Local life has entered a period of fierce competition, but Douyin seems to be hesitant in its strategic positioning, and its business development direction has not yet been clarified. According to 36Kr, in August, Douyin Takeaway, which was originally part of Douyin's e-commerce instant retail business, announced internally that it would return to Douyin's local life business line. This is the second structural adjustment of Douyin's takeaway business within half a year. In early April of this year, Douyin Takeout experienced a "change of hands", transferring it from the local life business line to the e-commerce business line. Since the change of leadership last year, Douyin Local Life has undergone multiple rounds of structural and business focus adjustments. In March 2024, Douyin reorganized the departments originally divided by industry into three major regions: North, Central, and South, and a national chain brand department. In April, the food delivery business was assigned to the e-commerce sector, highlighting the strategic focus on the local market. In particular, by increasing the GMV share of national chain brands to 50%, increasing hotel and travel commissions, targeting leading brands, and reducing dependence on small stores, Pu Yanzi will achieve the sales target of 600 billion yuan set by her. However, the return of the food delivery business seems to be contrary to the previous strategy. Douyin's food delivery business has a limited scale and a long operation chain, which requires the coordination of multiple resources, resulting in high investment and unstable returns. This change may reflect Douyin's internal strategic entanglement. Data from the first quarter of 2024 showed that the local life sales of Douyin and Meituan both reached 100 billion, but Douyin did not narrow the gap with Meituan. Although the leaders of both sides tried to break this balance by adjusting the organizational structure and strengthening business collaboration, the market feedback was not obvious. With the return of Douyin food delivery to the local life sector, the business landscape has changed again, and the market may usher in a new round of reshuffle. It is worth noting that Pu Yanzi, head of ByteDance's local life business, has been on vacation for three weeks. Whether this change is a signal of a strategic turning point remains to be revealed, but it undoubtedly indicates that the old balance has been broken and a new competitive landscape is brewing. 01 The “hot” Douyin takeawayBefore Pu Yanzi took over as the head of Douyin's local life business at the end of 2023, the biggest dissatisfaction within Douyin with the local life business focused on consumer experience. According to Zouma Finance, "Zhang Lidong criticized him (Zhu Shiyu) for not providing a good consumer experience, so he did not do anything well, and ended up hurting his enemy by 1,000 while hurting himself by 800." Historically, Douyin Takeout began its early exploration in 2020 and started to take frequent actions in 2022. It successively cooperated with Ele.me to launch group purchase and delivery. At the same time, it cooperated with SF Express, Dada, and Flash Express to solve the problem of group purchase and delivery. However, in 2023, Douyin Takeout began to enter a bottleneck period. According to data from LatePost, Douyin Takeaway's GTV (total transaction volume after write-off) in January and February 2023 continued to fall to 50 million yuan, and a slight rebound in March was only 100 million yuan. From January to March 2023, Douyin Takeaway's average daily order volume remained at 10,000-20,000 orders. In May, driven by platform subsidies, the daily order volume rebounded to more than 100,000 orders, but it was still far from the GMV target of 100 billion yuan. In the end, Douyin's takeaway business lowered its annual GMV target from 100 billion to 5 billion. Objectively speaking, the high-frequency nature of the food delivery business requires the joint participation of merchants, customers, riders, and platforms in establishing a system. What is more, it requires long-term and high-value investment, which is not easy for a company like Douyin that pursues ROI. Image source: TikTok Specifically speaking of local life, Douyin Takeaway will eventually become the focus of local life experience. And judging from Pu Yanzi's actions after taking office, quickly getting rid of the burden of Douyin Takeaway can almost be considered as the first task after the adjustment of Douyin's local life organizational structure. The unloading of the burden seems to mean the beginning of the effort. Subsequently, local life continued to take actions, from adjusting the hotel and travel commission to the end of focusing on national chain brands, and the KPI standards have been refined. As the person in charge of Douyin's commercialization, Pu Yanzi, according to third-party descriptions, can not only mobilize the commercial traffic of Douyin, but also the commercial traffic resources of almost all traffic-based products such as Toutiao, Xigua Video, Dongchedi, Huoshan, and Fanqie Novels. This is one of the reasons why Pu Yanzi is confident in raising the performance target to 600 billion. From the perspective of organizational structure adjustment, Pu Yanzi also received follow-up from her competitor Meituan. Wang Xing also adjusted Meituan’s organizational structure in April, integrating in-store and home delivery, and established a core local business, which was led by Wang Puchong. This move was almost synchronized with the adjustment of Douyin. This also means that the two have almost the same ideas, that is, to use a larger scale and more business coordination to carry out frontal offense and defense. The second quarter has passed. Judging from the results, although there is no clear data to determine the winner or loser, from the perspective of the secondary market, Meituan’s stock price rose by 14.77% in the second quarter, but Douyin did not seem as bright as imagined. The hot potato of Douyin takeaway has returned to local life again, which undoubtedly increased the burden of local life indirectly. From another perspective, it may mean that Pu Yanzi’s series of attempts did not meet the ideal expectations. 