N” project. This project, led by Gao Yulong, focuses on running physical storefronts. Others affected by the closure are seeking new opportunities within the company.
Before the quick commerce boom took off, Meituan’s top priority had been cost-cutting across new business lines, with Youxuan at the center of these efforts. “No matter whether we continued or shut it down, there was always going to be pressure,” one Meituan employee told 36Kr.
Over the past year, Youxuan’s trajectory has focused on changes in organizational structure and merchandising strategy.
On the organizational side, the company adopted a more centralized model. In September 2024, Meituan restructured its internal setup, consolidating 17 provincial divisions into nine. The move was aimed at reducing costs and improving efficiency, according to a person familiar with the matter. In addition, operations and merchant category management functions were merged under Li Pengju. The restructuring was intended to link strategic decisions more closely to real-time business data, consistent with how Meituan typically manages its ventures.
This heightened focus on category management also drove changes in Youxuan’s merchandising strategy. Under an ongoing directive to limit losses in new business lines throughout 2024, Youxuan’s total gross merchandise value declined from over RMB 100 billion (USD 14 billion) to RMB 70–80 billion (USD 9.8–11.2 billion). The top internal goal became improving profit margins, with product assortment emerging as the primary lever.
In this context, the platform significantly reduced its reliance on loss-leading items, white-label goods, and subsidies. For instance, Meituan eliminated most white-label SKUs and mandated profit margin increases across categories. “Eggs are one of the most classic loss leaders in retail, online or offline,” said a person close to Youxuan. “But during the most aggressive margin-chasing period, even eggs were expected to turn a profit. That was clearly misguided.”
This broad focus on profitability inevitably reduced sales volume. Earlier in the year, Youxuan also ended most of its consumer subsidies.
By around August 2024, the Youxuan team had stopped closely monitoring its main competitor, Duoduo Maicai. “We used to obsessively track market share. In our stronghold regions, we could capture more than half the market. In weaker areas, we’d still secure 10–20%,” one source said. “Now, it’s just not a topic in meetings anymore.”
In short, a prolonged period of losses and a persistently unclear path to a sustainable model placed Youxuan in a bind. So why has Duoduo Maicai managed to turn a profit?
One Youxuan employee explained to 36Kr, “Duoduo operates as a platform. It generates revenue from merchant commissions and marketing fees, among other streams.” That model aligns with Pinduoduo’s DNA as a platform company. For Meituan, which built its business on food delivery, Youxuan’s lower-tier city focus and low average order value were unfamiliar territory. “From the start, the positioning was different. Meituan took a more self-operated approach. Without constant subsidies and aggressive traffic acquisition, it’s tough to beat Duoduo on market share.”
The shutdown of Meituan Youxuan and the pivot toward offline retail through the Hema-like “N” project mark Meituan’s latest adjustment to its new business portfolio. “If this model is going to work, private-label development must be done right,” the same source said. One thing remains constant: product strength, and the supply chain that supports it, continues to be the core challenge.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Ren Cairu for 36Kr.