02 Algorithms fail in local lifeFrom a business perspective, in-store dining, in-store comprehensive services, and hotel and travel services form the basic plate of Douyin's local life. However, judging from its performance in the past year, Douyin, which is known for its traffic algorithm, seems to have difficulty making further progress in many aspects. In the hotel and tourism sector, Douyin is facing the pressure of low prices and low write-off rates. According to the person in charge of Douyin live broadcast of a hotel, hotel and tourism businesses are flocking to Douyin's live broadcast room, and their requirements for live broadcast efficiency and effectiveness are increasing, and prices are also becoming increasingly inward-looking. This year, it is more difficult to sell goods on Douyin than last year, but the effect and traffic are slightly worse than last year. The algorithm for selling goods on Douyin has been adjusted, and now the average stay time in some hotels’ Douyin live broadcast rooms is less than one minute. The low-price strategy has a strong appeal to price-sensitive consumers. However, if it is allowed to develop, it is easy to cause a local or even pan-regional low-price war. From another perspective, Ctrip's sudden rise this year and its rising market value also mean that from the perspective of investors, Ctrip, which focuses on mid-to-high-end and cross-border services, has resisted the attack of Douyin. In terms of in-store dining and in-store comprehensive services, Douyin has not broken the supply and demand relationship based on its positioning model, and can only solve the problem of information matching within a certain range. TikTok, which is based on algorithm distribution, cannot change the supply side of the limited businesses within a radius of 3-5 kilometers, nor can it provide consumers with more abundant local choices. This means that the core advantage of Douyin's e-commerce model, which aims to improve information distribution efficiency and solve the problem of supply and demand allocation, will be greatly weakened if there is no imbalance in supply and demand in the local life field. The few areas of focus are more on national and regional chains. However, the leading chain stores are also full of entanglements. Based on the Douyin ecosystem, low prices are the best way to attract traffic, but the sustainability is poor and the product range is relatively narrow. The most obvious example is Starbucks. As a leading chain store, Douyin has a very limited driving effect on it. Secondly, Meituan has launched "Bao Tuan Tuan" and "Shen Qiang Shou" in a targeted manner. In addition, compared with chain brand merchants, non-standard commercial entities still account for a large proportion of local life, and the impact of mom-and-pop stores on the ecosystem is that it is difficult to shorten the industrial chain. The final result is that small and medium-sized merchants who need Douyin's online traffic to expand their customer base do not have enough costs to support content production, traffic distribution, and promotion. From public reports, it can also be seen that since Pu Yanzi took office, she seems to have adopted the policy of focusing on the big and letting go of the small. According to a report from LatePost, in 2024, Douyin set a higher sales target for life services while also seeking to achieve a break-even as soon as possible. People familiar with the matter revealed that advertising business will be the focus of Douyin's life services this year. Compared with mobilizing the sales team to increase sales and earn commissions, it may be easier to create profits by guiding merchants to advertise on the platform. In July, according to reports, Pu Yanzi directly stated internally that Douyin Fresh will increase the proportion of national chains, while small stores will not be the focus and need to develop their own content capabilities. 03 Going back to the old ways, big companies competingJudging from the results, the return of Douyin’s food delivery service has, to some extent, brought Douyin’s local life back into the same river, and this tangled state seems to reflect the reality of Douyin’s local life operations. From the perspective of development speed, high-speed growth has always been the characteristic of Douyin's local life. In 2023, the GMV of life services has reached about 310 billion yuan, and the GMV target of Douyin's local life in 2024 has been set at 600 billion yuan. But in addition to the growth, it can be seen that Douyin seems to still hope to increase revenue in a light, fast and flexible way. According to public information reports, Douyin's investment in local life is more about supporting traffic and providing exposure opportunities, but in terms of infrastructure, Douyin rarely participates. The most obvious example is that on October 25, 2023, Douyin Life Service announced that it would invest 500 million yuan in the next year to encourage and support influencers to visit stores and match orders between merchants and influencers. The 500 million yuan of support includes encouraging influencers to accept business orders through cash subsidies, launching "Store Exploration Treasure" to match merchants and store exploration influencers, training store exploration influencers and guiding them to bring goods, etc., aiming to help merchants match suitable influencers more accurately, improve operating efficiency, and allow influencers to obtain higher income from bringing goods. Supporting content and allowing creators to make profits is almost similar to Douyin e-commerce. But for local life, which is originally a slow business, the ceiling is relatively limited if it only increases traffic and content. On the other hand, the recent actions of major companies do not seem to give TikTok time to catch up. Recently, Alibaba and JD.com almost simultaneously announced that they would increase their investment in instant retail. "For local life, we need to increase the scale and the number of orders. At the same time, we need to improve UE (unit economic model)." Alibaba CFO Xu Hong said in a recent earnings call. Alibaba's efforts in local life undoubtedly represent its confidence in the future of Ele.me. At this moment, Douyin, which has already achieved synergy with Ele.me, seems to have fallen into new problems. After all, in July this year, Taobao APP has added "Hourly Delivery" as a first-level traffic entrance on the homepage. At the same time, JD.com has integrated and upgraded the previous JD.com 1-hour delivery and JD.com home delivery into "JD.com Instant Delivery" in May, and arranged a first-level traffic entrance in the upper right part of the JD.com APP homepage. From a more macro perspective, Alibaba and JD.com, which already have mature delivery systems, are like a dimensionality reduction attack on Douyin at another level. The changes in local life seem to have ushered in a new chapter. When the magic of traffic enters a bottleneck period, who will break the deadlock? Let us wait and see. |
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